California is the hardest-hit state amid a nationwide decline in luxury-home sales, according to a recent report by Redfin, a national real estate brokerage.
The City of Oakland experienced the most dramatic drop in luxury home sales, falling by 70 percent in the three months prior to Aug. 31 compared to the year-earlier period. In San Jose and San Diego, the priciest homes declined 55 percent.
The same cities also reported the largest declines in luxury home listings—houses with sale prices in the top 5 percent—in the country as sellers backed off on listing their properties.
The declines in the luxury sector were the largest since Redfin began keeping such records in 2012, the company said.
The luxury market is more extreme than average home sales, especially during times of rising interest rates, according to Redfin Chief Economist Daryl Fairweather.
“High-end-house hunters are getting sticker shock when they see the impact of rising mortgage rates on paper,“ she said in the Sept. 22 report. ”For a luxury buyer, a higher interest rate can equate to a monthly housing bill that’s thousands of dollars more expensive.”
She said someone who had a $1.5 million budget last year might be unwilling to spend more than $800,000 this year because of higher mortgage rates.
“Luxury goods are often the first thing to get cut when uncertain times force people to reexamine their finances,” she said.
In the upscale enclave of Newport Beach, where the median price of a home is $3.1 million, sales have declined recently by 33 percent off last year’s record pace.
A local real estate economist characterized the downward trend as a “rebalancing” of the market.
“It’s normalizing,” Jordan Levine, vice president and chief economist of the California Association of Realtors, told The Epoch Times.
Newport Beach sales were up by 39 percent in 2021. With the recent decline, the Southern California city is still ahead of where it started and almost equal to 2019 numbers, according to Levine.
“I see that decline not as signs of a market that’s in a big selloff but rather one that’s kind of rebalancing after having been running so incredibly hot last year,” Levine said.
All-cash buyers investing in such homes may also be shying away from the market given the slowdown, Redfin said. Home prices are expected to drop in many cities, prompting some luxury-house buyers to invest elsewhere.
For the first time in more than 17 months, in August, an average home in the United States sold for less than its listing price.
Statewide, the California Association of Realtors (CAR) said existing, single-family home sales totaled 313,540 in August. That’s up 6.1 percent from July, although 24.4 percent lower than August 2021.
August’s median price for homes in California was $839,460, up 0.7 percent from July and up 1.4 percent from August 2021. Year-to-date statewide home sales were down 14.9 percent in August.
“Active listings have passed their annual peak, and while homes are taking slightly longer to sell, the share of homes seeing price reductions has also stabilized to near pre-pandemic levels,” CAR President Otto Catrina said.
The length of time houses stayed on the market has doubled in many of the larger metro areas in California, CAR said.
In Southern California, the time a house stayed on the market in August was 18 days, compared to 9 days the same month last year. In the San Francisco Bay Area, the median length of time was 20 days, compared to 11 days the year before.
Nationwide, sales of luxury houses were fewer on average, dropping about 28 percent during the same three-month period. Sales of non-luxury homes also dropped, decreasing by 19.5 percent during the three months ending Aug. 31, Redfin said.
Rising interest rates, inflation, a tepid stock market, and general economic uncertainty are causing luxury homebuyers to back off, according to the real estate service’s report.
The 30-year fixed mortgage rate was 6.8 percent as of Sept. 26, Mortgage News Daily reported.
The annual inflation rate for the United States ticked down to 8.3 percent in August after rising to 8.5 percent the month before, according to U.S. Labor Department data published Sept. 13.
