Homes at Rivo Alto Island in Miami Beach, Florida, US, on Wednesday, Feb. 1, 2023.
Eva Marie Uzcategui | Bloomberg | Getty Images
The U.S. housing market is taking a tough hit from higher mortgage rates, and luxury home sales are seeing the worst of it.
Sales of luxury homes dropped 45% throughout the three months ended Jan. 31 compared with the identical period the yr before, in response to Redfin, an actual estate brokerage. Redfin defines luxury homes as those estimated to be in the highest 5% based on the estimated market value. Sales of non-luxury homes were down about 38% during that period.
Miami, which had seen a large influx of rich buyers migrating from the Northeast in the sooner days of the Covid pandemic, saw sales drop nearly 69%. That was followed by the Nassau County-Suffolk County region on Recent York’s Long Island, home to the Hamptons – down nearly 63%. Among the priciest California markets also saw big drops in sales because they, too, experienced big pandemic sales.
While not all luxury buyers use mortgages, they’re affected by the broader economy, and more specifically the stock market. Volatility in financial markets is due to this fact having an outsized effect on the luxurious real estate market.
“The silver lining for the luxurious buyers who’re still out there is that competition is sparse, and jumbo loans now often have lower mortgage rates than other loan types, partly because there’s less risk that high-end buyers will default on their mortgages,” said Chen Zhao, Redfin economics research lead in a release. “Wealthy house hunters are also steadily offered additional rate discounts from their banks as a perk for storing substantial funds there.”
Competition is easing not simply because of falling demand. Supply is rising. Inventory rose 7% yr over yr, which was the most important increase since 2015.
Yet supply can also be still historically tight – not that much higher than the record lows of 2022. Recent listings are also down 22%, indicating that offer is higher because homes are sitting longer.
That lack of supply has pushed luxury home prices higher. The median price was up 9% compared with the identical period the yr before to $1.09 million. Luxury prices hit an all-time high of 1.1 million within the spring of last yr.
