Luxury home prices in the U.S. grew three times faster than those in the mainstream market in the third quarter, as high-net-worth buyers brought cash to the table to avoid high mortgage rates, according to a report Friday from Redfin.
The median price of a luxury residence—estimated to be in the top 5% of their respective metro area—rose to $1.1 million in the third quarter, a year-over-year increase of 9%, the data showed.
“Affluent Americans are still spending big, in large part because of pandemic savings and resilient housing and stock values,” said Jason Aleem, Redfin’s senior vice president of real estate operations.
At the same time, the median price of a non-luxury house was up 3.3% to $340,000. Prices were at record highs for the third quarter for luxury and non-luxury properties.
“Wealthy home buyers have more tools to weather the storm of high mortgage rates,” Aleem said. “Many of them can afford to pay in cash, meaning they’re escaping high mortgage rates altogether. Others are choosing to take on a higher rate and refinance later—an expensive option that isn’t feasible for a lot of lower-income consumers.”
The number of luxury homes purchased in cash rose to 42.5% in the third quarter, up from 34.6% during the same time period in 2022, the report said. Only 28% of non-luxury homes were bought in cash, about the same as in the third quarter of 2022.
Inventory also grew across the luxury market, with active listings up 2.9% compared to the third quarter of 2022, the figures showed. Meanwhile, the non-luxury market registered a 20.8% decline in total supply, the highest on record.
However, the luxury market may start to slow the longer costs remain elevated.
“While many luxury buyers have the resources to forge ahead even when mortgage rates are elevated, stubbornly high rates and home prices will likely push some affluent house hunters to the sidelines in the coming months,” said Daryl Fairweather, Redfin’s chief economist. “High costs, along with the uptick in the number of high-end homes for sale, could cause luxury price growth to cool.