Zillow’s study dovetailed with new research by realty brokerage Redfin, which found slowdowns and price softness in the upper-end, luxury segments — the top 5 percent most expensive homes — of some cities and suburbs. In Boston, luxury sales prices slumped by 16.7 percent year-over-year in the second quarter, compared with a 9.7 percent average increase in the nonluxury segment. Overall, however, luxury home prices increased nationwide by about 5.2 percent, down from 7.3 percent the previous quarter.
What’s going on? Multiple factors are at work. The recovery from the recession and housing bust has been underway since at least 2012. But every major upcycle in home prices eventually runs out of fuel because buyers’ incomes can’t keep pace with price increases. Once buyers begin balking, sales start to soften — note that June saw existing home sales nationwide on the decline for the third straight month — and inventories of available properties slowly begin to accumulate. Inventories of listings at the entry-level price range generally remain low and continue to sell fast, sometimes with multiple offers. But upper-bracket listings tend to be relatively more available and sell more slowly. Sometimes it takes six to 12 months to sell them, according to Lawrence Yun, chief economist of the National Association of Realtors.
Jonathan Miller — a nationally known appraiser active in metropolitan New York, Philadelphia, Miami and Los Angeles — told me the pattern he sees almost everywhere is “soft at the top” tier of the price spectrum and “tighter as you move lower in price.” He advises potential buyers to keep a close eye on local sales statistics, because declining sales point to more price reductions in the future.
Here’s what could be another emerging trend, which turned up in the Redfin luxury sales study: Small but noticeable numbers of homeowners who live in high-cost, high-tax states such as New York and California appear to be fleeing to lower-tax markets. Some communities in Florida, Nevada and Washington are seeing unusually large price jumps in sales of upper-bracket homes. Buyers aren’t reticent about their reasons either: Congress’ $10,000 cap on deductions of state and local property and incomes taxes. You might think local taxes are no big deal for well-off owners, but consider this: One house listed for $12 million in Massachusetts came with a $101,346 local real-estate tax bill.
Ouch!
