During the first quarter of this year, luxury home prices increased by 7.9 percent on a year-over-year basis, reaching an average of $1.8 million. In comparison, the bottom 95 percent of the housing market saw a 7.5 percent increase year-over-year and an average price of $330,000.
However, the number of homes for sale priced at or above $1 million dropped by 20.4 percent in the first quarter compared to a year earlier, while the number of homes priced at or above $5 million fell 19.2 percent. Fewer homes created faster sales: The average luxury home that sold in the first quarter went under contract after 82 days on the market, nine days faster than the same period one year earlier. And although a mere 1.5 percent of luxury homes were bid up over the asking price, that is slightly higher than the 1.3 percent level in the first quarter of 2017.
“For the first time since changes to the tax code went into effect, luxury buyers could no longer deduct more than $10,000 in state and local property taxes or interest for mortgages over $750,000,” said Redfin Chief Economist Nela Richardson. “In a world of balanced supply and demand these changes would have dampened price growth. Instead, this quarter saw the strongest luxury price appreciation in four years, demonstrating that the current inventory crunch is extremely broad-based and affects buyers at every price range.”