Home sales so far this year are lower than they were in 2013, but there’s one sliver of the housing market that’s going strong: the very top of it, according to Redfin (www.redfin.com), the customer-first real estate brokerage, in its 2014 Luxury Report. Sales of the priciest 1 percent of homes are up 21.1 percent so far this year, following a gain of 35.7 percent in 2013. Meanwhile, in the other 99 percent of the market, home sales have fallen 7.6 percent in 2014.
Luxury sales are up, and way up, in metros across the country. Ten markets have seen sales growth above 50 percent so far in 2014, and Oakland and San Jose are on pace to nearly double the number of home sales in the most expensive 1 percent of the market.
As for the other 99 percent? While home sales have shown meager to modest gains in the non-luxury portion of the market in Oakland (up 2.2% over last year), Miami (up 1%), Raleigh-Durham (up 1.2%) and Atlanta (up 4.8%), other markets including Phoenix (down 15.7%) and Minneapolis (down 12.5%) display a strange (and perhaps troubling) dichotomy: For the top 1 percent, the housing market continues to boom. For the rest of the market, the recovery is running out of gas because, as home prices have risen, wage and job growth have not kept up.
The price needed to reach that top 1 percent varies widely by metro. In San Francisco, the most expensive 1 percent of homes sold for $5.35 million or higher. In Los Angeles, joining the high-end luxury market costs at least $3.65 million, but further south in Orange County, luxury homes start at just $3.45 million. The budget luxury buyer could look to Atlanta ($861,000), Minneapolis ($881,000) or Raleigh ($815,000), where access to the top 1 percent of the market can be purchased for six figures rather than seven.
So who can afford these luxury homes? Banks don't offer conventional loans for homes in this price range. But to put things in perspective, here's what it would take: In San Francisco, a luxury homebuyer would need a million-dollar down payment and an annual salary of $916,000 to qualify for a 30-year fixed-rate loan, and to afford what would be a $21,369 monthly mortgage payment. In a lower-priced luxury market such as Raleigh, an annual income of just $140,000 could keep a buyer comfortably among the 1 percent in this hypothetical scenario.
Of course, 44.7 percent of buyers in this price tier simply pay with cash. That’s compared with the 32 percent of purchases made with cash among all home sales, as Redfin found in a recent report on all-cash transactions.
The Top Luxury Home Neighborhoods by Metro
Redfin broke down high-end home sales by neighborhood within each market to find where the highest-end luxury homes were being purchased. These are the neighborhoods with the highest average home sale price within the top 1 percent of the market. Neighborhoods in Los Angeles, Orange County and San Francisco dominated the top 20 list. Beverly Glen ($11.86 million), Holmby Hills ($9.91 million) and Malibu Road ($9.51 million) took the top three spots out of all neighborhoods analyzed.
Most Unequal Metros
Redfin also compared the price of the top 1 percent of homes with the price of the median home in each market to measure the distance between the middle and top of the housing market. The largest divides are unsurprisingly in sunny beach metros. The top 1 percent of home prices in Miami were at least 14.9 times higher than the median, and those in West Palm Beach were at least 14.1 times higher. Yet in lush but rainy Portland, Oregon (3.9 times the median), or lush but muggy Raleigh, North Carolina (4.1 times the median), the luxury end of the market is relatively closer to the median home sale price.
To read the full report, with a complete list of the top luxury home neighborhoods and the variance among major metros across the U.S., please visit: http://www.redfin.com/research/reports/special-reports/2014/2014-luxury-report.html.
Connect with Redfin
Redfin (www.redfin.com) is a customer-first real estate brokerage that represents people buying and selling homes. Founded and run by technologists, Redfin has a team of experienced, full-service real estate agents who are advocates, not salespeople, earning customer-satisfaction bonuses, not commissions. Redfin.com features all the broker-listed homes for sale, as well as for-sale-by-owner properties that don't pay brokers a commission. Redfin also offers online tools that make the entire process of buying or selling a home easier and more fun. The company serves major markets across the U.S. and has closed more than $13 billion in home sales. In 2012, Redfin was named one of The DIGITAL 100: World's Most Valuable Private Tech Companies by Business Insider.
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Christin Camacho, 206-588-6863