According to Redfin, which considers 5% of the area’s most expensive homes by the estimated market value to be luxurious, sales of such properties across the USA reduced by 44.6% year-on-year over the past three months, from early November 2022 to late January 2023. The sales of non-luxury houses dropped by 37.5%.
Over the past year, the US residential property market experienced a considerable cooling caused by the Federal Reserve System’s raising interest rates, consistently high house prices, and economic instability. As a result, sophisticated wealthy buyers prefer to adopt a wait-and-see attitude because they want to be certain their acquisition will retain its market value after the purchase, explains Alin Glogovicean, Real Estate Agent at Redfin Premier.
Sales of upscale homes plummeted the most in Miami (-68.7%). Nassau and Suffolk Counties, New York, were in the second place (-62.6%), and several areas in California came third (around -59%). One possible reason is that prices in these markets used to be some of the highest in the USA, and the growing rates only added insult to injury. It is also possible that sales of opulent houses in these metropolitan areas increased out of proportion during the pandemic and are now returning to normal.
Buyers of luxury properties may find some comfort in the fact that there are few competitors in the market now, and the banks are more willing to grant large loans and even offering additional discounts and bonuses to wealthy clients.
The sales of high-end residences increased by 7.1% year-on-year (a record high since 2015), but this is partially caused by the huge slump in sales a year ago. The supply in the market is growing gradually because there are still few customers ready to buy a house, but remains at a historic low. Fewer and fewer homeowners are listing their properties for sale. The number of new listings of luxurious houses reduced by 6.6% year-on-year (listings of regular homes reduced by 22.5%).