Redfin Report: Shrinking Supply Sends Prices for Luxury Homes Up Nearly 8 Percent in First Quarter

Number of Luxury Homes for Sale Fell 20 Percent, Marking Four Consecutive Quarters of Inventory Declines

Seattle, WA – May 14, 2018 (PRNewswire) (NASDAQ: RDFN) Luxury home prices in the first quarter of 2018 rose 7.9 percent compared to last year, to an average of $1.8 million, according to the latest report from Redfin (www.redfin.com), the next-generation real estate brokerage. The analysis tracks home sales in more than 1,000 cities across the country and defines a home as luxury if it is among the top 5 percent most expensive homes sold in the city in each quarter. The average price for the bottom 95 percent of homes was $330,000, up 7.5 percent compared to a year earlier.

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The strong price growth for luxury homes is due to decline in supply that has persisted since the second quarter of 2017. The number of homes for sale priced at or above $1 million fell 20.4 percent in the first quarter compared to a year earlier, while the number of homes priced at or above $5 million dropped 19.2 percent.

The inventory shortage in the luxury market is newer and somewhat less severe than the inventory shortage for more affordable homes. The number of homes for sale priced below $1 million has been in decline since the third quarter of 2015 and fell 22.8 percent in the first quarter compared to last year.

Competition for luxury homes is also escalating. The average luxury home that sold last quarter went under contract after 82 days on the market, nine days faster than the same period last year. While only 1.5 percent of luxury homes were bid up over the asking price, that’s up from 1.3 percent in the first quarter of 2017.

“For the first time since changes to the tax code went into effect, luxury buyers could no longer deduct more than $10,000 in state and local property taxes or interest for mortgages over $750,000. In a world of balanced supply and demand these changes would have dampened price growth. Instead, this quarter saw the strongest luxury price appreciation in four years, demonstrating that the current inventory crunch is extremely broad-based and affects buyers at every price range,” said Redfin chief economist Nela Richardson.

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Several cities in Florida and Nevada saw strong luxury price growth in the first quarter. In Vero Beach, Florida, the average sale price for a luxury home soared 68 percent over last year to $2.65 million. The early January sale of a $17.5 million property likely played a role in driving up the average sale price in Vero Beach.

Luxury home prices were up 51.3 percent in Reno, 26 percent in Las Vegas and 22.4 percent in Henderson, a Las Vegas suburb.

Jaime Moore, a Redfin agent in Reno, said, “We’re seeing an influx of buyers from high-cost areas such as Seattle, San Francisco and Southern California. Some come for retirement and the low taxes, others for tech jobs at companies like Tesla, Amazon and Switch. More companies are relocating here as the cost of living for the average employee has gotten too high in other cities. This is all leading many buyers to our area with larger pocketbooks than we have seen in the past and bidding wars and prices are reflecting that demand.”

Some cities saw luxury home prices decline in the first quarter. The average price for a luxury home fell furthest in Long Beach, California, down 26.1 percent year over year last quarter. Prices for high-end properties also fell in Washington, D.C. (-9.6%), Fort Lauderdale (-7.3%) and Clearwater (-4.5%).

To read the full report, complete with city-specific data and charts, as well as a list of the 10 highest-priced home sales in Redfin markets in the first quarter, visit: www.redfin.com.

About Redfin

Redfin (www.redfin.com) is the next-generation real estate brokerage, combining its own full-service agents with modern technology to redefine real estate in the consumer’s favor. Founded by software engineers, Redfin has the country’s #1 brokerage website and offers a host of online tools to consumers, including the Redfin Estimate, the automated home-value estimate with the industry’s lowest published error rate for listed homes. Homebuyers and sellers enjoy a full-service, technology-powered experience from Redfin real estate agents, while saving thousands in commissions. Redfin serves more than 80 major metro areas across the U.S. The company has closed more than $60 billion in home sales.

Metro Home-Price Growth Quickens to 5.7 Percent in the First Quarter

Washington, D.C. – May 14, 2018 (nar.realtor) Inventory levels hovering at all-time lows weighed down home sales and fueled faster price appreciation during the first three months of the year, according to the latest quarterly report by the National Association of Realtors®.

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The national median existing single-family home price in the first quarter was $245,500, which is up 5.7 percent from the first quarter of 2017 ($232,200). The median sales price during the fourth quarter of 2017 climbed 5.3 percent from the fourth quarter of 2016.

Single-family home prices last quarter increased in 91 percent of measured markets, with 162 out of 178 metropolitan statistical areas(1) (MSAs) showing sales price gains in the first quarter compared to a year ago. Fifty-three metro areas (30 percent) experienced double-digit increases, up from 15 percent in the fourth quarter of 2017.

Lawrence Yun Lawrence Yun

Lawrence Yun

, NAR chief economist, says record low inventory levels caused the housing market to get off to a slow start in 2018. “The worsening inventory crunch through the first three months of the year inflicted even more upward pressure on home prices in a majority of markets,” he said. “Following the same trend over the last couple of years, a strengthening job market and income gains are not being met by meaningful sales gains because of unrelenting supply and affordability headwinds.”

