Luxury market split: West Coast prices drop, East Coast up
Nationwide, luxury home prices are still on the rise, but several Western cities have experienced double-digit declines in the past year.
- San Francisco and Seattle posted the sharpest declines in luxury homes prices in Q2, though prices remained well above the national median.
- The 5 markets with the biggest increases in luxury home prices were on the East Coast.
- Across the country, the overall share of homes listed at $1 million or more is on the rise.
For buyers hoping to find a high-end home at a discounted price, the West Coast is the place to be.
A recent Redfin report found the median sale price for a luxury home — defined as a property in the top 5% based on market value — fell sharply in some of the country's priciest markets. In San Francisco, luxury home prices were down 12.7% in the second quarter compared to a year ago. Three other West Coast cities posted double digit losses: Seattle (down 12.3% year-over-year), Oakland (down 11.1%) and San Jose (down 10.3%).
Even with the price declines, it's still going to take a truckload of cash to purchase a luxury property in those areas. San Francisco's median price for a luxury home last quarter was $4.8 million, while San Jose came in at $4.3 million.
On the opposite coast, however, prices were surging. The five markets to post the biggest price increases for high-end homes were all situated along the East Coast. New Brunswick, NJ saw the largest jump (up 12.1% year-over-year), followed by Charlotte, NC (up 9.2%); Newark, NJ (up 9.2%); Orlando, FL (up 8.8%); and Virginia Beach, VA (up 7.8%).
And despite some notable declines in the West, median luxury home prices rose by 4.6% to a record $1.2 million on a national basis. In contrast, the median price for all homes sold in the second quarter was $416,100, down 7.4% compared to the same period last year, according to data from the Census Bureau and HUD.
Sales, however, remain sluggish. Redfin estimates luxury home sales fell 24.1% in the second quarter compared to a year ago — a large drop, but the smallest decline in a year — while non-luxury home sales fell 19.4%. At the same time, new listings of luxury homes fell at a much slower rate: just over 17% vs. nearly 30% for non-luxury homes.
An unusual time for luxury homes
Mixed economic signals have led to an interesting period in the luxury market. Sales have consistently declined more than non-luxury sales over the past year, but inventory is also down, putting a floor on prices.
Activity is likely picking back up as recession fears ease and the stock market continues to improve. In the non-luxury market, elevated interest rates have been a primary factor in slowing sales, but mortgage rates are typically less of a concern for luxury buyers.
"Normally when the housing market is hurting, it's the luxury market that's hurting the most by far, but today's market is unusual because there isn't a recession," said Daryl Fairweather, Redfin's chief economist. "While a lot of high-end homebuyers remain on the sidelines, many of the ones who are in the market are still willing to spend big."
Million-dollar homes becoming more common
In many markets, homes priced at $1 million or more are making up a larger share of the overall supply, according to a recent report from Point2, an online real estate marketplace.
The report found that high-end homes were becoming more prevalent in markets of all sizes. In Bozeman, Montana, for example, million-dollar homes accounted for 62% of the listings. The biggest share of pricey homes among cities studied was East Honolulu, Hawaii, where 70.5% of properties were listed at more than $1 million.
Among large U.S. cities, Los Angeles had the highest percentage of listings above $1 million at 63.6%. The study also noted that 11.6% of Los Angeles' listings were above $5 million.