The top-end of the U.S. housing market is living up to its name, with prices for luxury homes having hit an all-time high, according to a report Wednesday from Redfin.
The typical luxury home in the country sold for a median of $1.17 million in the fourth quarter, the highest the online property portal has ever recorded and up 8.8% from a year earlier. By comparison, prices of non-luxury homes increased at half that pace, up 4.6% year over year to a record $340,000—the online property portal said.
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Redfin, which has been tracking luxury price data since 2013, defines luxury homes as those estimated to be in the top 5% of their respective metro area based on market value.
One of the major factors underpinning the upswing in luxury prices in the fourth quarter was wealthy buyers’ ability to pay in cash, allowing them to avoid the unfavorable mortgage rates that have cooled the rest of the market.
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Nearly half (46.5%) of the fourth quarter’s luxury purchases were made in cash, a record share and up from 40% a year earlier.
“A lot of luxury buyers are coming in with cash, snapping up expensive homes,” said Heather Mahmood-Corley, a Redfin Premier agent based in Phoenix.
“High-end homes are selling fast,” she said, especially in Arizona’s coveted cities of Scottsdale and Tempe. “One client recently bought a house in Tempe, flipped it, and it sold for $1.4 million in two days.”
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Low inventory is another factor driving up luxury prices.
While the supply of luxury homes surged from the same time a year earlier, it remains significantly below pre-pandemic levels, and is resulting in deep-pocketed buyers competing for properties, the report said.
But luxury home supply is expected to grow further in 2024, and will temper price growth as the year progresses, according to Redfin senior economist Sheharyar Bokhari.
“Overall, that’s a good thing for the high-end market: Sellers will still fetch fair prices, buyers will have more to choose from and sales should tick up,” Bokhari said.
