Luxury home sales fell 17.8% year-on-year in the three months to April 30, which has shocked the housing market since the outbreak of the pandemic. By comparison, non-luxury home sales were down 5.4%. This is an analysis of the luxury real estate trends of Redfin, a technology-powered real estate agent.
The analysis Based on Redfin’s estimation of the market value of homes, we divide all homes into price levels and define luxury homes as the most expensive 5% of homes in each metropolitan area.
High-end markets are chilling as rising interest rates, slumping stock markets, inflation and economic certainty are weakening demand. For high-end buyers, high mortgage rates can mean that your monthly home bill can be thousands of dollars higher. The year-over-year cooldown also reflects the return of the luxury home market to the planet after a nearly 80% surge in sales a year ago.
With the extreme shortage of luxury home sales and the limited number of homes available for sale, sales growth in luxury homes began to slow in the spring and summer of 2021. Although tight inventories have begun to ease, the shortage of luxury homes on the market may still contribute to the decline in luxury home sales.
Elena Fleck, Redfin Real Estate Agent in West Palm Beach, Florida, said: “The good news for buyers is that the market is more balanced and competition is lessened. Of course, that doesn’t help Americans with completely reduced prices.”
Rising interest rates have caused a slowdown in the overall housing market in recent weeks. The average 30-year fixed mortgage rate for the week to June 9 was 5.23%, down slightly from the 2022 peak of 5.3%, but well above the 3.11% at the end of last year. Mortgage rates for the types of jumbo loans used by most high-end debtors are also skyrocketing. Interest rates on 30-year jumbo loans rose from 3.23% at the end of 2021 to 5.06% as of June 8.
“I had one seller in Del Rey who signed a deal at their home for over $ 2 million in March in the midst of a rate hike,” Freck said. “Buyers withdrew because they noticed that mortgage payments would increase by more than $ 3,000 a month at higher interest rates. They could no longer afford to buy a home comfortably.”
Median luxury home sales were $ 1.15 million, up 19.8% year-on-year in the three months to April 30, at about the same growth rate as non-luxury homes. It is still above the pre-pandemic level of less than 10%, but has fallen from the 27.5% peak in the spring of 2021.
The inventory crisis in the luxury home market is mitigating as sales declines and more homes are available for purchase. Supply of luxury homes for sale fell 12.4% year-on-year in the three months to April 30. This is compared to a record decline of 24.6% in the summer of 2021, when demand for luxury homes remained strong. Supply of non-luxury homes fell 8.4% in the three months to April 30.
The increase in the new luxury list is one of the reasons why the overall luxury supply supply has not declined as sharply as last year. New listings of luxury homes increased 1.1% year-on-year in the three months to April 30, the first increase since the summer of 2021.