Redfin Reports Luxury Home Prices Hit All-Time High As Record Share of High-End Buyers Pay Cash

Rhea-AI Summary

Redfin's report reveals that luxury home prices in the US rose at twice the rate of non-luxury homes in the fourth quarter of 2023. The typical US luxury home sold for a record $1.17 million, up 8.8% from a year earlier, while non-luxury homes increased by 4.6% to a record $340,000. A record-high share of all-cash luxury home purchases drove the relative strength of the high-end housing market, with nearly half (46.5%) of the fourth quarter's luxury purchases made in cash. New listings of luxury homes jumped 19.7% year over year, while luxury sales fell by 2%, the smallest decline in over 2 years. The report also includes metro-level luxury highlights, showcasing significant increases in prices, new listings, active listings, and home sales in various US metro areas.

Positive

• Luxury home prices increased by 8.8% year over year, reaching a record $1.17 million
• Record-high share of all-cash luxury home purchases at 46.5%
• New listings of luxury homes jumped by 19.7% year over year
• Smallest decline in luxury sales in over 2 years at just 2%

Negative

• None.

Insights

Market Research Analyst

The recent surge in luxury home prices, which have escalated by 8.8% compared to a 4.6% increase in non-luxury homes, indicates a diverging trend within the real estate sector. This divergence is a reflection of the purchasing power of affluent buyers, who are less sensitive to fluctuations in mortgage rates. The substantial cash transactions, nearly 46.5% of luxury home purchases, underscore a robust demand in the high-end market that is not hindered by the current financial barriers affecting the broader housing market.

From a market dynamics perspective, the uptick in luxury listings by 19.7% suggests a response from sellers looking to capitalize on the high price environment. However, this influx of inventory may gradually stabilize prices as supply begins to meet the pent-up demand. The resilience of the luxury market, evidenced by a minor 1.7% drop in sales compared to the more significant 8.1% decline in non-luxury home sales, reflects a less elastic demand curve for luxury properties, which could continue to buoy the market segment in the short term.

Financial Analyst

The implications of the robust luxury housing market on the broader economy and stock market are multifaceted. The increased activity in the high-end real estate market could signal confidence among wealthy consumers, potentially translating into higher spending on luxury goods and services. This consumer behavior could have positive spill-over effects on sectors catering to affluent demographics. Additionally, the real estate companies and brokerages specializing in luxury properties might experience enhanced revenues and profitability, which could reflect positively on their stock valuations.

However, it is crucial to monitor the sustainability of this trend, as an eventual normalization of inventory levels and potential shifts in consumer sentiment could moderate growth. The real estate industry, particularly companies like Redfin, may need to adjust their strategies to navigate the changing landscape, balancing the demand between luxury and non-luxury segments.

Economist

The data suggests a bifurcation in the housing market that has implications for economic inequality and monetary policy. The insensitivity of the luxury market to high mortgage rates could indicate a disconnect between the affluent and the average consumer, potentially exacerbating wealth disparities. This trend may also influence the effectiveness of monetary policy, as interest rate hikes aimed at cooling the housing market and controlling inflation may have a limited impact on the upper echelons of the market.

In the long term, such a trend could lead to a reevaluation of housing market dynamics and the role of cash purchases in driving up property values. Policymakers may need to consider targeted measures to ensure housing affordability across different market segments. The luxury real estate market's resilience in the face of broader economic headwinds could also serve as a bellwether for investor sentiment, influencing investment strategies across asset classes.

Prices of luxury homes rose at twice the pace of non-luxury homes at the end of 2023, partly because elevated mortgage rates are irrelevant to many affluent buyers

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — The typical U.S. luxury home sold for a record $1.17 million in the fourth quarter, up 8.8% from a year earlier, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

Prices of non-luxury homes increased at half the pace, rising 4.6% year over year to a record $340,000.

This is according to an analysis that divided all U.S. residential properties into tiers based on Redfin Estimates of the homes’ market values as of January 2024. Redfin’s report defines luxury homes as those estimated to be in the top 5% of their respective metro area based on market value, and non-luxury homes as those estimated to be in the 35th-65th percentile based on market value.

The outsized increase in luxury prices, along with a jump in luxury new listings and improving sales, signal that affluent homebuyers and sellers are becoming more active.

Share of luxury homes bought in cash hits record high

A record-high share of all-cash luxury home purchases drove the relative strength of the high-end housing market: Nearly half (46.5%) of the fourth quarter’s luxury purchases were made in cash, up from 40% a year earlier.

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. High mortgage rates have a more chilling effect on the rest of the market, upping interest payments and keeping price increases modest.

“A lot of luxury buyers are coming in with cash, snapping up expensive homes,” said Heather Mahmood-Corley, a Redfin Premier agent in Phoenix. “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. One client recently bought a house in Tempe, flipped it, and it sold for $1.4 million in two days.”

Low inventory is another factor pushing luxury prices up. Even though the supply of luxury homes surged from a year earlier, it’s still well below pre-pandemic levels, leading to competition from well-heeled buyers over a limited number of homes.

