Luxury home price growth across the U.S. re-entered positive territory in the second quarter of the year.
High-end home prices inched up 0.8% between April and June compared with last year, to an average of $1.66 million, according to a new analysis from Redfin, which tracks luxury sales in more than 1,000 cities across the country. Homes included in the analysis are are among the 5% most expensive in each city.
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While this is an improvement from the first quarter, when luxury prices fell 1.1% on an annual basis, the bottom 95% of the market is outperforming it, with home prices growing around 5% each quarter for the past two years. Inventory of homes priced above $1 million fell 0.5%from a year prior, while sales increased 10.7%.
Redfin, a real estate brokerage, expects new economic uncertainties to further impact the luxury market in the wake of the Brexit vote and in run-up to the U.S. presidential election in November.
“For the most part, the housing market can stomach large swings in the stock market. But there are markets, like Silicon Valley, that become queasy when the equity market is this volatile. In these areas, homebuyers’ wealth and downpayments are more closely tied to stocks,” said Redfin chief economist Nela Richardson.
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“In addition, foreign buyers who normally flock to these cities are also highly sensitive to global volatility. I expect a bit of motion sickness as high-end buyers decide whether parking their money in real estate is a safe place in a rocky global economy.”
The best-performing area in the second quarter of the year was Stuart, Fla., where prices skyrocketed 139.4%, to $2.94 million. However, 10 of the 15 best-performing cities had luxury price points under $1.5 million, with more local buyers than foreign investors.
As a result, with rates hovering near all-time lows, buyers in these areas with the means are taking advantage and moving up into higher-priced homes, according to Redfin.
The worst performer was The Woodlands in Houston, Texas, where prices dropped 23.4%, to $1.64 million. The luxury market in the world’s oil capital has been suffering since the price of black gold began crashing in 2014.
San Francisco, meanwhile, has made Redfin’s luxury losers list for two consecutive quarters, with prices for the most expensive homes falling 11% compared to a year ago as the market slows after four years of double-digit house-price inflation.
The luxury markets in Washington, D.C., and Alexandria, Va., have also been soft for several quarters, Redfin data show. This luxury slump follows an overall price slowdown in the Washington metro area but may also reflect political concerns. Redfin agents report some buyers may be sitting on the real estate sidelines until after November.
“With the upcoming election comes uncertainty, as people here are bracing to see how the government will take shape,” said Dan Galloway, a Redfin real estate agent in Washington. “For buyers and sellers here, it's less about politics and more about the logistics of the potential turnover in jobs and people moving in and out of the area. Therefore, it may make sense to wait until November, when we know what the future will bring for jobs and housing in D.C."
| Q2 | Luxury Market (Top 5%) | Rest of Market (Bottom 95%) |
| Average Sale Price | $1.66m | $313,000 |
| Average Sale Price YoY | 0.80% | 4.70% |
| Average Sale Price QoQ | 4.40% | 9.10% |
| Average Days on Market | 72% | 62 |
| Percentage of Homes that Sold Above List Price | 1.50% | 21.80% |
Source: Redfin