A shortage of homes for sale is now affecting the upper tier of the housing market too and prompting prices to escalate even more. The top 5 percent of homes by price sold in the third quarter saw their prices rise 4.9 percent compared to a year ago, according to a new report by Redfin, a real estate brokerage.
The higher prices are due to a sharp decrease in the number of listings in the luxury sector, according to the report. The number of homes for sale priced at or above $1 million dropped to just over 18 percent compared to a year ago.
“There is still strong buyer demand for high-end homes,” Nela Richardson, Redfin’s chief economist, told CNBC. “Despite declining inventory, luxury sales soared in the third quarter.”
Indeed, sales of homes $1 million or up rose 11 percent from a year ago. Sales of homes at $5 million or above were up by 10 percent. However, inventories are falling in those upper price ranges. For example, the number of homes for-sale priced at $5 million or higher dropped 19 percent.
Luxury homes are selling faster. In the third quarter, luxury homes sold, on average, in 70 days — four days faster than a year ago, according to Redfin.
Redfin predicts that demand will likely remain high in the luxury market as supplies of homes for-sale continuing to shrink. Economists point to a booming stock market and higher demand from international buyers as two big factors driving a surge in luxury sales lately.