Mortgage News March 24, 2023
According to a report by Redfin, luxury home sales have seen a record year-over-year decline, dropping to the second-lowest level ever. During the three months ending Jan. 31, sales of homes in the top 5% of estimated market values fell by 44.6% annually, the largest drop ever recorded. This drop can be attributed to the gains in high-end home sales during the COVID-19 pandemic, which saw luxury home sales grow faster than non-luxury sales. The challenging economic environment has had a negative impact as consumers tend to buy fewer costly items, such as homes, during times of financial instability or unpredictability. Additionally, high mortgage rates have significantly increased the price of luxury homes, leading even wealthy buyers to feel hesitant about making a purchase.
Many luxury home hubs, including Miami, Nassau County-Suffolk County, New York (Long Island), Riverside, Anaheim, and San Jose, saw a big drop in high-end home sales during the three months ending in January. However, luxury home prices remain near their peaks despite the drop in sales. The median sales price of these homes jumped 9% annually, reaching $1.09 million, with the all-time high being $1.1 million, reached in the spring of 2022.
Despite the decline in sales, the scarcity of luxury homes for sale has helped keep their prices elevated. In the three months ending Jan. 31, the number of luxury homes available for purchase increased by 7.1% compared to the previous year. However, it’s worth noting that the reason for this increase is that the inventory of luxury homes hit a record low about a year ago.
According to Chen Zhao, economics research lead at Redfin, financing remains easily accessible even for buyers willing to plunge into the market’s most luxurious tiers. Nevertheless, the tempestuous state of Wall Street, which just had its roughest year since 2008, may make some luxury home buyers hesitant to spend big. Overall, luxury home sales are likely normalizing from unsustainable levels, and while the market may not be as frothy as it was during the pandemic, it still remains relatively strong.
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