Real estate is increasingly a tale of two markets — a luxury sector that is booming, and the rest of the market that continues to struggle with high rates and low inventory.
According to , overall real estate sales across the country fell 4 percent in the first quarter. Redfin. Still, luxury real estate sales rose more than 2 percent, posting their best year-over-year gain in three years, according to Redfin.
Real estate experts and brokers work out the difference in interest rates and supply. With mortgage rates now above 7% for a 30-year fixed loan, most homebuyers are finding prices out of reach. However, affluent and wealthy buyers are snapping up homes with cash, making them less vulnerable to higher rates.
About half of all luxury homes, defined by Redfin as homes in the top 5% of their metro area, were purchased with all cash in the quarter, according to Redfin. This is the highest share in at least a decade. In Manhattan, all-cash deals accounted for 68 percent of all sales, according to Miller Samuel.
The flood of cash is also pushing up prices. According to Redfin, median luxury home prices rose nearly 9 percent in the quarter, nearly double the increase seen in the broader market. The median price of luxury homes hit an all-time high of $1,225,000 during that period.
“People with the means to buy high-end homes are jumping in now because they believe prices will continue to rise,” said David Palmer, a Redfin agent in Seattle, where the average The pricey luxury home sells for $2.7 million. “They are willing to buy with more hope and less apprehension.”
Trump International Hotel and Tower New York Building by AvalonBay Communities Inc. Park Loggia Condominium is seen from the balcony of an apartment unit at 15 West 61st Street on May 15, 2019 in New York.
Mark Abramson | Bloomberg | Getty Images
The luxury market is also benefiting from an oversupply of homes for sale. Because wealthier sellers are more likely to buy with cash, they aren’t as concerned about trading down a low-rate mortgage as most homeowners. This has freed up the top end of listings, created more inventory and driven more sales.
According to Redfin, the number of luxury homes for sale rose 13 percent in the first quarter, while the rest of the housing market fell 3 percent. While overall luxury inventory is “well below” pre-pandemic levels, the number of luxury listings coming online increased 19 percent during the first quarter, the report said.
“High-end home prices continue to rise, so homeowners find it’s a good time to cash in on their equity,” Palmer said.
Still, not all luxury markets are booming, and the strongest price increases are in areas not typically known for luxury homes. According to Redfin, the market with the fastest rising luxury prices was Providence, Rhode Island, where prices rose 16%, followed by New Brunswick, New Jersey, where prices rose 15%. New York City saw the biggest drop in prices, down 10 percent.
When it comes to overall luxury home sales, Seattle posted the strongest growth of any metro area, with sales up 37%. Austin, Texas was second with a 26 percent increase in sales, followed by San Francisco with a 24 percent increase.
Luxury homes sold the fastest in Seattle, with an average days on market of nine days, followed by Oakland, California, and San Jose, California.
Credit : www.cnbc.com
