After a nine month slump, the luxury real estate market rebounded at the end of 2015 according to an article by Redfin. Prices for the most expensive homes, accounting for the top 5%, gained 3.1% during the fourth quarter compared to a year earlier with the biggest gains being in Sacramento, Austin and in Philadelphia.
Sales for the remaining 95% of the market increased by 5.4%, and outpaced the price growth of luxury homes for the fourth consecutive quarter. The number of homes priced for $1 million or more dropped by 6.4% compared to a year earlier. It’s likely that the limited supply of luxury homes in many cities was a factor in driving up prices at the top of the market.
Even though the price increase is good news for luxury real estate investors, experts are reluctant to call it a lasting trend. They point out that a volatile stock market and slower economy may have many luxury home sellers worried. This may be a particular concern in large luxury markets such as Chicago, Houston, Tampa and Miami as prices of luxury homes in these markets declined.
Places that saw particularly large increases include Austin and Philadelphia where the average price of a luxury home was more than 20% higher than a year earlier. It’s hardly surprising that prices in Austin have increased substantially as it is one of the fastest growing cities in the nation. However the increase in Philadelphia is slightly more surprising and it’s thought it may be linked to the sale of several multi-million dollar condos in a new development. Prices at the top end of the market in Sacramento increased by 12.6% and the market here is being driven by buyers relocating from other parts of the state, in particular from Silicon Valley and San Francisco where prices are high and inventory levels are low.
The luxury market in Baltimore saw the largest price decrease, dropping by 17.9% and in Tampa Florida prices fell by 14.7%. Prices of luxury property in Tampa fell by nearly 9% from the third quarter to the fourth quarter which is being put down to buyers timing their purchase to coincide with the school calendar. The most desirable communities in Tampa are renowned for their highly rated schools so the real estate market often quieter at the end of the year.
Real estate prices of luxury homes in Baltimore, Houston and Chicago have fallen for two consecutive quarters. The price falls in Houston are being attributed to a knee-jerk reaction from buyers due to low oil prices. However experts point out that Houston is actually quite diversified and is far from being just an oil and gas city.