The average price of a luxury home in the US increased 1.6% year-over-year in the fourth quarter of 2019.
A report from Redfin shows that it was the largest annual gain since the third quarter of 2018 and took the average price of a luxury home to $1.63 million nationwide. In the first quarter of 2019, the average price was down 4%.
However, the market remains well below the super-gains seen in previous years and lags the rest of the market which gained 5.2% annually to an average of $317,000, the third consecutive quarterly gain.
The report covers more than 1,000 cities across the US but excludes New York; with ‘luxury’ defined as the 5% most expensive homes sold in the quarter.
"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," said Redfin chief economist Daryl Fairweather. "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% to 5% by spring."
Top luxury gains
Luxury prices increased in two-thirds of the markets tracked by Redfin, with the top three gainers in the southeast. West Palm Beach, FL topped the list for the second straight quarter, with a 104.5% year-over-year increase to an average price of nearly $3 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," said Redfin Palm Beach market manager Delray Valle. "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."
Top 10 cities where luxury home prices rose most:
The largest declines
Meanwhile, luxury home prices in St. Petersburg, FL saw the largest decline, down 13.3% to an average of $1.21 million in the fourth quarter.
"The luxury market in St. Petersburg is challenging because it's an old city. Even when you renovate the $1 million-plus homes, many of them still have low ceilings, bold design features and lack the open-floor plan that modern buyers are looking for, so house hunters often push back on pricing because they need to spend money on renovations," said local Redfin agent Brian Walsh. "The trend that you saw this past quarter is reflective of sellers finally understanding that they're not going to get the pie-in-the-sky price that they thought they would."
Next came San Diego (down 13.1% to $2.46 million) and Mesa, AZ (down 8.7% to $698,000). Luxury prices also slipped in San Francisco and Chicago.
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