October 07, 2019
A Look at the Decline in Luxury Home Sales
In 2017 luxury homes—particularly in certain locales—were flying high. The bidding wars seen in the market were not limited to just starter homes or mid-range homes. Celebrity home sales were in the news for how high they went. But, in tandem with the tightening market on lower-end homes and the buyers’ fatigue that arose in late 2018, we also saw a marked decline in luxury home sales, according to a March report by Redfin.
To begin with, let’s establish what we mean by “luxury homes.” For purposes of the report, these homes were classified in part as houses priced at more than $2 million. Redfin looked at data from sales in more than a thousand cities in the United States—excluding New York City—and considered houses among the most expensive five percent of homes sold during a given quarter.
While, as can be expected in a time of low inventory, homes in the lower 95 percent of homes rose in price during the year-over-year period by 2.7 percent to reach an average of $300,000 (a six year streak).
But the inventory of luxury homes has actually risen since 2017 (when it fell by 10 percent). Unlike construction of more traditional single-family homes, construction has continued on these high-end homes, where contractors hope to make a larger margin on sales.
And people are also taking the new tax code into account. No longer can people deduct as much mortgage interest, particularly in high-tax states. (This harms prospective high-end purchasers in our service area of Massachusetts—Boston, for example, saw the largest drop in luxury home sales prices, with a full 22.4 percent decline in luxury home prices during the first quarter, and a ten percent drop in number of sales—but could theoretically be seen as beneficial for those in our service area of Florida, where there is no state income tax; yet Miami nonetheless saw a drop of 19.3 percent in home prices, and a 12.9 percent drop in number of sales.) As a result, most of the declines seen actually only took place in one third of the cities surveyed.
Year-over-year, homes priced in excess of $2 million saw a sales decline of 16 percent, and tended to stay on the market for an average of 83 days on the market, while those priced under $2 million averaged a full twenty days fewer on the market. Only one percent of these homes sold for above listing price. (Compare that to 18 percent for non-luxury homes.) What’s most alarming about this? It is the largest such drop since 2010.
At Topouzis & Associates, P.C., our goal is to put our considerable experience and expertise to use in ensuring that any title we service—whether for a luxury home or for a starter home—is issued to buyers clear of defect. Contact us if you want our professional judgment backed up with a solid insurance plan, whether the states we service that have income tax—Rhode Island and Massachusetts—or the one we service which does not, Florida.