Luxury home prices have dropped 2.3% year over year nationwide, Redfin said. In the 12 weeks ending June 14, the median sale price for luxury homes fell to $1,099,521, marking one of the biggest declines in luxury home prices since the beginning of 2015.
However, new data from Redfin shows that homes in the highest percentile — the top 5%, are rising 3.5% year over year for the seven-day period ending June 14.
Prices of high-end homes in Dallas sank 12% year over year in the 12 weeks ending June 14, the highest drop in any metro. Las Vegas was the second-highest, with a 6.7% drop.
Some metros even saw prices rise – Providence, Rhode Island saw luxury home prices rise 14.7% year over year, followed by Montgomery County, Pennsylvania seeing an 11.2% rise.
March was when the luxury market really started to falter – and also when the pandemic set in. Price growth for homes in the top 5% remained positive from October 2019 until March.
“The pandemic is playing an outsized role in the luxury market, as very expensive homes are particularly sensitive to periods of economic uncertainty,” said Redfin Economist Taylor Marr.
“Many luxury buyers are nervous about pouring money into an investment that may be difficult to sell if the economy takes a nosedive,” Marr continued.
“By comparison, people buying starter homes they plan to live in for 10 years are less concerned with volatile financial markets as long as they have money for a down payment and can afford monthly mortgage payments. And although access to credit is loosening up now, it tightened considerably for jumbo loans, which a lot of luxury buyers use, in April and May.”
Last month, realtor.com said that after falling 9.5% year over year in April, searches for million-dollar homes grew 7.3% year over year in May, proving luxury buyers are ready to return to the market. This topped the 6.2% growth before the pandemic slowed things down.
“Looking forward, prices for luxury homes may continue to experience a slight uptick as panic about the economy subsides,” the Redfin report said.
“Luxury home prices have likely already bottomed out,” Marr said. “Price growth may continue to be lower than last year through the summer and fall, but with smaller drops as the months go on. The fact that prices increased in the beginning of June may represent pent-up demand because buyers held off during the height of pandemic panic. The top end of the real estate market will recover more slowly than the rest of it.”