Key Highlights
- Luxury home sales jumped +41.5% in Q3 2020, according to Redfin
- Sales of mid-priced homes increased +3%
- Sales of affordable homes declined -4.2%
Usually, luxury home sales drop markedly during a recession but, as we’ve said and written many times before, there is nothing “usual” about this pandemic recession. That being said, sales of luxury homes skyrocketed +41.5% during Q3 2020, according to a new report by Redfin.
To add to this pandemic upheaval in the housing market, sales of medium-priced homes increased only +3% during Q3 2020 and sales of affordable homes actually dropped by 4.2%, again according to Redfin.
“The luxury housing market normally takes a hit during recessions as wealthy Americans tighten their purse strings, but this isn’t a normal recession,” said Daryl Fairweather, chief economist with Redfin.
Since this pandemic housing market is benefitting workers who can work remotely while hammering those who can’t, wealthy buyers (many who are remote workers) are taking advantage of surging stock market prices as well as near low mortgage rates. Meanwhile, banks are tightening credit for first-time buyers and lower and middle-class buyers.
Fairweather said, “Remote work, record-low mortgage rates and strong stock prices during the pandemic are allowing America’s wealthy families to gobble up expensive houses with home offices and big backyards in the suburbs. Meanwhile, scores of lower- and middle-class Americans have lost their jobs or are still renting in the city because they’re essential workers…so they’re unable to reap the benefits of homeownership.”
Take a look at median sale prices at the various market price points:
- $862,700 – luxury homes
- $402,000 – expensive homes
- $259,000 – medium-sized homes
- $178,000 – affordable homes
- $90,000 – most affordable homes
Redfin noted that the only market tier with increased inventory was the luxury tier. Lux inventory increased by +8.4% y/y. Inventory for expensive homes for sale was down -2.6%; medium-priced homes experienced an inventory drop of -7.9%; affordable homes for sale dropped -7.6% and inventory of the most affordable homes for sale dropped -4.8%. Overall, the number of active listings for sale hit a new all-time low of -28% y/y.
Metros where luxury home sales increased the most included:
- Sacramento – +86.1% with a median lux home sale price of $1,200,000 in Q3
- Riverside – +62.8%
- Oakland – +60.9%
- Portland OR – +60.6%
- West Palm Beach – +59.7%
The only two metros where lux home sales declined in Q3 were Philadelphia (-8.2%) and Nassau County, NY (-2%).
Fairweather summarized her insights into this latest home sales data from Redfin by saying, “Luxury listings are skyrocketing because high-end homeowners have the financial means and the flexibility to move during this pandemic. The growing supply of luxury homes for sale means that wealthy buyers have more options to choose from and a better chance of finding a home that checks all the boxes. Meanwhile, buyers who are in search of more affordable homes are grappling with fewer choices and fierce competition.”
During the week ending October 4, the median home sale price was $320,625, compared to $279,090 one year ago. This was the largest increase on record, a +15% y/y jump, according to a Redfin analysis of the latest Case-Shiller national home price index and MLS data.
Thanks to Redfin, Bloomberg News and HousingWire.
Also read: V-Shaped Recovery in July’s Housing Market, Luxury Homes in South Florida Are Flying Off the Shelves, How Influential is Airbnb in Dublin’s Housing Market?
