U.S. Home Sales Decline, But Luxury Market Thrives
As we know, high mortgage rates and inventory shortages have significantly impacted the real estate market. In October, existing U.S. home sales dipped by 4.1 percent to an annual rate of 3.79 million, the slowest pace since 2010, according to a report from the National Association of Realtors. Sales across the country dropped by 14.6 percent compared to last October, despite an increase in existing home prices. The median home price for this year was $391,800, a 3.4 percent increase from 2022.
Luxury Market Outpaces Mainstream Market
Although October marked a 13-year low in overall market activity, high-net-worth buyers looking for homes in the luxury category experienced a different story. A recent Redfin report defined luxury properties as those estimated to be in the top 5 percent of their respective metro area. The luxury market grew at three times the rate of the mainstream market in the third quarter of 2023.
The median price of a luxury residence reached a record high of $1.1 million, up 9 percent compared to last year. During this period, not only did prices increase, but the amount of inventory also grew. There were 2.9 percent more active luxury listings on the market in the third quarter than in 2022. The report noted an overall increase in homebuilding, with much of that new construction resulting in luxury residences.
Cash Is King for Wealthy Buyers
According to Redfin’s senior vice president of real estate operations, Jason Aleem, paying cash “helped wealthy buyers weather the storm of high mortgage rates.” The report found that 42.5 percent of luxury homes sold in the third quarter were paid for in cash, an approximately 8 percent increase compared to the same time last year. In contrast, only 28 percent of non-luxury properties were purchased in cash.
While many wealthy buyers believe that cash is king, “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,” Aleem explained to Mansion Global. “Affluent Americans are still spending big, in large part because of pandemic savings and resilient housing and stock values.”
Conclusion
Despite the decline in U.S. home sales, the luxury market has continued to grow, with increased home prices and inventory. High-net-worth buyers have managed to weather the storm of high mortgage rates by paying cash or taking on higher rates and refinancing later. The resilience of the luxury market is attributed to pandemic savings and strong housing and stock values, providing a bright spot in an otherwise challenging real estate landscape.
Orginal article: Link To Article – provided by Kansas City Realtors
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