Luxury home prices in the U.S. surged by 8.7% year over year in the first quarter of 2024, with the median price hitting a record $1.225 million, according to data from Redfin.
In comparison, prices for non-luxury homes rose by 4.6% to a median of $345,000, which is also a record high.
Redfin defined luxury homes as those estimated to be in the top 5% of their metro area based on market value, while non-luxury homes are those with estimated values in the 35th to 65th percentile.
High-end buyers tend to be more immune to mortgage rate fluctuations and flock to the luxury housing market. During the three months ending Feb. 29, nearly half (46.8%) of luxury homes sold were purchased in cash, up from 44.1% during the same period a year ago. That’s the highest share in at least a decade, Redfin reported.
A surge in new listings of luxury homes was not enough to curb the price growth associated with rising demand. New listings of luxury homes soared 18.5% from a year earlier in the first quarter, the second consecutive quarter of double-digit increases. That’s about seven times more than the 2.7% increase for non-luxury homes.
The total number of luxury homes for sale rose 12.6% year over year in Q1 2024, the largest increase on record, but the total supply of luxury homes still lags behind pre-pandemic levels.
“People with the means to buy high-end homes are jumping in now because they feel confident prices will continue to rise,” David Palmer, a Redfin Premier agent in the Seattle metro, said in a news release.
“They’re ready to buy with more optimism and less apprehension. It’s a similar sentiment on the selling side: Prices continue to increase for high-end homes, so homeowners feel it’s a good time to cash in on their equity. Even though mortgage rates remain elevated and demand isn’t as high as it was during the pandemic, many homebuyers and sellers feel the worst of the housing downturn is behind us.”
In the first quarter of 2024, sales of luxury homes rose 2.1% year over year. Luxury sales started to post year-over-year increases in January for the first time since August 2021. Meanwhile, sales of non-luxury homes decreased 4.2% year over year.
Certain luxury properties, however, have posted price declines, according to a report released Friday by Realtor.com.
About 10.7% of homes on the market priced between $2 million and $5 million underwent price reductions in March. This trend was particularly noticeable in the South.
“The top luxury markets seeing price reductions are primarily in the South,” Hannah Jones, senior economic research analyst at Realtor.com, said in a statement. “Before the run-up in prices during the [COVID-19] pandemic, you could get a lot more for your money in these markets. Buyers are looking for that again. And buyers at this price point have a lot more options, so they can afford to be pickier.”
Six of the top 11 cities with the biggest price cuts for luxury homes in March were in Florida. And price reductions in the state were up 74.7% year over year in March, according to Realtor.com data.