TAMPA, Fla. (WFLA) — Luxury home sales across the United States took a dramatic turn downward, according to data published by Redfin, a real estate company. Nationally, sales of luxury homes dropped 38%, but in Tampa, the decrease in sales stopped just short of 44%.
The drop in home sales wasn’t exclusive to luxury residences either. The same report from Redfin showed sales for non-luxury homes dropped 31.4% on average across the U.S. too. In Tampa, they fell by 32.3%.
The Redfin report “divided all U.S. residential properties into tiers,” based on their home market value estimates through Dec. 10. Their report “defines luxury homes as those estimated to be in the top 5% based on market value,” while the non-luxury homes are those in the 35th to 65th percentile of market values.
“The luxury market and the overall housing market have lost momentum this year due to many of the same factors: inflation, relatively high interest rates, a sagging stock market, and recession fears,” Redfin reported. “But the high-end market has slowed at a sharper clip for a handful of reasons.”
Those reasons include:
- Luxury goods are often among the first to get cut from budgets during times of economic stress.
- Luxury properties are frequently used as investment properties, and with home values and rents poised to fall in 2023, investment prospects are lackluster.
- High-end home sales saw outsized growth during the pandemic, so they have more room to fall (see chart above).
- Affluent buyers often have significant funds stored in the stock market, which has been losing value.
Sales declining across the U.S. accompany an increase of luxury homes for sale. Redfin reported the number of homes for sale in the luxury price range rose 5.2% compared to 2021. In comparison, non-luxury home inventory fell 5.7%. Redfin said price drops and sales decreases come as demand for homes declines.
“There has been a small shift in the market that’s not fully showing up in the data yet. With mortgage rates falling, a lot of house hunters see this as their moment to come back and compete,” Redfin agent Shoshana Godwin said. “Many of my buyers are taking out jumbo loans—mortgages typically used for purchases of high-end homes. While some data shows jumbo mortgage rates above 6%, some of my buyers are getting rates in the low 5% range.”
In the past year, Redfin said the prices for both luxury and non-luxury homes increased 10% through Nov. 30, slower than in 2021 when prices rose 17%. In every metropolitan area, Redfin said sales of luxury homes fell, but the biggest declines were in states like New York and California, while the smallest decreases were in Missouri and Ohio, as well as others.
The shift in sales left inventory higher in bigger metros such as Austin, Texas, Denver, Colo. and Atlanta, Ga., alongside other cities across the U.S.