New listings climb nearly 20% year over year to pre-pandemic levels

New listings of luxury homes jumped 19.7% year over year in the fourth quarter, the biggest increase in over two years. The increase brings the number of U.S. new luxury listings to just under 53,000, comparable to fourth-quarter levels in 2018 and 2019, just before the pandemic started.

By comparison, new listings of non-luxury homes fell roughly 3% from a year earlier—though that’s the smallest decline in a year and a half.

Luxury new listings soared for several reasons:

• High-end sellers put their homes on the market to cash out while prices were high.
• The mortgage-rate lock-in effect doesn’t hold back affluent buyers as much as middle-income buyers.
• New listings had a lot of room to grow, as they were sitting at their lowest level in a decade at the end of 2022.

The total number of luxury homes for sale also soared, rising 13% year over year. Total non-luxury inventory dropped 9.7%.

Despite the big year-over-year jump, total luxury inventory is still below typical fourth-quarter levels. But the total supply of luxury homes is likely to rise more in 2024. That’s because new listings have already increased significantly, and more high-end homeowners are likely to jump on the selling bandwagon because they can command record-high prices.

“More luxury listings will temper price growth as the year goes on,” said Redfin Senior Economist Sheharyar Bokhari. “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.”

Luxury sales fall 2% from a year earlier—the smallest decline in over 2 years

Sales of luxury homes dropped 1.7% year over year in the fourth quarter, the smallest decline since the middle of 2021. That’s compared to an 8.1% decline for non-luxury homes, the smallest since the start of 2022—but four times bigger than the decline in luxury sales.

Metro-Level Luxury Highlights: Q4 2023

Redfin’s metro-level luxury data includes the 50 most populous U.S. metro areas. Some metros are removed from time to time, to ensure data accuracy. All changes noted below are year-over-year changes.

• Prices: The median sale price of luxury homes rose most in Newark, NJ (11.6%), New Brunswick, NJ (10.9%) and Orlando (10.8%). It fell in just eight metros, with the biggest declines in Austin, TX (-8.6%), Las Vegas (-6.1%) and Jacksonville, FL (-2.3%).
• New listings: New listings of luxury homes rose most in Phoenix (42.3%), Tampa, FL (41.6%) and New York (31.6%). They fell most in Milwaukee (-16.7%), Baltimore, MD (-10.2%) and Chicago (-4.4%).
• Active listings: The total number of luxury homes for sale increased most in Austin, TX (44.5%), San Antonio, TX (33.1%) and Tampa, FL (30.4%). It fell most in Detroit, MI (-14.7%), Oakland, CA (-12.6%) and Newark, NJ (-11.9%).
• Home sales: Luxury home sales increased most in Las Vegas (33.9%), Tampa, FL (24.3%) and Pittsburgh, PA (21.5%). They fell most in New York (-21%), Charlotte, NC (-21%) and Kansas City, MO (-20.8%).

10 Most Expensive U.S. Home Sales: Q4 2023

1. Miami, FL (Indian Creek Village): $79M
2. New York, NY: $75M
3. New York, NY: $65.6M
4. Aspen, CO (Glenwood Springs): $60M
5. New York, NY: $47M
6. Aspen, CO (Glenwood Springs): $42.3M
7. San Francisco, CA (Atherton): $40M
8. Fort Lauderdale, FL: $40M
9. Miami, FL (Miami Beach): $35.4M
10. Los Angeles, CA: $34.6M

To view the full report, including charts and a full metro-level summary, please visit: https://www.redfin.com/news/luxury-housing-market-q4-2023/

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We also run the country's #1 real estate brokerage site. Our home-buying customers see homes first with same day tours, and our lending and title services help them close quickly. Customers selling a home in certain markets can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Customers who buy and sell with Redfin pay a 1% listing fee, subject to minimums, less than half of what brokerages commonly charge. Since launching in 2006, we've saved customers more than $1.5 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240131554772/en/

Redfin Journalist Services:

Isabelle Novak

414-861-5861

press@redfin.com

Source: Redfin

FAQ

What was the year-over-year increase in luxury home prices?

Luxury home prices increased by 8.8% year over year, reaching a record $1.17 million

What was the share of all-cash luxury home purchases in the fourth quarter?

A record-high share of all-cash luxury home purchases drove the relative strength of the high-end housing market, with nearly half (46.5%) of the fourth quarter's luxury purchases made in cash.

How much did new listings of luxury homes increase year over year?

New listings of luxury homes jumped by 19.7% year over year

What was the percentage decline in luxury home sales in the fourth quarter?

Luxury sales fell by 2%, the smallest decline in over 2 years

Which metro area saw the highest year-over-year increase in luxury home prices?

The median sale price of luxury homes rose most in Newark, NJ (11.6%), New Brunswick, NJ (10.9%) and Orlando (10.8%)

What was the most expensive US home sale in Q4 2023?

The most expensive US home sale was in Miami, FL (Indian Creek Village) for $79M