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Luxury home sales decline for first time in 2 years as prices tick up nationwide

This $46-million Kauai home was the most expensive sale in Q4 2018. Photo from Redfin.com.

Sales of homes priced at or above $2 million dropped 3.9 percent annually in the fourth quarter, according to real estate brokerage Redfin — the first time in more than two years sales of luxury homes have fallen on a year-over-year basis.

At the same time, the average sale price for luxury homes nationwide rose 4.7 percent annually to an average of $1,772,000 in the fourth quarter of 2018, Redfin’s report states. That’s on par with the annual growth seen in the second quarter of last year and up from a 3.2 percent growth rate in the third quarter.

For this analysis, Redfin tracks home sales in more than 1,000 cities across the country and defines a home as luxury if it’s among the 5 percent most expensive homes sold in the quarter. In the other 95 percent of the market, prices grew 4.3 percent to an average of $341,000 in the fourth quarter.

The typical luxury home that sold in the fourth quarter went under contract in 74 days, down from 78 days during the same period in 2017. Compare that with non-luxury homes: Homes that sold in the final quarter of 2018 took 56 days to go under contract, down from 63 days in the fourth quarter the year before.

Sales and Supply of $2 million-plus homes decline 

The fact that sales of high-priced homes declined as their prices grew at a relatively strong rate can be explained in part by the basics of supply and demand, Redfin said. Compared with a year earlier, there were 6.5 percent fewer $2 million-plus homes on the market last quarter, the seventh quarter in a row inventory of luxury homes has dropped annually.

Supply of homes priced under $2 million, meanwhile, has been on a steady upward trend since the beginning of 2018.

While Redfin said domestic and global economic uncertainty may have put a bit of a damper on demand for luxury homes, the decreased supply was enough to continue to push prices up at a strong but sustainable rate just below 5 percent annually.

“In the fourth quarter of 2018 there was a lot of economic uncertainty —mortgage interest rates peaked in November, and the stock market was all over the place. This may have encouraged luxury sellers to hold on to their real estate assets and also caused luxury buyers to be reluctant to make major home purchases,” said Redfin chief economist Daryl Fairweather. “There’s also economic uncertainty abroad. For example, China’s economy slowed down at the end of 2018, which may be affecting a segment of U.S. luxury sellers and buyers whose wealth is invested overseas.”

Fairweather continued, “Finally, it’s worth noting that when we’re examining the most expensive segment of the housing market nationwide, a disproportionate amount of the movement seen in prices and sales is driven by activity — or lack thereof — in major expensive coastal markets like San Francisco and San Jose, where sales fell by double digits while price growth slowed or reversed at the end of the year.”

Biggest Price Gains and Declines 

Cities in Florida experienced some of the biggest increases in luxury home prices. In West Palm Beach, the average sale price for the top 5 percent of homes sold in the fourth quarter was $1,628,000, up 35 percent from the year before, and in St. Petersburg luxury prices shot up 30.7 percent to $1,427,000.

Florida cities also dominate the list of places where luxury home prices have dropped the most. Sarasota clocks in at number one with an average luxury price of $1,760,000, down 30.7 percent annually.

Luxury market (top 5%) Rest of market (bottom 95%)
City Average sale price YoY change Average sale price YoY change
West Palm Beach, FL $1,628,000 35% $225,000 7.1%
St. Petersburg, FL $1,427,000 30.7% $263,000 24.6%
Reno, NV $1,429,000 24% $379,000 8.3%
Boca Raton, FL $3,142,000 23.9% $363,000 3.7%
San Diego, CA $2,961,000 15.2% $632,000 2.6%
Raleigh, NC $1,119,000 13.6% $304,000 9%
Seattle, WA $2,233,000 11% $687,000 1.9%
Phoenix, AZ $1,080,000 10.3% $278,000 6.9%
Houston, TX $1,553,000 8.6% $258,000 4.5%
Spring, TX $1,021,000 7.7% $267,000 6.4%

Redfin’s list of 10 most expensive sales of Q4 2018

This Hawaiian mansion tops the list of most expensive homes sales in Q4 2018. Photo from Redfin.com.

1) This Kauai property isn’t a hotel, but it sure does look like one. The 6-bedroom, 8.5-bathroom home, which features an infinity pool overlooking a white-sand beach, sold for just over $46 million in November, making it the most expensive sale of the fourth quarter.

2) The second most expensive property sold last quarter, a 6-bedroom, 8-bathroom home that sits on the Orange County coast between Newport Beach and Laguna Beach, went for $30.5 million. The 15,000-square-foot home features a movie theater, game room, saltwater aquarium and gym—and that’s just on the inside.

3) Drive up the coast to Los Angeles for the third most expensive property of the quarter, a $29.5 million lot located in the Hollywood Hills. The 4.5-acre property is ready for development and features sweeping views from the ocean through downtown.

4) The California love continues with this $27.6 million Beverly Hills estate. The 5-bedroom, 8-bathroom, known as the Rutherford House, is a “contemporary Art Deco masterpiece.”

5) The only property in the Northeast on last quarter’s list is Swain’s Neck, a 63-acre retreat overlooking Polpis Harbor in Nantucket. The property, which sold for $25 million, features a main house with five bedroom suites along with a guest cottage, studio, gate house and boathouse.
6) With 51,000 square feet of living space, this Rolling Hills, California property is the 36th largest residence in the U.S., according to the listing. Known as Hacienda de la Paz, the 7.4-acre estate features two pools, two tennis courts and access to horse stables. It sold for $22.4 million.

7) This newly built home, located in the Bel Air neighborhood of Los Angeles, sold for $20.5 million. Featuring five bedrooms and seven bathrooms, the property comes complete with an infinity pool, saltwater aquarium, theater and cigar room.

8) With seven bedrooms and eight-and-a-half bathrooms, this Miami Beach home sits on 110 feet of waterfront. The contemporary, fully automated property sold for $20.4 million.

9) Located in Woodside, California, this 12,500-square-foot estate went for $20 million. The newly constructed home sits on four acres, complete with an olive grove, barn and guest cottage.

10) No. 10 on the list sold for $26 million less than number one—but it still cost its new owners $20 million. The nine-bedroom, 11-bathroom home, located in Maui, provides a “private and secure environment away from the public eye but open to stunning Pacific Ocean views,” according to the listing.

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