As the supply of luxury homes tightens, the cost to get one of these expensive dream homes is getting … well … more expensive.
According to a CNBC report, the top 5 percent of homes by price sold in the third quarter saw their values increase 4.9 percent compared with a year ago, hitting an average of $1.71 million, according to Redfin.
Prices are on the rise amid a sharp decline in listings in the luxury sector. According to Redfin Chief Economist Nela Richardson, the number of homes for sale priced at or above $1 million fell just over 18 percent compared with the same period last year.
“There is still strong buyer demand for high-end homes. Despite declining inventory, luxury sales soared in the third quarter.”
Moreover, Redfin reported that the sales of homes priced at more than $1 million increased by 11 percent from a year ago, while sales of homes priced at or above $5 million were up almost as much at 10 percent.
However, at the ultra-high end, the number of homes priced at or above $5 million fell 19 percent.
Given the high demand, supplies will likely continue to fall. Homebuilders are turning their attention to the lower end of the market, where demand has been rising for years and where the lack of supply is acute.
Luxury homes in the third quarter sold on an average of 70 days, four days faster than a year ago. Nonluxury homes sold on an average of 53 days, a full week faster than last year.
The city of Longmont, Colo., led the nation with the strongest year-over-year price growth in the luxury segment in the third quarter. The average price of a luxury property increased 34.7 percent compared to last year to $1.55 million. Strong luxury home price gains were seen in Fort Lauderdale, Fla., (+28.7 percent) and St. Petersburg, Fla., (+19.6 percent).
The average price for a luxury home fell furthest in the third quarter in the cities of Delray Beach, Fla., San Francisco, Calif., and Boca Raton, Fla., where prices fell 26.9 percent, 14.7 percent and 13.8 percent respectively compared to last year.