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45 » VISIT US ONLINE @ DSNEWS.COM LIVING IT UP: HIGH DEMAND FUELS LUXURY HOME MARKET Life's a beach for the luxury homes market, which ended December with a year-over-year sales increase of 7.4 percent to an average of 1.76 million in Q 4 2017. at's according to an analysis by online real estate broker Redfin. e analysis tracks home sales in more than 1,000 cities across the country and defines the luxury market as the top 5 percent of the most expensive homes sold in the city in each quarter. e high demand with a shortage of availability of luxury homes led to the rising prices. e report indicated the number of homes for sale priced at or above $1 million fell 23.8 percent compared to the same period in 2016, marking three consecutive quarters of declines in luxury supply. e supply of homes priced at or above $5 million followed suit and declined 23.4 percent. Despite the shortage of supply the sale of homes priced at or above $1 million jumped 15.2 percent from a year ago, and sales of homes priced at or above $5 million climbed 13.7 percent. "e stock market hit all-time highs with gains in nearly every sector last quarter, instilling confidence among the wealthiest homebuyers As a result, we saw double-digit growth in luxury home sales in the last months of the year," said Nela Richardson, Chief Economist at Redfin. According to the analysis, beachfront communities in Florida were the biggest winners of this price boom with luxury home prices in Sarasota and Delray Beach increasing 45.6 percent and 41.3 percent respectively. For five other Florida cities, including Boca Raton, Miami, Fort Lauderdale, Vero Beach, and West Palm Beach, prices rose by more than 25 percent year-over-year. California, which is otherwise a state with some of the hottest home markets in the country, lost out when it came to luxury home sales with San Francisco posting the largest year over year decline in luxury home prices, down 12 percent to an average of $5.03 million. THE ECONOMY'S GREAT—WHY IS HOUSING A PROBLEM? e American housing market is constrained. Not by price so much as by the continuing lack of houses on the market; and this, according to Realtor.com's "State of the Housing Union" report, is "pressuring potential home buyers striving to attain the American Dream," despite a strong U.S. economy. "Strong demand and weak supply continue to set the tone for the industry," said Joe Kirchner, Senior Economist for Realtor.com. "e new tax law that caps the mortgage interest deduction and the deductibility of state and local taxes can be expected to impact the upper-end market in 2018. Precisely how and the extent of which remain to be seen." While the economy overall is encouraging—consumer confidence and the stock market are high, unemployment in 2017 was at its lowest level since 2000, and the economy added jobs for a record 86th consecutive month, according to November data from the U.S. Labor Department—sales growth of existing U.S. homes actually cooled. Housing sales grew a mere 1.1 percent in 2017, compared to the 3.8 percent growth that occurred in 2016. At the same time, inventory fell 8.8 percent nationally in 2017, versus a 10.7 percent dip during the comparable period a year earlier. Tight supply, the report stated, was the single biggest factor affecting the market. Even with a sharp increase in new construction—single-family housing starts jumped 8.4 percent last year—inventory shortages persisted. As has been the case with the housing economy over the past two years, millennials are feeling it the most. Demand for houses is high among millennials, the report found. But constrained supply that leads to bidding wars and higher prices are in the way. In 2017, housing prices, on average, gained 6 percent. More price growth occurred in blue states, namely California and Illinois and the tri-state region of New York, New Jersey, and Connecticut. Growth in these states was above 9 percent. "Builders will need to focus more on homes geared for moderate incomes, partner with the government on initiatives to transform distressed urban neighborhoods, and overcome labor shortages through a combination of workforce development training and pressure to ease artificial restrictions on the supply of labor," Kirchner said. e report suggests that blue states also have some challenges ahead with the tax bill. "Last year, 2.5 percent of all mortgages in blue states were more than $750,000 and will be directly impacted by the capping of the mortgage interest deduction in 2018," the report stated. "Conversely, only 0.4 percent of mortgages in red states will be impacted."

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