Sales of luxury homes fell 17.8 percent year-over-year during the three months ending April 30, the largest drop since the onset of the pandemic, according to Redfin. By comparison, sales of non-luxury homes fell 5.4 percent.
The luxury market is cooling as soaring interest rates, a tepid stock market, inflation and economic certainty put a damper on demand. For a luxury buyer, a higher mortgage rate can mean a monthly housing bill that’s thousands of dollars more expensive.
The year-over-year cooldown also is a reflection of the market for high-end homes coming back to earth following a nearly 80 percent surge in sales a year ago, according to Redfin.
“The pool of people qualified to purchase luxury properties is shrinking because the stock market is falling and mortgage rates are rising,” Redfin West Palm Beach real estate agent Elena Fleck said in release. “The good news for buyers is the market is becoming more balanced and competition is easing up. Of course, that doesn’t help the scores of Americans who have been priced out altogether.”
Mortgage rates for jumbo loans, the type most luxury borrowers use, also have been surging. The rate on a 30-year jumbo loan was 5.06 percent as of June 8, up from 3.23 percent at the end of 2021.
“I had one seller in Delray who went under contract on their home for over $2 million in March, right in the middle of an interest-rate hike,” Fleck said. “The buyers backed out because they realized their mortgage payment would rise by more than $3,000 per month with the higher interest rate. They could no longer afford the house comfortably.”
The inventory crunch in the high-end housing market is easing as the drop in sales leaves more homes available for purchase. The supply of luxury homes for sale fell 12.4 percent year-over-year during the three months ending April 30. That compares with a record decline of 24.6 percent during the summer of 2021. The supply of non-luxury homes fell 8.4 percent during the three months ending April 30.
Luxury home sales fell in all but one of the top 50 metros Redfin analyzed. The biggest year-over-year decline was in Nassau County, N.Y. (-45.3 percent), followed by Oakland, Calif. (-35.1 percent), Dallas (-33.8 percent), Austin, Texas, (-33 percent) and West Palm Beach, Fla. (-32.8 percent). The only increase was in New York (+30 percent).
The median sale price of luxury homes rose year-over-year in all the top 50 metros. It was up the most in Tampa, Fla. (+33 percent), followed by San Diego (+31.4 percent), Jacksonville, Fla. (+31.2 percent), Nashville, Tenn. (+30.3 percent) and Fort Worth, Texas (+29.4 percent).
New listings of luxury homes increased in 16 of the top 50 metros. The biggest year-over-year gain was in Warren, Mich. (+32.2 percent), followed by New York (+31.1 percent), San Antonio (+22.8 percent), Detroit (+22.3 percent) and Nashville, Tenn. (+18.4 percent). The biggest declines were in Oakland, Calif. (-28.4 percent), Los Angeles (-27.6 percent), Anaheim, Calif. (-25.2 percent), San Francisco (-24.9 percent) and San Jose, Calif. (-23.6 percent).