- Luxury home sales slowed due to rising interest rates and fewer properties for sale.
- The average 30-year fixed mortgage rate is now 5.58%, down from 3.11% at the end of last year.
- The average price of the top 1% of luxury homes was $5.5 million earlier in the year.
The luxury home market is weakening due to a combination of rising mortgage rates, runaway inflation and a shortage of properties for sale, according to analysis by real estate firm Redfin.
Sales fell 17.8% in the three months to April 30 from the same period last year, the biggest drop since the pandemic. In comparison, sales of non-luxury goods fell only 5.4%.
“The pool of people qualified to buy luxury properties is shrinking because the stock market is down and mortgage rates are rising,” said Redfin agent Elena Fleck.
The Florida-based agent said she had a $2million home under contract in March before the buyer pulled out.
“They realized their mortgage payment would go up by more than $3,000 a month with the higher interest rate. They couldn’t comfortably afford the house anymore,” Fleck said.
The average 30-year fixed mortgage rate is now 5.58%, well above 3.11% at the end of last year. Jumbo mortgage rates, used for luxury homes, are also at the same level.
The average price for the top 1% of homes in the United States was $5.5 million in January, according to online real estate firm Realtor.
Sales of high-end properties began to fall in the spring and summer of 2021, according to analysis from Redfin, which found that the shortage of homes on offer meant fewer sales.
The number of luxury homes for sale fell 12.4% year-on-year in the three months to April 30, according to data from Redfin.
However, it recorded its first increase since last summer, with a slight increase in new listings.
“The good news for buyers is that the market is becoming more balanced and the competition is lessening. Of course, that doesn’t help the dozens of Americans who have been totally overwhelmed,” Fleck said.
Luxury home sales fell in all but one of the 50 major metropolitan areas. The largest drop was in Nassau County, NY, down 45%, followed by Oakland, CA, with a 35.1% drop and a 33% drop in Dallas. The only increase was in New York, up 30%.