Upscale Home Buyers Opting for Cash Payments Drive Surge in Luxury Home Prices
Discerning home buyers with deep pockets are increasingly choosing to make cash payments, fueling a rapid increase in prices for the most exclusive residences in the United States.
The median sale price of luxury homes, which are classified in the top 5% of the market nationally, reached a record high of $1.23 million in the first quarter. This marks an impressive 8.7% surge compared to the same period last year, as per an analysis conducted by Redfin. Notably, this growth rate is nearly double that of non-luxury homes.
One key factor behind this disparity in sales figures is the propensity of affluent buyers to circumvent financing obstacles by opting for cash transactions. This trend is playing a significant role in driving up the prices of high-end properties at a much faster pace than their more affordable counterparts.
Consider, some 46.8% of luxury homes were bought entirely with cash in the three months ended February 29, according to Redfin. That's the highest share of all-cash luxury home purchases in at least a decade and it's up from 44.1% from a year earlier.
Prices for the most expensive homes have kept climbing even as the inventory of high-end properties has increased sharply this year. All told, the number of luxury homes on the market jumped 12.6% in the first quarter compared to a year earlier, while new listings surged nearly 19%, Redfin said.
In contrast, the inventory of homes in the middle-third of the market fell 2.9% in the January-March period from a year earlier. Home prices are growing more unaffordable for the average American, in part because inventory has been low.
Homeowners have been hesitant to sell because they would then face buying another property at today's higher mortgage rates. Some homeowners have also watched their home equity grow in value, making them even more reluctant to walk away from that wealth growth.
Buying a house is costlier than anytime in at least the last decade, with property buyers hit with the double whammy of rising mortgage rates and home prices, Redfin has said.
