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Portfolio > ETFs > Broad Market

Luxury Home Prices Slow Significantly in Q4: Redfin

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Average luxury home price growth decelerated in the fourth quarter, growing only by 3% year over year, according to a report released Monday by Redfin, an online real estate brokerage.

Last quarter’s growth level for homes priced within the top 5% in Redfin’s markets was the lowest since 2012 — a big comedown from 16% growth in the first three months of 2014.

Redfin reported that slowing price growth was a trend it had seen in the luxury market and across the overall market throughout 2014, and one it expected would continue this year.

However, the overall slowdown in luxury home price growth did not hold in many cities, where prices outpaced the rest of the market by double digits.

For example, luxury home prices in Miami Beach rose by 32% for the quarter and 66% from the previous year — a 41 percentage-point difference in growth compared with the rest of the Miami Beach market.

The price boom was driven by an influx of buyers from Europe and South America, according to Redfin.

“Locals haven’t been part of the party,” Aaron Drucker, a Redfin agent in Miami, said in a statement.

“In Miami Beach, downtown and in Brickell, many condos are empty and most sales are in cash because they are second, third or even fourth homes for foreign owners and the U.S. elite who want to preserve their wealth in U.S. real estate.”

Following are other cities with year-over-year double-digit luxury home price growth in the fourth quarter:

  • Kirkland, Washington, 39%
  • Sugar Land, Texas, 38%
  • Alexandria, Virginia, 28%
  • Oakland, California, 28%
  • Washington, D.C., 25%
  • Irvine, California, 25%
  • Carlsbad, California, 16%
  • Fort Lauderdale, Florida, 11%
  • Boston, 16%

In many other cities, the high-end market cooled in the fourth quarter, with prices in the top 5% of the market dropping by double digits year over year while prices in the rest of the market showed strong growth.

In both Delray Beach, Florida, and Boulder, Colorado, luxury home prices fell by 18% year over year, while prices in the rest of those markets rose by 12% and 5%, respectively.

A strong domestic economy, stable price growth and financial volatility abroad are increasing the attractiveness of U.S. housing to foreign investors, Redfin said.

It predicted that in addition to breakaway cities such as Miami Beach, some coastal and inland cities with a track record of foreign ownership — Huntington Beach, Cal., and Scottsdale, Ariz., for example — would likely rise to that status in 2015.

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