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In the luxury home market there is a mad dash for the exit.

However, buyers are holding their noses as Luxury Home Sales See Biggest Slump in Nearly a Decade.

Sales of homes listed at $2 million and above fell 16% in the first quarter, the sharpest annual decline since 2010, according to Redfin, a real estate brokerage.

This as the supply of those homes rose 14%, marking four straight quarters of annual increases in inventory.

The average price of a “luxury” home, which Redfin defines as the top 5% in each of the 1,000 cities it tracks, fell 1.6% to $1.55 million. Nonluxury homes saw their average price rise 2.7% annually to $300,000.

“Not only do the new rules make it less desirable to purchase a multi-million dollar home in high-tax states, it has also motivated some people—especially those with big incomes and big housing budgets—to consider moving to places like Florida, Washington or Nevada, which have no state income tax,” wrote Redfin’s chief economist, Daryl Fairweather, in a release.

​The shift in the luxury market has been more pronounced, therefore, in certain metropolitan markets. The average luxury sale price fell hardest in Boston (-22.4%), Newport Beach, California (-21.8%), and Miami (-19.3%). Miami’s drop may have been less about tax changes and more about overbuilding on the luxury end in recent years that has led to an oversupply of high-end homes for sale.

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This trend is in its infancy.

Retiring or retired boomers whose kids have long ago moved out of the house are tired of maintaining these gargantuan homes.

Some want to move closer to their kids, others need to move closer to their kids for health reasons.

Another subset wants to be closer to their grand kids.

Perhaps now its just the way top end, over $2 million, but that will quickly trickle down.

A $2,000,000 home discounted to $1,600,000 or cheaper will affect the prices of all the homes currently in the $1,200,000 to $1,600,000.

I fully expect a cascade, just like we saw in 2007-2010, just not on the same scale or same impact.

Mike "Mish" Shedlock​