Luxury Home Sales Drop 38 Percent

HOUSTON – (By Dale King, Realty News Report) — The luxury home sales market – long considered invulnerable to the vagaries of the general real estate arena – has just tanked in a big way, says a new report from real estate brokerage Redfin.

In the U.S., luxury home sales dropped 38.1 percent year over year during the three months ending Nov. 30, 2022, the biggest decline ever recorded, states the Redfin study. The result outpaced the record 31.4 percent nationwide decline in completed deals for non-luxury homes during that same time.

Redfin’s data dates to 2012

Home sales in major Texas metros didn’t escape the sales plunge, either for high-end dwellings or for mid-range residences. Austin – once a hotbed of skyrocketing prices and soaring sales – couldn’t even outdistance the dismal national numbers.

Luxury home sales in the Lone Star State capital dropped 40.9 percent, year over year, said Redfin’s calculations for the period ending Nov. 30, 2022. The non-luxury market in Austin lost 33.69 percent of its sales for the same period. This compared to the national declines of 38.1 and 31.4 percent, respectively.

Houston fell face-first, but not quite so bad. It recorded a 36.3 percent loss of sales in the luxury market and 24.1 percent for mid-range priced homes.

The sale of top-of-the-line dwellings in Fort Worth dropped 36 percent while purchases of houses the public can afford fell 21.1 percent. In neighboring Dallas, the bad news wasn’t quite as bad, with luxury home sales dropping 30.9 percent and the lower-end residences drawing 24.6 percent fewer buyers.

“The luxury market and the overall housing market have lost momentum this year due to many of the same factors: inflation, relatively high interest rates, a sagging stock market and recession fears,” explains the Redfin report.

“But the high-end market has slowed at a sharper clip for a handful of reasons, including:

Luxury goods are often among the first to get cut from budgets during times of economic stress.
Luxury properties are frequently used as investment properties, and with home values and rents poised to fall in 2023, investment prospects are lackluster.
High-end home sales saw outsized growth during the pandemic, so they have more room to fall.
Affluent buyers often have significant funds stored in the stock market, which has been losing value.

Many luxury homes on market

The number of luxury homes for sale in the US rose 5.2 percent year over year to roughly 163,000 during the three months ending Nov. 30, says Redfin research — the largest increase since 2016. By comparison, the supply of non-luxury homes declined 5.7 percent to about 552,000.

“The large decline in luxury home sales is contributing to the rise in supply, but new listings are also a factor. New listings of luxury homes fell just 2.9 percent year over year during the three months ending Nov. 30, compared with a 19.8 percent drop in listings of non-luxury homes.”

In Texas, new listings for luxury homes are up 20.2 percent in Austin and 5.9 percent in Dallas while that tally was down 2.9 percent in Fort Worth and 1.5 percent in Houston. By comparison, new listings for lower-end homes are down in all four metros: 29.5 percent in Austin, 13.6 percent in Dallas, 6.7 percent in Fort Worth and 12 percent in Houston.

Home-price growth has slowed across the housing market due to ebbing demand, says Redfin. Prices of both luxury and non-luxury homes rose 10 percent year over year during the three months ending Nov. 30, compared with 17 percent growth one year earlier. The median sale price nationally was about $1.1 million for luxury homes and $325,000 for non-luxury homes.

Redfin’s Home Price Highlights:

In Texas, the median prices of homes in the luxury and non-luxury markets are all up:

Austin, $1,889,500 per home for high rollers, up 12.1 percent, and a half-million bucks for houses on the general market, up 9.7 percent.

Dallas, $1,350,000 for luxury seekers, up 17.4 percent, and $391,000 (up 14.8 percent) for regular folk.

Fort Worth, $1,040,000 for big ticket homes, up 14.8 percent and $325,900, up 12.4 percent, to purchase dwellings for the rest of us.

Houston, $1,095,000 for the luxe class, up 15 percent, and $300,000, up 11.5 percent, for middle class shoppers.

The Houston Association of Realtors report of November activity, reported sales of homes priced at $1million and up declined 23.7 percent in November.

Overall sales activity in Houston was off sharply in November as rising mortgage rates and inflation battered the market. According to the Houston Association of Realtors’ November 2022 Market Update, single-family home sales fell 30.4 percent, with 5,827 units sold compared to 8,374 in November 2021.

Buyer demand creeping back

Redfin reports finding early signs that overall homebuyer demand is beginning to creep back as interest rates decline, which may ultimately cause the decline in luxury sales to ease. Mortgage applications and Redfin’s Homebuyer Demand Index—a measure of requests for tours and other buying services—have both been on the rise, and Redfin real estate agents say they’re seeing more buyers move away from the sidelines.

“There has been a small shift in the market that’s not fully showing up in the data yet. With mortgage rates falling, a lot of house hunters see this as their moment to come back and compete,” said Seattle Redfin agent Shoshana Godwin.

“Many of my buyers are taking out jumbo loans—mortgages typically used for purchases of high-end homes,” she added. “While some data shows jumbo mortgage rates above 6 percent, some of my buyers are getting rates in the low 5 percent range.”

The new Freddie Mac survey released Thursday, Dec. 29, showed that mortgage rates ticked up as the year came to an end.

Freddie Mac said the 30-year fixed-rate mortgage averaged 6.42 percent as of December 29, up from last week when it averaged 6.27 percent.

A year ago at this time, the 30-year mortgage averaged 3.11 percent.

15-year fixed-rate mortgage averaged 5.68 percent, down from last week when it averaged 5.69 percent. A year ago at this time, the 15-year mortgage averaged 2.33 percent.

“The housing market remains in the doldrums with declining sales, inventory and prices,” said Sam Khater, Freddie Mac’s Chief Economist. “The declines in sales and deceleration in home prices began swiftly earlier in 2022 but have moderated more recently. While the intensity of weakness is moderating, the market continues to decline and forward leading indicators suggest housing will remain weak throughout the winter.”

Dec. 30, 2022

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