Wealthy Homebuyers’ Overpaying Fears Slow Price GrowthPrashant Gopal
Prices for the most expensive U.S. homes grew at the slowest pace in three years as wealthy buyers became worried about overpaying following a surge in values, Redfin Corp. said.
Prices for the top 5 percent of homes in 75 cities rose 0.9 percent in the first quarter from a year earlier, compared with a 4.3 percent gain for the rest of the market, according to an analysis released Thursday by the Seattle-based brokerage.
The wealthy took advantage of low prices after the housing crash to plow profits from the stock market into mansions and penthouses from New York to Los Angeles. Now, after years of steady gains, they’re slowing their purchases, said Redfin Chief Economist Nela Richardson.
“Rich people have a lot of money, but nobody wants to be the guy or gal that buys at the top of the market,” Richardson said. “With all the price appreciation, there’s widespread concern that the market may be topping out.”
Also affecting demand for luxury homes are the weakening global economy and less-favorable exchange rates for foreigners. Those issues may prove to be a benefit for the U.S. residential market because many international buyers view it as a haven, Richardson said.
A year ago, luxury-home prices were up 15.8 percent from 2013, while the rest of the market was up 13.3 percent, Redfin said. This year’s first quarter had the weakest growth rate for high-end home prices since the first three months of 2012, when they were down 0.3 percent.
Luxury properties stayed on the market for 96 days on average, up from 92 in the first quarter of 2014, according to Redfin. Other houses took an average of 72 days to sell, the same as last year.
The markets with the biggest price drops for trophy homes were Boston, where values slumped 18.7 percent in the first quarter; Alexandria, Virginia, with a 12.4 percent decline; and Hollywood, Florida, where prices were down 6.9 percent.
The reasons for the declines vary by city. In the Washington area, cutbacks in federal-government spending have probably affected job prospects for high-income contractors, Richardson said. In Boston, one of the snowiest winters in history sidelined potential buyers for the priciest homes, which sold for an average of $3.59 million.
High-end residential values aren’t flattening in all markets. Luxury-home prices jumped 33.2 percent in Delray Beach, Florida, where executives from companies in nearby areas such as Boca Raton are driving demand, Richardson said. The technology boom helped fuel a 31.5 percent gain in Austin, Texas, and a 17.5 percent increase in Oakland, California.
The report, which was based on multiple-listing and county-recorder sales data in markets served by Redfin, included only cities with 25 or more luxury home sales in the quarter.
(An earlier version of this story corrected the number of cities analyzed.)
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