According to a new report published by Redfin, a technology-powered real estate brokerage, there has been a significant decrease in luxury home sales. Over the past three months, leaning toward the end of 2022, a record decline in sales was established, putting the luxury market in a looming recession.
Redfin has been renowned for releasing state-of-the-art properties and trusting statistics. Specifically designed for high-end real estate brokers, they have been tracking data since 2012, keeping an eye on the market to know what's hot and what's not. Currently, Redfin operates in 95 markets throughout the United States and Canada, while their remaining markets are monitored via referral agents. However, in the past three months, inflation has exceeded its potential, and "Luxury homes are often among the first to get cut from budgets during times of economic stress," says Forbes. The power-play in the luxury market concluded toward the end of November. Sales of luxury homes fell 38.1%, the "biggest decline by record," whereas non-luxury home sales experienced a 31.4% decline. While investments and luxury sales soared through the pandemic, this only gave them "more room to fall." As well, funds that were stored away in the stock market are now losing value.
In the three months prior to November 30th, 2022, the most popular metropolitan areas were those significantly affected. Luxury homes in Long Island dropped 65.6% "year over year," while San Diego saw a 60.4% decrease, and Riverside experienced a 55.6% plummet. Contrarily, when the economy is at its peak, these are the few out of the many specific markets which are dubbed the most expensive. While interest rates are slowly declining, buyer demand is starting to get back on track with more competition within the market. As a result, the market is only becoming more expensive with less appeal to move forward with sales. Shoshana Godwin, Seattle Redfin agent, says, "Many of my buyers are taking out jumbo loans—mortgages typically used for purchases of high-end homes. While some data shows jumbo mortgage rates above 6%, some of my buyers are getting rates in the low 5% range." Within the three-month research period, the median sale price was standing at $1.1 million for luxury homes and $325,000 for non-luxury. Data displayed the largest jump in price sales for homes were in Miami (28.1%) and West Palm Beach, Florida (25%), while San Fransisco detained its prices as they saw a mere 0.1% jump in sales, and Nassau Country experienced a smidge of 2.1% increase.
High-end home sales are plummeting. Here’s why:— Redfin (@Redfin) December 28, 2022
✨ Luxury sales spiked during the pandemic, so there’s more room to fall
📉 Affluent buyers’ spending power is suffering from a faltering stock market
💰 Investment opportunities are lackluster
As we enter a new year, buyers and big spenders are working hard to ensure their investments are placed into safe hands. But with a looming recession, it is unwritten how the housing market will be affected in the coming year. However, with Redfin's continuous updates, luxury property owners, investors, and buyers will be keeping an eye out for trends in the market. Stay tuned.