In an era of instability in the real estate market, the luxury housing sector is king.
A new report from Redfin found that the average luxury home sold for a median of $1.17 million during the fourth quarter of 2023, an 8.8 percent uptick from a year prior, setting a new record. At the same time, prices for properties at the high end of the luxury sector—those estimated to be in the top 5 percent of their metro area—increased at twice the pace of non-luxury homes.
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“Luxury prices are rising at twice the rate of non-luxury prices largely because so many affluent buyers are able to buy homes in cash, rendering today’s elevated mortgage rates irrelevant,” the report stated. “High mortgage rates have a more chilling effect on the rest of the market, upping interest payments and keeping price increases modest.”
According to the analysis, almost half—46.5 percent—of luxury purchases in the fourth quarter were all-cash sales. For context, 40 percent of buyers paid in cash in 2022. The metro where high-end home prices increased the most in Q4 might just surprise some because it wasn’t Beverly Hills or Palm Beach; it was Newark, New Jersey, with an 11.6 percent spike.
“A lot of luxury buyers are coming in with cash, snapping up expensive homes,” Heather Mahmood-Corley, a Redfin Premiere agent in Phoenix, said in the release. “High-end homes are selling fast, especially in desirable areas like luxurious Scottsdale or Tempe, which West Coast transplants love because it’s centrally located.”
The supply of luxury properties has yet to return to pre-pandemic levels, so the current inventory, or lack thereof, is another factor driving up prices. However, it is inching closer. The number of new listings for high-end homes was up almost 20 percent year over year in the last quarter, which was the largest spike in over two years, according to Redfin. As a whole, the total number of luxury homes for sale rose a whopping 13 percent year over year, while sales dipped 1.7 percent, the smallest decline since the beginning of 2022.
“More luxury listings will temper price growth as the year goes on,” Redfin senior economist Sheharyar Bokhari added in the report. “Overall, that’s a good thing for the high-end market. Sellers will still fetch fair prices, buyers will have more to choose from and sales should tick up.”
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