Redfin is telling us that home sales and prices in expensive coastal markets are seeing double digit declines. Take a look:
- Los Angeles sales are down -19%
- Orange County sales are down -16%
- Seattle sales are down -15%
- San Francisco sales are down -14%
At the top end of the market, affordability and tax changes are causing major pain. Lawrence Yun, the chief economist with the National Association of REALTORS ® (NAR), said, “Before (the tax law passed in December 2017), you could fully deduct mortgage interest and property taxes. Now, as part of the state and local income tax limit of $10,000 that many people have, those expensive home real estate taxes are becoming a big burden.”
Sale prices of $2M+ homes fell -1.6% to $1.55M nation-wide in Q1 2019, according to Redfin. This -1.6% drop in sales prices represents the first annual decline in luxury sales prices in nearly 3 years. Simultaneously, the volume of luxury home sales dropped to a loud thud of -16% y/y. This sales volume thud translated into an increase of +14% of luxury homes on the market.
Daryl Fairweather, chief economist with Redfin, said, “Home prices got so expensive in those (above) places – so this is kind of a correction year for these markets.”
The National Association of REALTORS ® (NAR) Pending Home Sale Index (PHSI), however, indicated that pending sales rose in March 2019 and that this doom and gloom scenario of a slowdown in sales may not last long. NAR’s PHSI was up +3.8% and that an affordability correction may have already happened.
Take a look at more affordable cities, such as Milwaukee and Minneapolis, where sales and prices are up. Whopping sales increases in Baltimore, up +35%, and Orlando, up +24%, are additional examples of “hot” spring sales.
One more word to the wise agent/broker, however…additional reporting from Knock indicates that even with these sales upticks in more affordable markets, 72% of the homes sold at all price points in Q1 2019 sold for amounts under listing prices. (Knock predicts that 75% of homes sold in Q2 2019 will sell under listing prices.