Luxury home sales tanked by 28.1% YOY in the three months ending August 31, the biggest drop since 2012, according to new Redfin data.
The decline overtook even the 23.2% drop that happened at the beginning of the pandemic, when home sales slowed to a crawl in every area.
Non-luxury home sales also fell by the largest margin on record, but in a far less dramatic drop of 19.5%, a change of 0.5%.
The same stressors that are beating down the non-luxury market are impacting high-end buyers: low inventory, rising rates, and economic uncertainty.
“High-end-house hunters are getting sticker shock when they see the impact of rising mortgage rates on paper. For a luxury buyer, a higher interest rate can equate to a monthly housing bill that’s thousands of dollars more expensive,” Redfin Chief Economist Daryl Fairweather said.
“Someone who was in the market for a $1.5 million home last year may now have a maximum budget of $800,000 thanks to higher mortgage rates. Luxury goods are often the first thing to get cut when uncertain times force people to reexamine their finances.”
Even all-cash buyers seeking properties for investment purposes are backing away as prospects sour.
Investors “want to reassess the market to make certain we aren’t going into a severe recession,” Scott Arnold, a broker who represents institutional landlords, told Bloomberg.
“They are waiting for the market to slide so that they can buy at a lower price. And they believe the interest rates will go back down a little bit.”
California markets, which are typically pricey, are seeing huge declines in expensive home sales. Oakland, CA, saw a 63.9% decrease YOY in this three-month period, while San Jose and San Diego saw 55%+ dips.
Inventory is rebounding at this price point, however, down only 1.9% YOY compared to a record 25% decrease this same time last year. Luxury stock is up 39.2% from the beginning of 2022.
Price growth is slowing as a result, up 10.5% YOY compared to a 20.3% increase at the same time last year, and a record-breaking 27.8% jump during the three months ending June 30, 2021.
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