Luxury Home Sales Fall 45% in the US; Miami and Hamptons lead the decline
Luxury Home: The US interest rate increase rightly hits the real estate market-and the luxury property market is most powerful.
The sale of real estate, the value of which is one of the upper 5 % of the market, collapsed in the three months that ended on January 31 compared to the same period last year.
The data comes from Redfin Real Estate and show a decline of over 45 % during this period, which has been the greatest decline for the profile of this property in the past ten years.
The sales of non-luxury properties also suffered, but to a slightly lower scale: a decrease of 38 %. CNBC states that buyers of luxury properties usually do not buy mortgages, which does not make them vulnerable to higher interest rates.
However, they are “affected by the macroeconomic context and in particular from the stock market,” says the website. “The volatility of the markets has an enormous impact on the luxury property market.” In this declining market, Miami was one of the cities that suffered the most, where the sales of luxury properties decreased by 69 %.
After the city recorded an influx of wealthy buyers at the beginning of the pandemic, the decline is mainly from California.
The second market that suffered the most was the area of Long Island on the coast of New York, where the Hamptons exists. The region, which is famous for its villas by the sea, recorded a decline in the sales of luxury properties by 63 %during this period.
Third place was Riverside in Los Angeles with a transaction decline of 60 % compared to the previous year. According to Redfin, the declines are the normalization of these markets in a way. All three regions have had great sales and real estate prices in recent years- and now they are making a correction.
“Experienced buyers are registering because these markets were already among the cheapest in the country and high interest rates put oil into the fire,” reports Redfin. “Luxury purchases also fall from an unsustainable level.”
The decline in transactions has so far not been accompanied by lower prices, mainly because only a few properties of this profile are for sale. In other words, the buyer has disappeared, but the seller has not (yet) abandoned.
The advantage for buyers of luxury properties, said Redfin economist Chen Zhao, is that “the competition is weak and ‘Jumbo’ mortgages-those who finance the luxury sector-have lower interest rates than others, sometimes because the risk of default is lower. “
