Luxury U.S. homes purchases fell 28.1% year over year during the three months ending Aug. 31, 2022, according to a new report from Redfin, as rising interest rates, inflation, a tepid stock market and economic uncertainty are causing luxury buyers to back off.
That’s the biggest decline since at least 2012, eclipsing the 23.2% plunge that occurred when the onset of the Covid-19 brought the housing market to a near standstill roughly two years ago, the real estate brokerage revealed.
“High-end-house hunters are getting sticker shock when they see the impact of rising mortgage rates on paper. For a luxury buyer, a higher interest rate can equate to a monthly housing bill that’s thousands of dollars more expensive,” Fairweather said. “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 higher mortgage rates. Luxury goods are often the first thing to get cut when uncertain times force people to reexamine their finances.”
Expensive California markets are leading the drop in high-end-home sales. In Oakland, CA, luxury-home sales plunged 63.9% year over year during the three months ending Aug. 31, the largest decline among the 50 most populous U.S. metropolitan areas. San Jose and San Diego also experienced decreases of more than 55%. These markets have something else in common: they’ve seen larger declines in luxury listings than anywhere else in the country as sellers have backed off in response to ebbing demand. This has exacerbated the decline in home sales; when there are fewer homes hitting the market, there are fewer homes that can be sold.
Sales of non luxury homes also fell the most on record, decreasing 19.5% during the three months ending Aug. 31. That slightly outpaced the 19% decline during the three months ending June 30, 2020. The supply of non luxury homes fell 3.5% year over year during the three months ending Aug. 31. That’s the first time in roughly two years that luxury-home supply fell at a slower clip than non luxury supply.