National real estate firm Redfin is reporting this week that the U.S. luxury home market, which they defines as the priciest 5 percent of properties, increased a mere 0.4 percent in the second quarter from a year earlier. In contrast, prices in the bottom 95 percent of the market grew 10 times faster, increasing 4 percent during the same time period.
Meanwhile, sales of homes priced $1 million or more surged in the second quarter, increasing 14.2 percent from a year earlier. In fact, markets that saw the biggest decrease in luxury home prices had one thing in common - a large pickup in the number of high-end homes for sale since last year. Prices in Fort Lauderdale, Fla. slumped 23 percent from last year, inventory of homes priced $1 million or more surged by 42 percent. Redfin saw similar double-digit growth in million-dollar homes for sale in other cities on the biggest luxury losers list including Santa Rosa, Calif. (37%), Houston (44%), Austin, Texas (27%), and Irvine, Calif. (27%). Of the 10 biggest price losers, only Los Angeles had a drop in both sale prices and inventory.
Not all markets had a slowdown, several cities had big luxury price gains in the second quarter. The biggest winner was Palm Beach Gardens, Fla., with a whopping 42 percent increase in average luxury sale price from a year ago. Other cities that saw big increases in luxury sale price from a year ago were Bend, Ore. (33%), Huntington Beach, Calif. (27%), Boulder, Colo. (26%) and Bellevue, Wash. (25%).
Of the more than 138 luxury markets studied, Miami Beach, Fla. was the most unequal. At nearly $6.59 million, average luxury prices were nearly 12 times greater than average prices in the other 95 percent of the market. In fact, the nine most unequal metros were all located on the southeast coast of Florida.
"The high cost of living on the coast has become too much for all but the most well-heeled buyers," says Pierre Shaheen, a Redfin agent in Fort Lauderdale. "The stronger U.S. dollar hasn't turned off foreign buyers, but high prices and the recent spike in flood insurance rates are forcing most middle-class buyers to look westward for homes. This means the luxury market is much hotter than the rest of the market here."