Luxury home sales in the U.S. rose by 61% year over year during the three months ending Nov. 30, the biggest increase in some seven years, real estate brokerage Redfin reported Wednesday.
The increase was nearly four times higher than growth during the three months ending Feb. 29, before the coronavirus was declared a pandemic. Not only that, it far outpaced the 14.8% increase in sales of mid-priced homes and the 6.8% uptick in sales of affordable ones.
The 49 most populous U.S. metropolitan areas all experienced at least double-digit growth in luxury home sales during the three-month period ending Nov. 30.
For Redfin’s purposes, “luxury” homes comprise the top 5% of the market, based on market values as of Dec. 15. In comparison, “expensive” homes are in the 65th to 95th percentile, “mid-priced” homes in the 35th to 65th percentile, and “affordable” ones in the 5th to 35th percentile. “Most affordable” homes make up the bottom 5% of the market.
Redfin said that with the decline in the U.S. unemployment rate, sales of affordable homes have rebounded after plunging around 30% in the spring.
But growth in this segment still pales in comparison to growth in the luxury tier, as high-earning Americans take advantage of stock-market gains, record-low mortgage rates and the flexibility to work from anywhere, Redfin’s chief economist Daryl Fairweather, said in a statement.
“Low- and middle-income Americans aren’t out of the woods when it comes to this recession,” Fairweather said. “Affluent Americans are out of the woods, and they’re at their beach houses sipping margaritas. When times are tough, banks are most likely to dole out home loans to the people who need them the least.”
With affluent Americans on the move, the market for vacation homes — many of which are luxury properties — soared 100% year over year in October, surpassing the 50% increase in demand for primary homes, according to Redfin.
And many of the country’s hottest neighborhoods, such as Lake Tahoe and the Lakes Region of New Hampshire, are popular resort destinations full of high-end houses.
Price Growth Converges
Redfin reported that before the pandemic took hold in the U.S., affordable home prices had been increasing faster than prices of high-end homes. Now, prices across all tiers are growing at a similar rate.
Affordable home prices grew 8.6% during the three months ending Nov. 30, comparable to the luxury tier’s 9% growth. During the three months ending Feb. 29, prices of the most affordable homes were up 9.1%, versus growth of just 4.9% for luxury homes.
Luxury price growth has caught up to affordable price growth as a result of increasing competition in the luxury market, Fairweather said.
Consider how quickly homes are selling. According to Redfin, the typical luxury home that was for sale during the three months ending Nov. 30 spent 55 days on the market — 27 fewer days than during the same period a year earlier. That compares with 15 fewer days for mid-priced homes and 11 fewer days for affordable homes.
See the gallery for the 12 cities with the fastest growth in luxury homes for the three months ending Nov. 30. Median sale price growth is from a year earlier.
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