Luxury homes are more expensive than ever as the wealthy buck high mortgage rates
- Luxury home prices are at the highest they've ever been, with prices rising twice as much as non-luxury homes, Redfin said.
- The typical US luxury home sold for about $1.17 million in the fourth quarter of 2023, up 8.8% year-over-year.
Luxury home prices have hit an all-time high, rising at twice the pace of non-luxury homes, Redfin wrote in a report on Wednesday. While high mortgage rates have crushed the rest of the housing market, wealthy buyers have enough cash to pay for a home upfront, free from the rate "lock-in effect."
"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," the release stated. "High mortgage rates have a more chilling effect on the rest of the market, upping interest payments and keeping price increases modest."
A typical US luxury home cost $1.17 million as of the end of last year, up 8.8% from a year earlier. Compare that to the price of a non-luxury home, which rose 4.6% to a record $340,000.
The share of rich homebuyers paying all cash in the luxury home market rose to a record 46.5% in the fourth quarter of 2023. That's up from 40% a year ago.
"A lot of luxury buyers are coming in with cash, snapping up expensive homes," a Redfin Premier agent, Heather Mahmood-Corley, said. "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."
What's driving the surge is not just the fact that wealthy Americans can skip taking out a home loan. It's also that the supply of luxury homes is still low, driving up competition and pushing bid prices higher.
The luxury housing market as a whole is performing well, and new luxury listings have risen 19.7% year-on-year — the biggest jump in two years, according to Redfin. The total number of luxury homes on the market also rose by 13%. Sales dipped by 1.7%, but that's the smallest decline the market has seen since 2021.