Looking to get that mansion off your back? Now’s not a great time.
Luxury home sales in the United States plunged 38.1% year-over-year in the three-month period ending on Nov. 30, according to a market report published Wednesday by Redfin. The data goes back to 2012 and is the biggest decline in the last decade — with Redfin noting it outpaced the record 31.4% drop in sales for non-luxury homes in the same span of time.
(For Redfin, luxury homes are those estimated to be in the top 5% based on market value. Non-luxury is defined to be homes in the 35th to 65th percentile based on market value.)
Why? All those big 2022 talking points — including inflation, growing interest rates to combat inflation and fears of a recession — led to the slowdown in both markets. However, Redfin notes, the luxury end of the spectrum saw a sharper decline for reasons including luxury goods being trimmed from budgets at times of economic stress — and wealthy would-be buyers having funds in the stock market, which has been losing value.
What’s more, luxury property is often used as an investment — and with home values and rents projected to fall in 2023, “investment prospects are lackluster,” the report adds.
With the decline in sales came an increase in available property — with the report adding luxury-home supply rose the most since 2016 during this time period. The number of for-sale luxury homes climbed 5.2% year-over-year to about 163,000. (The supply of non-luxury dwellings slipped 5.7% to some 552,000.)
The brunt of it felt relatively close to home. Long Island’s Nassau County — home to affluent communities, such as Great Neck — saw luxury home sales drop a staggering 65.6% year-over-year in the three-month period ending last month, “the largest decline among the most populous US metropolitan areas ,” according to the report.
Next up were four areas in California. San Diego saw sales slip by 60.4% and San Jose had a 58.7% decline. Riverside and Anaheim, meanwhile, saw respective 55.6% and 55.5% falls.
“These markets are prohibitively expensive for most buyers even when the economy is thriving, so it’s not surprising more buyers would back off during a downturn,” the report says.
Redfin adds there are some preliminary signs that overall homebuyer demand is beginning to come back at a time of declining interest rates, which may cause the luxury sales decline to ease up.