Luxury home prices reached the highest third-quarter level on record this year after surging 9% year over year to $1.1 million, according to recent data from Redfin.
The annualized price jump was almost three times the growth rate for non-luxury home prices, per the real estate brokerage. The median sales price for a non-luxury home rose 3.3% year over year to $340,000 — also the highest level for any third quarter in Redfin’s records.
Notably, the share of luxury home purchases paid for in cash were also up, from 34.6% in third-quarter 2022 to 42.5% this year. Only 28% of non-luxury homes were paid for entirely in cash, which changed little compared to the prior year.
“Wealthy homebuyers have more tools to weather the storm of high mortgage rates,” said Jason Aleem, Redfin’s senior vice president of real estate operations. “Many of them can afford to pay in cash, meaning they’re escaping high mortgage rates altogether. Others are choosing to take on a higher rate and refinance later — an expensive option that isn’t feasible for a lot of lower-income consumers. Affluent Americans are still spending big, in large part because of pandemic savings and resilient housing and stock values.”
The capital cushions for affluent buyers may also be helping to buoy luxury home sales as overall sales continue to slide. Luxury sales dropped 10.6% year over year in Q3 2023 — not a minuscule decrease but far smaller than the 17% drop in non-luxury sales during the same time frame. Both luxury and non-luxury home sales fell to their lowest third-quarter levels since 2014.
The current combination of high rates and high prices may be getting to be too prohibitive for even well-to-do home seekers, according to Redfin chief economist Daryl Fairweather.
“While many luxury buyers have the resources to forge ahead even when mortgage rates are elevated, stubbornly high rates and home prices will likely push some affluent house hunters to the sidelines in the coming months,” Fairweather said. “High costs, along with the uptick in the number of high-end homes for sale, could cause luxury price growth to cool.”
For its study, Redfin defined “luxury homes” as residential properties estimated to be in the top 5% of their metro areas based on Redfin estimates of their market value. “Non-luxury homes” were defined to be in the 35th to 65th percentile of their respective metro areas.
