Redfin’s latest report [1] on housing revealed luxury home prices fell 2.3%, bringing the annual median sale price for a luxury home in the U.S. down to $1,099,521. The report covered the season occurring during the 12 weeks ending on June 14.
Although this recent Redfin report shows a dip in luxury home price tags compared to pre-COVID numbers, the most recent data analyzed points to the possibility that the luxury home market may indeed be headed for a rebound. Specifically, Redfin revealed that the price of those homes found in the top 5% of priciest homes on the market recorded a 3.5% rise year-over-year for the week ending on June 14.
Redfin economist Taylor Marr commented on the uptick and how it relates to the pandemic: "The pandemic is playing an outsized role in the luxury market, as very expensive homes are particularly sensitive to periods of economic uncertainty. Many luxury buyers are nervous about pouring money into an investment that may be difficult to sell if the economy takes a nosedive. By comparison, people buying starter homes they plan to live in for 10 years are less concerned with volatile financial markets as long as they have money for a down payment and can afford monthly mortgage payments. And although access to credit is loosening up now, it tightened considerably for jumbo loans, which a lot of luxury buyers use, in April and May."
Previous to the COVID-19—specifically from October 2019 through mid-late March 2020—luxury home price growth in the top 5% had been on the rise. Following that time, growth stalled, and home prices began to dip dramatically, seeing the biggest dip (down 2.5% year-over-year) during the 12 weeks ending on June 7.
Experts now point to the recent luxury home price increase seen in the week of June 7 to June 14 as a sign that luxury buyers are beginning to dip their toes back into the bidding market. This leads experts to expect that the price tags for these luxury homes may continue to rise slightly as the economy begins to recover from the pandemic’s original onslaught.
Marr addressed this subject, commenting on future expectations: “Luxury home prices have likely already bottomed out. Price growth may continue to be lower than last year through the summer and fall, but with smaller drops as the months go on. The fact that prices increased in the beginning of June may represent pent-up demand because buyers held off during the height of pandemic panic. The top end of the real estate market will recover more slowly than the rest of it."