The sales of luxury homes continues to decline, with real estate firm Redfin reporting that luxury home sales in the second quarter fell 24% year over year.
The decline is the smallest in a year, but continues a trend of declining luxury home sales that hit a record 42% dip at the start of the year, according to Redfin. For residential integrators that count luxury home builds and retrofits as the bulk of their projects, this could be concerning if the trend continues.
Redfin, in a July report, said several typically pricey housing markets are seeing declines in luxury home sales, including the Bay Area and Seattle. That is leading to sellers having to drop the price of their listings.
The median sale price of luxury homes in San Francisco fell a record 12.7% year over year to $4.8 million in the second quarter—the largest decline among the 50 most populous U.S. metropolitan areas, according to the real estate company.
In Seattle, luxury sale prices decreased a record 12.3% to $2.5 million—the second biggest drop in the country. Next came Oakland, Calif., which dropped 11.1% to $2.8 million, and San Jose, Calif., which dropped 10.3% to $4.3 million.
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In addition, new listings of luxury homes fell 17.1% year over year in the second quarter. Non-luxury homes also dipped, but more pronounced a rate of 29.8%.
“Buyers are getting big discounts on high-end condos in San Francisco right now—especially those under 1,000 square feet,” said local Redfin Premier real estate agent Ali Mafi, in a statement. “Those homes are having trouble selling, and some sellers are losing a lot of money.”
Luxury sale prices across the country were still higher than they were last year, as the median sale price so far is 4.6% above last year. Non-luxury home prices also increased 1.5%.
Homebuyer demand has slowed across the board this year, Redfin says, but prices are being propped up by a lack of inventory that is fueling competition in many housing markets.
Building permits, starts and completions are also down in general as of the writing of this article.
Despite the decline in the luxury housing market, Redfin suggests the tide may be turning, as the stock market is performing better of late and recession fears are easing. This could help provide a boost to high-end home purchases.
Luxury home sales are also being propped up by an increase in homebuilding, Redfin says, citing the Commerce Department’s data from June which showed housing starts rising for four straight months before dropping in June.
Housing starts rose to a seasonally adjusted annual rate of 1.631 million units last month from April’s downwardly revised 1.34 million, the Commerce Department said on Tuesday. May’s rate was the highest since April 2022, which was then the highest since 2006.
Overall, Redfin says luxury sales have consistently declined more than non-luxury sales over the last year because people tend to purchase fewer expensive goods during times of economic uncertainty, but the gap is likely narrowing due to an improving stock market and easing recession fears.
“Normally when the housing market is hurting, it’s the luxury market that’s hurting the most by far, but today’s market is unusual because there isn’t a recession,” says Redfin Chief Economist Daryl Fairweather, in a statement. “While a lot of high-end homebuyers remain on the sidelines, many of the ones who are in the market are still willing to spend big.”
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