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As 2023 wound down, luxury buyers ramped up their cash purchases, causing luxury home prices to hit a new high, Redfin reported on Wednesday.
The sales price of the typical luxury home in the U.S. was up 8.8 percent year over year during the fourth quarter of 2023 to a record $1.17 million, according to Redfin’s data. Meanwhile, non-luxury home prices only rose 4.6 percent year over year during the same period to a record $340,000.
For this Redfin study, luxury homes were considered those in the top 5 percent of their metro area based on market value. Non-luxury homes are those in the 35th to 65th percentile, based on market value.
The share of cash purchases drove the luxury market during the fourth quarter, making up 46.5 percent of all luxury purchases, up from 40 percent the year before.
As luxury prices have steadily climbed, Ruthie Assouline of The Assouline Team at Douglas Elliman said her buyers in Miami have latched onto any home that seems like it’s even mildly suggesting a bargain, compared to similar properties whose sellers are trying to take advantage of sky-high prices.
“With the inventory still being as dry as it is, I think that when you have a good product, a lot of the product that’s out there is still priced so astronomically high, that when you’re able to price it [well], even if it’s slightly higher than it was last year but is somewhat within reason compared to the market, it ends up looking like, ‘OK, that’s not so bad,’” Assouline explained to Inman.
“Let’s say there’s a particular line in a condo that’s been trading around $11 million, but now all the other units of the same line that are coming to market are asking $15 million and highs that never sold [before], and now you come and try to sell it for $12.5 or $13 million — you’re suddenly looking like, ‘Hey, not so bad,’ compared to the others that are asking so much money.”
The median sale price of luxury homes rose most in Newark (up 11.6 percent year over year) and New Brunswick, New Jersey (up 10.9 percent year over year), where the median sale price hit $1.6 million and $1.875 million, respectively.
As prices have steadily appreciated in those markets since the pandemic, Jane Mueller of RE/MAX First Realty told Inman that features like pools and large outdoor spaces have continued to command a premium, and helped drive prices. The rise in multigenerational living and demand for larger homes more generally has been another contributing factor, she added.
“In the Brunswick area, we have a lot of people who have moved from New York from [other parts of] New Jersey, so there’s a lot of different cultures and families moving into the area, a lot of multigenerational families, too,” Mueller said. “So that’s made the luxury home more desirable in recent years.”
In Nevada’s luxury market, which provides a more affordable alternative to other, pricier coastal luxury markets, Gianni Sammarco of Las Vegas-based huntington & ellis told Inman that luxury buyer-transplants have been leading many all-cash transactions in the state.
“Most of the time when you get into the bracket of the high-end market, [most clients] are cash buyers,” Sammarco said. “They’ve sold their home in California, and Las Vegas still looks like a bargain compared to those major metropolitan cities like New York, Seattle, San Francisco, San Diego, Los Angeles, all those big cities.”
As prices rose, the number of new luxury listings also skyrocketed, Redfin reported, with luxury homeowners ready to cash out on bigger sales profits while not being restricted by mortgage rates. New luxury listings rose 19.7 percent year over year during Q4 2023, marking the largest increase in new listings in more than two years. By contrast, new listings of non-luxury properties fell about 3 percent year over year, which was the smallest decline in new listings in the last year-and-a-half.
Even with that growth in new listings, total luxury inventory is still below typical fourth-quarter levels, Redfin noted. Still, overall luxury inventory is projected to continue increasing in 2024 as more luxury homeowners seek out those larger home sale profits.
“More luxury listings will temper price growth as the year goes on,” Redfin Senior Economist Sheharyar Bokhari said in a statement. “Overall, that’s a good thing for the high-end market: Sellers will still fetch fair prices, buyers will have more to choose from and sales should tick up.”
New luxury listings on the market also contributed to a smaller decline in sales from recent years — sales of luxury properties decreased by just 1.7 percent year over year during Q4 2023, the smallest drop in sales since mid-2021.
Sammarco told Inman that Nevada’s luxury market as a whole continues to be a haven for out-of-state buyers looking for a more tax-friendly investment. According to Redfin’s report, Las Vegas saw a nearly 34 percent increase in luxury sales year over year during the fourth quarter.
“We’re seeing Nevada be a tax haven for high-net-worth individuals, and particularly, Las Vegas is just really seeing an influx of people coming in from all over for tax purposes,” Sammarco said.
He noted that he had just closed a home at luxury development The Ridges for a high-net-worth buyer from California who had recently sold his company and was relocating to Las Vegas because of the tax-friendly environment.
With the luxury market already heating up just one month into 2024, agents also said luxury clients shouldn’t wait until spring to enter the market this year.
“I would recommend to any buyer that’s out there, don’t wait towards the end of the season — buy now, because if it’s going to be like last season, the frenzy came towards the end of the season,” Assouline said.
With inventory tight and buyers out and about, Sammarco said he and his team are turning to their network to find off-market listings. “It’s challenging us on our skill set to find properties that are not listed on the MLS, [and] finding that nugget of that seller who’s willing to sell at the right price.”
Sammarco added, “The spring market has already started.”
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Email Lillian Dickerson