Luxury, all-cash deals are the market’s only sign of life 

Luxury was the lone sector keeping busy in last month’s housing market. 

While sales of new homes and previously owned properties were down in June, more wealthy buyers are plunking down cash for homes, according to National Association of Realtors data reported by Bloomberg.

While most of the country is deterred from buying new homes in a market scorched by high interest rates and inflated home prices, homes with a price tag of more than $1 million saw a rise in sales — the only price category that saw sales increase in the last month.

And the homes on the high end are trading in all-cash deals.  

At the end of the first quarter, almost half of high-end homebuyers used cash — the largest share in at least a decade, according to Redfin data. The most common sources of the cash are sales of long-term holdings in commercial real estate, newly inherited generational wealth and healthy stock portfolios.

“Historically, higher priced homes are the first to feel the hit when interest rates rise,” Ali Wolf, chief economist for residential construction firm Zonda, told Bloomberg. “We aren’t seeing that today. High home equity and the strong stock market have acted as a buffer against interest rates for wealthier Americans.”

The boom has shown up in the stock market. Toll Brothers, the country’s biggest luxury homebuilder, beat expectations with its second quarter earnings, making them the second best performing publicly traded US builder in the past six months.

Expect the trend to continue while elevated building costs make it harder for builders to accommodate the need for lower-priced housing. Chris Weekley, president of Houston-based Weekley Homes, one of the largest privately held builders in the country, told the outlet it’s difficult to build a home for less than $400,000 with the rising cost of land, labor and materials.

Luxury buyers and all-cash deals have been the subject of proposals to clamp down on limited liability companies shielding buyers who are laundering funds through real estate.

 — Christina Previte

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