Luxury home sales drop 45% into 2023 

Purchases sank to second lowest level on record: Redfin

House; downward trend graph
(Illustration by The Real Deal with Getty)

Luxury home sales continue to crater, hampered by high prices, low supply and the general unease enveloping the economy.

Deals estimated to be in the top five percent in a market dropped 44.6 percent year-over-year for the three-month period ending Jan. 31, according to Redfin. That’s the largest annual decline and the second lowest level on record. 

The decrease beat a 38.1 percent year-over-year drop recorded among luxury home sales from September to November, according to the brokerage’s data going back to 2012. At the time, that was the largest annual drop ever recorded.

Last year’s 44.6 percent drop also outpaced the decline in non-luxury home sales, which fell 37.5 percent year over year.

The same factors inhibiting the general housing market are flustering luxury sales. Inflation, high home prices, elevated mortgage rates and economic uncertainty have led wealthy Americans to park their funds in other assets.

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Miami’s luxury market took the biggest hit in the three-month period, with a  year-over-year decrease of 68.7 percent. That was followed by Long Island (62.8 percent) and three California markets: Riverside (59.8 percent), Anaheim (59.3 percent) and San Jose (59 percent).

Sales volume in the luxury segment dropped, but prices remained high. The median sale price of a luxury home rose 9 percent year over year to $1.09 million. That’s only a hair off the all-time high of $1.1 million, set last spring.

High prices are sustained by low supply as elevated mortgage rates deter would-be sellers from putting their homes on the market. New listings dropped 6.6 percent year over year, a smaller decrease than the 22.5 percent drop in new listings for non-luxury homes.

The number of luxury homes for sale actually jumped 7.1 percent year over year to its biggest increase in eight years, on the back of constrained supply. 

Luxury buyers who remain in the market are benefitted by decreased competition and jumbo loans that are often more favorable than other financing options, Redfin economist Chen Zhao noted in a statement.

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