- 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 $1.7 million in the fourth quarter of 2023, up 8.8% year-over-year.
- “So many affluent buyers are able to buy homes in cash, rendering today’s elevated mortgage rates irrelevant.”
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.
Redfin defines a luxury home as “those estimated to be in the top 5% of their respective metro area based on market value.” Non-luxury homes fall in the 35th to 65th percentile.
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.
But it’s not just luxury homes that are selling. The broader housing market is recovering, and new listings have risen 19.7% year-on-year — the biggest jump in two years. The total number of 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.