Record prices and limited supply aren't just making it hard on the average homebuyer this year. Shoppers at the high end of the market -- typically less susceptible to supply and demand -- are encountering similar challenges.
The average price of a luxury home rose 7.5 percent, to $1.79 million, in the second quarter of 2017 compared to last year, reports the real estate brokerage Redfin. That's a half-percentage point higher than the rest of the market, and the first time since 2014 that prices on the luxury market -- the 5 percent of homes that sold for the highest price -- grew more than the bottom 95 percent.
One reason for the higher prices: a rare shortage of inventory. The share of U.S. homes priced at or above $1 million fell 9.4 percent compared to the same period last year, according to Redfin, while homes priced at or above $5 million fell by 9.5 percent. The supply of luxury homes hasn't dropped that much year over year since Redfin began tracking that market three years ago.
Redfin chief economist Nela Richardson said that, despite fewer high-end homes for sale and surging prices, luxury buyers aren't facing the same level of competition for a home as the rest of the market.
"Only one in 50 luxury homes homes sold above list price in the second quarter," she said, "compared to more than one in four homes in the bottom 95 percent.”
Meanwhile, more U.S. neighborhoods are beyond the reach of the average homebuyer than at any time since before the recession, according to an analysis of sales in 30,000 ZIP codes by Zillow.
The real estate website found that 4.35 percent of ZIP codes have a significant share -- at least 10 percent -- of million-dollar homes, compared to 3.77 percent in 2007.
The growth of million-dollar neighborhoods underscores the growing economic divide between coastal cities and the rest of the country. Of the 346 ZIP codes that joined the million-dollar club since 2014, six in 10 are on the East or West coast.
These areas -- neighborhoods in cities like San Francisco, Seattle, New York, Boston and Washington D.C. -- are some of the most vibrant in the country. But, as they become ever more expensive to live, fewer people looking for better jobs and higher wages can afford to relocate.