Prices for condos in luxury new developments in Greater Los Angeles are soaring despite transactions falling, according to Douglas Elliman’s market report released Thursday.
The median sales price of top-tier newly built condos—defined as the top 10% of sales—soared 29% annually in the second quarter of 2018 compared to the second quarter of 2017, pushing median prices up to $2.99 million.
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Transactions, however, fell 23.3% and inventory rose 32.4% in the same time frame, factors that usually cause prices to fall rather than rise.
But, "generally speaking you have to have a year’s worth of [sales] declines before you see an effect on prices," said Jonathan Miller, author of the Douglas Elliman report and chief executive of real estate appraisal firm Miller Samuel.
The same phenomenon was witnessed in the luxury single-family home market, though not to the same extreme.
The median sales price of big ticket single-family homes reached $10 million on the nose, a 5.3% increase from last year. Meanwhile, the number of sales fell 6.2% and supply increased 30.9%.
"In the single-family market we had a lot of high-priced sales," Mr. Miller said, which skewed median prices upward.
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The luxury condo resale market performed more typically. As transactions dipped 5.9% and listing inventory rose 27.8%, the median sale price fell 13.8% to $2.11 million, the report said.
One thing each luxury market segment had in common was its absorption rate—the time it would take to sell the entire property stock. The single-family home, the resale condo and the new development condo market all saw absorption rates rise: 39.3%, 34.4% and 69.6%, respectively.
But the figures aren’t too drastic and show that the market is "going from a white-hot pace to a fast pace," Mr. Miller said.
Outside of the luxury market, the general Los Angeles market saw its median sales price fall 7.1% to $1.3 million, the first year-over-year decline on a quarterly basis in 23 quarters, or almost six years.
On a neighborhood level, posh Pacific Palisades ranked as the most expensive area for single-family homes with a median sales price of $3.44 million, an increase of 8.4% from the second quarter 2017, the report said.
Beverly Hills was home to the priciest condos, despite prices falling 14.4% annually. The median sales price for a condo in the neighborhood now stands at $1.1 million, the report said.