Real estate is splitting into two parts: luxury and everything else. Luxury properties are doing well, while the rest of the market is struggling with high mortgage rates and not enough homes for sale.
In the first quarter, comprehensive real estate sales dropped by 4% across the country, according to Redfin. However, luxury real estate sales went up by more than 2%, which is the best increase in three years, also according to Redfin.
Experts and real estate agents say this difference is because of interest rates and the number of homes available. With mortgage rates now above 7% for a 30-year loan, many people can’t afford to buy. But wealthy buyers can pay with cash, so high rates don’t affect them as much.
Almost half of all luxury homes, which are the top 5% by value in their area, were bought with all cash in the quarter, according to Redfin. This is the highest it’s been in at least ten years. In Manhattan, 68% of all sales were all-cash deals, which is a record, according to Miller Samuel.
All this cash is making prices go up even more. The median price for luxury homes went up by almost 9% in the quarter, which is about twice the increase seen in the rest of the market, according to Redfin. The median price for luxury homes reached a new record of $1,225,000 during this time.
“People who can afford to buy expensive homes are doing it now because they think prices will keep going up,” said David Palmer, a Redfin agent in Seattle, where the average luxury home sells for $2.7 million. “They’re feeling confident and ready to buy without worrying too much.”
