Luxury Home Sales Plummeted By 38% In The Last 3 Months

Since the beginning of the COVID-19 pandemic, the housing market has been on quite a rollercoaster ride. Amid the confusion at the beginning of 2020, home sales quickly cooled down, followed by an increase in sales as homeowners started migrating to other areas. Now, almost three years after the pandemic was announced, sales are declining again due to interest rate hikes and economic uncertainty. In November 2022, home sales were down more than 35% from 2021 (via Bankrate).

However, it's not only the sale of modestly-priced houses that are being affected but also those that are far more expensive. Luxury houses are those in the top 5% of the market with a median price of $1.1 million, and according to RedFin, the sale of these properties has dropped by 38% year over year. This is the most drastic plummet RedFin's data has recorded since 2012. Below, you'll discover more details about the drop and possible reasons for the declining sales.

Many of America's most expensive cities have experienced the largest decline in luxury home sales, per RedFin. For instance, in Long Island, New York, sales dropped by 65.6% year over year. California was also drastically affected: San Diego dropped by 60.4%, San Jose by 58.7%, Riverside by 55.6%, and Anaheim by 55.5%.

There are quite a few reasons why the number of sales is plummeting, and it's not just because of inflation and rising interest rates. Instead, there are other factors that affect the affluent more than others. For instance, since so many luxury houses were purchased at the beginning of the pandemic, their sales had an opportunity to fall further than regularly-priced homes. Also, many people with the opportunity to purchase an expensive home may have funds tied up in the stock market, which has recently been losing value, so they may have less money to spend. Mansion Global also points out that luxury properties are usually seen as an investment, and since prices are expected to drop during 2023, this isn't the best time to buy. Finally, those who purchase luxury homes typically aren't hard-pressed to move, so they can usually wait for the opportune time to buy or sell.