U.S. Luxury Home Prices Dip in Q3, First Time in Four Years

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According to national real estate broker Redfin, U.S. home prices in the luxury market fell in the third quarter for the first time since 2012. Prices in the luxury market, which Redfin defines as the priciest 5 percent of home sales, fell 2.2 percent year over year, while prices in the rest of the market increased 3.8 percent.

The dip in luxury values might indicate that wealthy buyers and foreign investors are stepping out due to volatility in the global markets and fears that prices have climbed too high, too quickly. A bigger supply of luxury products might also be pushing prices down.

"High-end buyers are usually not weighed down by rates, mortgages or competition from other buyers, but they do look for deals," said Redfin chief economist Nela Richardson. "The luxury market was the first to recover from the housing downturn, and now it's a bellwether of slowing price growth for the rest of the market. Sales at the top end of the market continue to soar, but prices are downshifting."

The biggest luxury-market losers were Scottsdale, Ariz. and Boca Raton, Fla., where prices sunk 15 percent year over year. Fort Lauderdale, Fla. saw a 14 percent drop in values. Luxury prices in Boca Raton and Fort Lauderdale have now seen significant declines for two consecutive quarters, likely due to a wave of luxury condos hitting the market.

Not all markets had a slowdown. Washington, Denver, Delray Beach, Fla., and Bend, Ore., saw double-digit, year-over-year price gains in the third quarter. In California, the East Bay of San Francisco was also hot. In Oakland and Fremont, luxury home prices increased 9 percent and 8 percent respectively.

According to local Redfin agent Mia Simon, Oakland and Fremont are both popular because they are more affordable than San Francisco and Silicon Valley. Even well-heeled buyers who can afford a home in the top 5 percent of the market are concerned about the sky-high prices in San Francisco and San Jose. Simon expects Oakland and Fremont to continue to see above average appreciation in the years to come due to well-ranked schools, walkability and public transportation options.