Home prices continue to tick up in all price ranges across the country, but none saw more significant change than luxury homes, which hit a record high for the month of October this year.
Luxury home prices in the United States rose 5.5% year over year to a median $1.28 million, according to a new report from Redfin. That’s roughly three times higher than nonluxury prices, which increased 1.8% to $373,249.
Price growth at the high end has outpaced the middle of the market for the last two years, as wealthy buyers are more equipped to withstand the price pressures of the current market.
“Luxury buyers are still able to move forward in ways that many typical buyers can’t right now, whether that’s because they’re paying in cash, benefiting from stock-market gains, or taking out smaller loans,” said Redfin Senior Economist Sheharyar Bokhari in a press release Friday.
“Those advantages make them less sensitive to high mortgage rates, which helps keep demand at the top of the market steadier,” he added. “In contrast, a lot of middle-income buyers are holding off until monthly payments come down or their financial outlook improves.”
Luxury homes are those estimated to be in their top 5% of their metro area’s price range. Nonluxury homes fall in the 35th-65th percentile, the report said.
Despite the sharp rise in prices, luxury sales were up 2.9% year over year and nonluxury sales climbed 0.7%, although both were still close to decade-low levels.
Pending sales also grew for luxury and nonluxury homes, increasing 2.1% and 1.4% from last year, respectively.
“The luxury market has been a little more protected over the past year, compared to non-luxury or starter homes,” said Jonathan Buch, a Redfin Premier Agent in West Palm Beach, Florida, in the release. “Affordability challenges have made it more difficult to sell homes priced under $800,000, but high-end properties are still moving.”
While affordability issues persist, the situation improved for the fifth consecutive month in October on the back of year-low mortgage rates, according to the Mortgage Bankers Association.
As a result of the high prices and relatively low sales, nonluxury home inventory rose 9.5% year over year, the highest level since October 2019, compared to a 6.4% jump to a five-year high for luxury homes. New listings of luxury homes were up 2.3% from a year ago, while nonluxury homes dropped 1.7%. Still, the number of homes for sale in both categories remain well below prepandemic levels.
Higher prices have also made buyers more selective, and thus homes are selling slower. The typical luxury and nonluxury home took six days longer to sell compared to a year ago, at 58 days and 45 days, respectively.
Early-contract activity slowed as well, with the share of luxury listings going under contract within two weeks falling 0.6 percentage points from last year to 26.7%. The share of non-luxury homes going under contract in less than two weeks decreased 2.9 percentage points to 31.3%, the report said.
Regionally, Midwest metro areas saw the largest price hikes, with Warren, Michigan, and Milwaukee experiencing 14.9% and 13.5% increases, respectively. The only declines were in Tampa, Florida, 2.9%, and Oakland, California, 2.4%.
Sales rose the most in Nashville, Tennessee, 20.3%, and fell the most in Philadelphia, 15.4%.
