- Sales of luxury homes have cooled due to rising interest rates and fewer properties up for sale.
- The average 30-year fixed mortgage rate is now 5.58%, up from 3.11% at the end of last year.
- The average price for the most expensive 1% of luxury homes was $5.5 million earlier in the year.
The market for luxury homes is subsiding due to a combination of rising mortgage rates, soaring inflation and a shortage of properties up for sale, analysis by real estate firm Redfin found.
Sales fell by 17.8% in the three months to April 30 compared with the same period last year in the largest drop since the pandemic. In comparison, ales of non-luxury property was down by just 5.4%.
"The pool of people qualified to purchase luxury properties is shrinking because the stock market is falling and mortgage rates are rising," said Elena Fleck, a Redfin agent.
The Florida-based agent said she had a $2 million home under contract in March before the buyer backed out.
"They realized their mortgage payment would rise by more than $3,000 per month with the higher interest rate. They could no longer afford the house comfortably," Fleck said.
The average 30-year fixed mortgage rate is now 5.58%, far higher than 3.11% at the end of last year. Jumbo mortgage rates, used for luxury homes, are also at the same level.
The average price for the most expensive 1% of US homes was $5.5 million in January, according to online real estate firm Realtor.
Sales of top-end properties started dropping off in the spring and summer of 2021, according to Redfin's analysis, which found the shortage of homes on offer meant fewer sales.
The number of luxury homes up for sale plummeted by 12.4% year-on-year during the three months to April 30, Redfin data shows.
However, it has now recorded its first increase since last summer, with a slight rise in new listings.
"The good news for buyers is the market is becoming more balanced and competition is easing up. Of course, that doesn't help the scores of Americans who have been priced out altogether," Fleck said.
Luxury home sales fell in all but one of the top 50 metropolitan areas. The biggest decline was in Nassau County, NY, down 45%, followed by Oakland, CA with a 35.1% decline and a 33% drop in Dallas. The only increase was in New York, up 30%.