Real estate is increasingly a tale of two markets — a luxury sector that’s booming, and the rest of the market that continues to struggle with higher rates and low inventory.
Overall real estate sales fell 4% nationwide in the first quarter, according to Redfin. Yet luxury real estate sales increased more than 2%, posting their best year-over-year gains in three years, according to Redfin.
Real estate experts and brokers chalk up the divergence to interest rates and supply. With mortgage rates now above 7% for a 30-year-fixed loan, most homebuyers are finding prices out of reach. Affluent and wealthy buyers, however, are snapping up homes with cash, making them less vulnerable to high rates.
Nearly half of all luxury homes (defined by Redfin as homes in the top 5% of their metro area by value) were bought with all cash in the quarter, according to Redfin. That’s the highest share in at least a decade. In Manhattan, all-cash deals hit a record 68% of all sales, according to Miller Samuel.
The flood of cash is also driving up prices at the top. Median luxury-home prices soared nearly 9% in the quarter – roughly twice the increase seen in the broader market, according to Redfin. The median price of luxury homes hit an all-time record of $1,225,000 during the period.
“People with the means to buy high-end homes are jumping in now because they feel confident prices will continue to rise,” said David Palmer, a Redfin agent in Seattle, where the median-priced luxury home sells for $2.7 million. “They’re ready to buy with more optimism and less apprehension.”
The luxury market is also benefitting from more supply of homes for sale. Since wealthy sellers are more likely to buy with cash, they aren’t as worried about trading out of a low-rate mortgage — like most home-owners. That’s freed up the upper end of listings, creating more inventory and driving more sales.
The number of luxury homes for sale jumped 13% in the first quarter, compared to a 3% decline for the rest of the housing market, according to Redfin. While overall luxury inventory remains “well below” pre-pandemic levels, the number of luxury listings that came online during the first quarter jumped 19%, the report said.
“Prices continue to increase for high-end homes, so homeowners feel it’s a good time to cash in on their equity,” Palmer said.
Still, not all luxury markets are booming, and the strongest price growth is in areas not typically known for luxury homes. According to Redfin, the market with the fastest luxury-price growth was Providence, Rhode Island, with prices up 16%, followed by New Brunswick, New Jersey, where prices were up 15%. New York City saw the biggest price decline, down 10%.
When it comes to overall sales of luxury homes, Seattle posted the strongest growth of any metro area, with sales up 37%. Austin ranked second with sales up 26%, followed by San Francisco with a 24% increase.
Luxury homes sold the fastest in Seattle, with a median days on market of nine days, followed by Oakland, California, and San Jose, California.
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