Sales of non-luxury homes also fell by the most on record, dropping 19.5% during the three months ending August 31. That exceeded a slight decrease of 19% during the three months ending June 30, 2020.
High interest rates, inflation, a tepid stock market, and economic uncertainty are causing buyers of luxury goods to fall back. The average 30-year fixed-rate mortgage exceeded 6% last week, hitting its highest level since 2008. While premium buyers are likely to pay cash, many still take out mortgages — sometimes as an investment strategy. The story in the luxury market is similar to the story in the housing market in general, but more extreme, said Daryl Fairweather, chief economist at Redfin.
“High-end home hunters are shocked to see the impact of higher mortgage rates on paper. For luxury-goods buyers, a high interest rate can equate to a monthly housing bill worth thousands of dollars.” “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 high mortgage rates. Luxury goods are often the first thing cut when uncertain times force people to re-examine their financial resources.
California’s expensive markets are driving the decline in high-end home sales. In Oakland, California, sales of luxury homes fell 63.9% year-on-year during the three months ending August 31, the largest decline among the 50 most populous US metropolitan areas. San Jose and San Diego also saw declines of more than 55%. These markets have something else in common: They’ve seen a bigger drop in luxury listings than anywhere else in the country as sellers have pulled back in response to lower demand. This has exacerbated the decline in home sales. When there are fewer homes that reach the market, there are fewer homes that can be sold.
Luxury home prices are growing at half the speed they were a year ago
Home price growth in the luxury goods market is slowing as demand declines. The median sale price of luxury homes rose 10.5% year-over-year to $1.1 million during the three months ended August 31, compared to a year-on-year increase of 20.3% a year earlier and a record gain of 27.8% during the three months ended June 30. , 2021.
Luxury home prices are rising at a slower pace than non-luxury home prices, which increased 15.5% year-over-year to $335,000 during the three months ending August 31. It posted a 19.7% gain during the three months ending March 31, 2022.
It’s also possible that price growth in the luxury goods market will slow in part because the supply crunch is generally waning, which means home hunters have more options to choose from and less competition.
The shortage of luxury homes is fading away
The number of luxury homes for sale fell 1.9% year over year to nearly 169,000 during the three months ending August 31, compared to a record drop of 25% nearly a year ago. The supply of luxury homes is still down year-on-year, but has been up since the beginning of the year. The number of luxury homes on the market rose 39.2% from a record high of about 121,000 during the three months ending Feb. 28.
The supply of non-luxury homes fell 3.5% year over year during the three months ended August 31. This is the first time in nearly two years that the supply of luxury homes has declined at a slower rate than the supply of non-luxury homes.
The supply crunch in the luxury goods market is declining for two reasons: lower demand and an increase in the number of homes hitting the market. While listings are declining in expensive coastal markets including Oakland and San Diego, they are generally increasing. Nationally, new listings for luxury homes rose 1.2% year over year during the three months ended August 31, while new listings for non-luxury homes fell 5.9%.
To read the full report, including graphs, methodology, and additional metro-wide data, visit: https://www.redfin.com/news/luxury-home-sales-august-2022/
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