Sales of luxury homes rose 41.6% year-over-year in the first quarter of 2021, crushing sales of affordable homes (7% increase) and mid-priced homes (5.9%), per a recent report from Redfin.
Redfin defines “luxury” homes as selling for an average of $975,000, “expensive” homes as selling for an average of $429,000, “mid-priced” as selling for an average of $272,000, “affordable” as selling for an average of $184,400, and “most affordable” as selling for an average of $99,000.
The study showcases both sides of the COVID-19 crisis, with affluent Americans taking advantage of low mortgage rates and the ability to work from anywhere, and buying up high-end houses — particularly in popular vacation destinations. Meanwhile, many lower-income Americans have lost their jobs and lack the means to become homeowners.
Likewise, middle- to lower-income homeowners are thinking twice about selling their home for fear of being unable to afford a new home, per Daryl Fairweather, Redfin chief economist. The typical luxury home that was for sale during the first quarter spent 61 days on the market — 38 fewer days than the same period in 2020. That’s compared to 26 fewer days for expensive homes, 18 fewer days for mid-priced homes and 14 fewer days for affordable homes.
When looking at the largest markets in the U.S., the biggest increase in luxury-home sales in the first quarter was Miami, with sales up 101.1% from a year earlier. Miami was followed by San Jose(up 92.3%), Oakland (up 82%), and Sacramento, California (up 79.3%) and Las Vegas (up 72.7%).
Lack of inventory, a national housing issue following the onset of the pandemic, isn’t an issue for luxury homes. In fact, the number of luxury homes for sale fell only 5.1% year over year in the first quarter, the smallest decline of all five price tiers. The supply of affordable homes for sale, however, slumped 14.9%, and the supply of mid-priced homes dipped 19.8%.
“[Selling] isn’t as big of an issue for luxury homeowners since there’s a relative abundance of high-end homes to choose from,” Fairweather said.
The consequences of low inventory finally caught up with the housing market in February, with tightened supply largely responsible for a 10.6% drop in the number of homes in contract from the prior month, according to new data from the National Association of Realtors. Lawrence Yun, NAR chief economist, echoed Fairweather’s assessment, noting that only the “upper-end market” is experiencing more activity because of reasonable supply.
That’s been the case for Katy Polvorosa, a Redfin real estate agent located in Oakland, California, who said high-end properties are receiving several offers despite the prices.
“Luxury properties, even those in the $3 million range, are getting multiple offers and going for well over the asking prices,” Polvorosa said. “That’s something we haven’t seen before, even though the Bay Area has many affluent residents. Everyone just wants more space and big backyards, whether it’s because they’re stuck at home during the pandemic or because they have a growing family.”
Other markets with interesting luxury home numbers include Denver, where high-priced homes are staying on the market an average of only 14 days; Phoenix, where luxury homes are selling, on average, for 25% more than they did in 2020; Warren, Michigan, which has 73.8% more luxury homes on the market than in the first quarter of 2020; and San Francisco, where luxury homes are averaging nearly $4 million — the highest median price of Redfin’s study — but are still flying off the shelves in only 16 days, on average.