The average sale price for luxury homes climbed 1.6 percent year-over-year to $1.63 million in the fourth quarter of 2019, the largest gain since the third quarter of 2018, according to a report from Redfin.
Redfin said sales of homes priced at or above $1.5 million rose 11.2 percent in the fourth quarter, marking the second-consecutive increase following three quarters of declines. Sales of homes priced below $1.5 million climbed 6 percent year-over-year.
“Demand for luxury is improving. That’s showing up primarily in an increase in sales right now, but it’s also putting some slight upward pressure on prices,” Redfin Chief Economist Daryl Fairweather said in a news release. “We’re ending the year in a much better position than we started, which is a good sign for 2020. I expect price growth to return to at least 3 percent to 5 percent by spring.”
According to the report, non-luxury homes saw prices increase 5.2 percent annually to an average of $317,000 during the fourth quarter, the third consecutive quarterly gain. Meanwhile, the supply of active listings priced at or above $1.5 million grew 5.8 percent year-over-year in the fourth quarter. The supply of active listings priced below $1.5 million dropped 5.1 percent year-over-year during the fourth quarter.
“Back in 2018, prices were growing just as fast in the top of the market as they were in the bottom of the market,” Fairweather said. “It’s unclear if that’s going to happen again, as prices are already so high, and a lot of the demand seems to be at the low end. But if wealth inequality continues to rise and the rich keep getting richer, it’s very possible that luxury could accelerate to that point again.”
Redfin said the biggest price gains in luxury prices (in the markets it tracks) were in West Palm Beach, Fla. (104.5 percent year-over-year increase to an average price of nearly $3 million); Charlotte, N.C. (up 21.2 percent to $1.26 million); and Tampa, Fla. (up 20.6 percent to $1.30 million).
“The Palm Beach market was slow over the summer with rumors of a potential crash, a possible rise in interest rates and jitters from Hurricane Dorian. A lot of people were touring but not making offers,” Redfin Palm Beach market manager Delray Valle said. “But then the market never crashed, the storm largely spared Florida and Palm Beach blew up. People who weren't closing deals in the summer closed in the winter, plus, you had an influx of snowbirds and folks looking to take advantage of Florida’s tax benefits.”