Added Yun, “Realtors® in areas with strong job markets report that consumer frustration is rising. Home shoppers are increasingly struggling to find an affordable property to buy, and the prevalence of multiple bids is pushing prices further out of reach.”

Total existing-home sales(2), including single family and condos, decreased 1.5 percent to a seasonally adjusted annual rate of 5.51 million in the first quarter from 5.59 million in the fourth quarter of 2017, and are 1.7 percent lower than the 5.60 million pace during the first quarter of 2017.

At the end of the first quarter, there were 1.67 million existing homes available for sale(3), which was 7.2 percent below the 1.80 million homes for sale at the end of the first quarter in 2017. The average supply during the first quarter was 3.5 months – down from 3.7 months in the first quarter of last year.

The national family median income rose to $74,779(4) in the first quarter, but overall affordability decreased from a year ago because of rising mortgage rates and home prices. To purchase a single-family home at the national median price, a buyer making a 5 percent down payment would need an income of $55,732, a 10 percent down payment would require an income of $52,779, and $46,932 would be needed for a 20 percent down payment.

“Prospective buyers in many markets are realizing that buying a home is becoming more expensive in 2018,” said Yun. “Rapid price gains and the quick hike in mortgage rates are essentially eliminating any meaningful gains buyers may be seeing from the combination of improving wage growth and larger paychecks following this year’s tax cuts. It’s simple: homebuilders need to start constructing more single-family homes and condominiums to overcome the rampant supply shortages that are hampering affordability.”

The five most expensive housing markets in the first quarter were the San Jose, California metro area, where the median existing single-family price was $1,373,000; San Francisco-Oakland-Hayward, California, $917,000; Anaheim-Santa Ana-Irvine, California, $810,000; urban Honolulu, $775,500; and San Diego-Carlsbad, $610,000.

The five lowest-cost metro areas in the first quarter were Decatur, Illinois, $73,000; Cumberland, Maryland, $86,200; Youngstown-Warren-Boardman, Ohio, $91,300; Elmira, New York, $100,800; and Binghamton, New York; $103,000.

Metro area condominium and cooperative prices – covering changes in 61 metro areas – showed the national median existing-condo price was $231,700 in the first quarter, up 5.9 percent from the first quarter of 2017 ($218,800). Eighty-five percent of metro areas showed gains in their median condo price from a year ago.

Regional Breakdown
Total existing-home sales in the Northeast slipped 8.5 percent in the first quarter and are 8.1 percent below the first quarter of 2017. The median existing single-family home price in the Northeast was $267,400 in the first quarter, up 4.6 percent from a year ago.

In the Midwest, existing-home sales fell 6.9 percent in the first quarter and are 1.8 percent below a year ago. The median existing single-family home price in the Midwest grew 5.9 percent to $187,100 in the first quarter from the same quarter a year ago.

Existing-home sales in the South increased 3.7 percent in the first quarter and are 0.7 percent higher than the first quarter of 2017. The median existing single-family home price in the South was $220,400 in the first quarter, 5.5 percent above a year earlier.

In the West, existing-home sales in the first quarter declined 1.1 percent and are 2.2 percent below a year ago. The median existing single-family home price in the West increased 8.2 percent to $371,300 in the first quarter from the first quarter of 2017.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.

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NOTE: NAR releases quarterly median single-family price data for approximately 175 Metropolitan Statistical Areas (MSAs). In some cases the MSA prices may not coincide with data released by state and local Realtor® associations. Any discrepancy may be due to differences in geographic coverage, product mix, and timing. In the event of discrepancies, Realtors® are advised that for business purposes, local data from their association may be more relevant.

Data tables for MSA home prices (single family and condo) are posted at http://www.nar.realtor/topics/metropolitan-median-area-prices-and-affordability/. If insufficient data is reported for a MSA in particular quarter, it is listed as N/A. For areas not covered in the tables, please contact the local association of Realtors®.

1. Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. NAR adheres to the OMB definitions, although in some areas an exact match is not possible from the available data. A list of counties included in MSA definitions is available at: http://www.census.gov/population/estimates/metro-city/List4.txt (link is external).

Regional median home prices are from a separate sampling that includes rural areas and portions of some smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quarter comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.

Median price measurement reflects the types of homes that are selling during the quarter and can be skewed at times by changes in the sales mix. For example, changes in the level of distressed sales, which are heavily discounted, can vary notably in given markets and may affect percentage comparisons. Annual price measures generally smooth out any quarterly swings.

NAR began tracking of metropolitan area median single-family home prices in 1979; the metro area condo price series dates back to 1989.

Because there is a concentration of condos in high-cost metro areas, the national median condo price often is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional areas will be included in the condo price report.

2. The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing.

3. Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).

Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.

4. Income figures are rounded to the nearest hundred, based on NAR modeling of Census data. Qualifying income requirements are determined using several scenarios on downpayment percentages and assume 25 percent of gross income devoted to mortgage principal and interest at a mortgage interest rate of 3.9%.

NOTE: Existing-Home Sales for April will be released May 24, and the Pending Home Sales Index for April will be released May 31; release times are 10:00 a.m. ET.