Luxury home sales nationwide plummeted by 38.1% annually in the three months ending Nov. 30, marking the largest year-over-year decline ever recorded by Redfin.
The decrease exceeded the 31.4% yearly backtrack for non-luxury home sales, which also marked a new record. Redfin data, which goes back to 2012, defines luxury homes as residential properties estimated to be in the top 5% of local market value. Non-luxury homes, on the other hand, are those estimated within the 35th to 65th percentile based on market value.
Obviously, the entire U.S. housing market has deflated due to higher interest rates, inflation, low affordability and fears of recession. Redfin speculated on a few additional reasons for the big decline in luxury homebuying, including the weakness of the investment property sector, a regression from the recent outsized growth of high-end home sales, and the flagging stock market where affluent buyers often have significant money tied up.
Luxury home sales fell in every metro area in the country, but sales declines were steepest in pricey coastal areas. New York’s Nassau County (Long Island) saw luxury home sales nosedive by 65.6% annually in the three months ending Nov. 30, the sharpest plunge among the country’s largest metros. The top five was rounded out by four expensive California markets: San Diego (down 60.4%), San Jose (-58.7%), Riverside (-55.6%) and Anaheim (-55.5%).
Meanwhile, due in part to flagging sales, the number of luxury homes listed for sale grew 5.2% year over year in the September through November period, rising to 163,000 units. That’s the largest gain in luxury home supply since 2016. The supply of non-luxury homes, on the other hand, fell 5.7% to about 552,000 units during the same time frame.
There may be some relief on the horizon, both for the luxury home market and for residential sales as a whole. With interest rates gradually retreating, early signs of a small recovery in homebuyer demand are beginning to surface. Mortgage applications have recently seen an uptick, as has Redfin’s Homebuyer Demand Index, which is based on the frequency of requests for home tours and other buyer services.
“There has been a small shift in the market that’s not fully showing up in the data yet,” said Shoshana Godwin, a Redfin agent based in Seattle. “With mortgage rates falling, a lot of house hunters see this as their moment to come back and compete.
“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.”