Redfin Research Center reported Wednesday that sales of homes for $1 million and up increased by 9% in the third quarter, while the total market declined by 1.2% from the same time last year.

The luxury housing market was the first to recover after the financial crisis, and has benefited from a surging stock market, low interest rates and overseas investment.

However, Redfin said, overseas investment is starting to slow with the result that sales of expensive homes in markets that are most dependent on international demand are steadily declining.

At the same time, luxury home sales in cities where those sales rely less on foreign and domestic investors continue to rise.

Redfin examined seven markets with heavy international investment in million-dollar-plus homes: Los Angeles, Orange County and Riverside-San Bernardino in California; Miami, Orlando and Fort Lauderdale in Florida; and Las Vegas.

Luxury home sales in these markets remained strong, but over the past 12 months, year-over-year growth has dropped from 46% to 5%.

With the waning of international investor interest in expensive properties, Redfin said, interest rates are expected to rise, making pricey homes even more costly.

It said supply of million-dollar-plus homes fell by 13% in the third quarter compared with last year. As a result, any post-crisis deals in high-end real estate have all but disappeared.

Top Luxury Home Markets

Redfin reported that a handful of expensive California cities topped the list of million-home sales in the third quarter.

This was not unexpected, but Chicago and Houston, which are considered more affordable, also joined the top decile of cities, beating out more expensive Seattle, Boston and Washington, D.C.

Houston’s locally driven luxury market stands in contrast to cities where international investor interest has traditionally driven high-end real estate sales, Redfin said.

According to its research, sales of homes for $1 million or more in Houston have increased by 42% since last year. This compares with the average increase of 17% for the 385 cities that had luxury home sales in the third quarter.

Redfin said a diverse job market, with energy and technology companies such as Exxon Mobil hiring employees away from both coasts, is driving a shift in homebuyer demand toward luxury properties.

Looking Ahead

Redfin forecasted that sales of million-dollar-plus homes would continue strong into next year. However, at just under 3% of the market, those sales would have a limited effect on overall sales growth in 2015.

It said this sector of the market, particularly in places that have typically had strong foreign interest, would need wealthy traditional buyers to offset disappearing demand from international investors.

— Check out 12 Hottest U.S. Cities for Millionaires on ThinkAdvisor.