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Price growth of luxury homes in the U.S. skyrocketed past non-luxury properties during the first quarter of 2024 as luxury buyers remained undeterred by elevated mortgage rates, according to a new Redfin analysis.
The news comes as buying a home in the U.S. has never been more expensive, with homebuyers’ median monthly housing payments hitting a record of $2,775, Redfin reported in a separate analysis this week.
In the luxury sector, home prices in the first quarter increased nearly 9 percent year over year, which was twice as fast as non-luxury home prices, which climbed 4.6 percent year over year. The median-priced luxury home in the U.S. sold for a new high of $1.225 million, while the median-priced non-luxury home sold for $345,000, which was also a new record.
Credit: Redfin
Redfin’s report was based on Redfin Estimates (the firm’s calculation of a home’s value) of home market values as of March 2024. Luxury homes are defined as those in the top 5 percent of their metro area based on market value, and non-luxury homes are those that are in the 35th-65th percentile, based on market value.
Demand for luxury properties has held up better than non-luxury homes as mortgage rates and home prices have continued to climb, in part because many luxury buyers purchase homes with cash.
Luxury inventory also increased by a record of nearly 13 percent year over year, while new listings rose by a hefty 18.5 percent. At the same time, non-luxury inventory declined by 2.9 percent and non-luxury new listings only rose by 2.7 percent.
That boost in luxury inventory — a result of luxury homeowners not being locked in by mortgage rates and wanting to cash out on high prices — is still well below pre-pandemic levels, however, and has not been enough to curtail price growth seen with increased demand.
Credit: Redfin
“People with the means to buy high-end homes are jumping in now because they feel confident prices will continue to rise,” David Palmer, a Redfin Premier agent in Seattle, said in Redfin’s report.
“They’re ready to buy with more optimism and less apprehension,” he continued. “It’s a similar sentiment on the selling side: Prices continue to increase for high-end homes, so homeowners feel it’s a good time to cash in on their equity. Even though mortgage rates remain elevated and demand isn’t as high as it was during the pandemic, many homebuyers and sellers feel the worst of the housing downturn is behind us.”
Luxury home sales only began to rise on an annual basis starting in January for the first time since August 2021. During the first quarter, they rose 2.1 percent year over year as non-luxury home sales declined 4.2 percent year over year.
That increase in luxury home sales is largely due to luxury buyers’ cash power (and their attendant indifference to mortgage rates). Nearly half (46.8 percent) of all luxury homes purchased during the three months ending February 29 were done using cash, Redfin reported. That’s the highest share of all-cash purchases seen in at least a decade, Redfin noted, and is up from the 44.1 percent of all cash purchases seen the previous year.
Providence, Rhode Island, saw the greatest increase in median sale price of luxury homes year over year, with a 16.2 percent increase to $1.4 million. New Brunswick, New Jersey, also saw a substantial annual price increase, with the median luxury sales price rising 15 percent year over year to $1.9 million.
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