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Luxury home sales plunge as mortgage rates rise

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Wealthy homebuyers are not immune to this year’s tough housing market.

According to one study, summer sales of luxury homes plummeted 28.1% year-on-year. redfin reportThis is the steepest drop since at least 2012, when the company began collecting data.

The plunge surpassed the 23.2% decline during the pandemic two years ago and the 19.5% decline in non-luxury home sales recorded during the same period.

The latest figures highlight that mortgage rates are rising rapidly across the housing market after rising more than 3 percentage points since the beginning of the year.

“High-end home hunters are in sticker shock after seeing the impact of rising mortgage rates on paper. ,” said Daryl Fairweather, Chief Economist at Redfin. “When times of uncertainty force people to rethink their finances, luxuries are often the first thing cut.”

Redfiin reports 28.1% decline in luxury home sales

This week, the interest rate for the 30-year fixed mortgage, the most popular for home loan purchases, jumped to 6.29% from last week’s 6.02%. This is the highest level since October 2008, and high-end homebuyers are feeling the pressure. become less.

“People who were looking to buy a $1.5 million home last year may now have a maximum budget of $800,000 due to higher mortgage rates,” Fairweather said.

In addition, inflation, recession concerns, and lukewarm stock market Even if you manage to get to the table with all your cash, it’s weighing heavily on high-end homebuyers.

“Cash buyers who like to put their money in luxury homes may be staying away from the real estate market given the worsening investment prospects.” redfin report OK. “With house prices trending lower in many cities, some luxury home hunters may be shifting their money to other investments such as bonds that may offer higher returns. .”

In the California Bay Area, Oakland 63.9% drop.Both San Diego and San Jose registered 55% Rejected.

BEVERLY HILLS, CALIFORNIA - SEPTEMBER 8, 2008: Court-appointed trustee Ted Lannes currently manages the property and is responsible for finding a buyer and repaying the lender and other creditors. . Sale in Bel Air. This is clearly the largest home for sale in the United States.Neil Niami, developer

Beverly Hills, CA: The One, 105,000 sq ft home for sale in Bel Air. This is clearly the largest home for sale in the United States. Developer Nial Niami went public with his $500 million, but ran into financial trouble and was seized by Don Hankey. Photo taken Wednesday, September 8, 2021 in Bel Air, Beverly Hills, California. (Allen J. Schaben/Los Angeles Times via Getty Images)

Redfin also found that declining sales are starting to dampen price increases in luxury homes. The median selling price rose 10.5% year-over-year to $1.1 million for the period. This is down from an annual increase of 20.3% in the same period last year, and he posted a record rise of 27.8% in the three months to the end of June 2021.

“Luxury home prices have skyrocketed so much that many buyers feel they can’t justify a purchase,” said Sam Chute, a Redfin real estate agent in Miami. “Some of the homes that he would have sold for $5 million before the pandemic have now received only minor cosmetic updates, are now priced at over $10 million. It’s a tough pill to swallow for today’s buyers.”

Ronda is a Senior Personal Finance Reporter for Yahoo Money and an attorney with experience in law, insurance, education and government. follow her on her twitter @writesronda

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