Sales of luxury and non-luxury homes fell by more than 30 percent in the three months ended Nov. 30, with price growth nationwide slowing down, among which Californian metropolitan areas saw some of the biggest sales declines, according to real estate brokerage Redfin.
However, the sharper decline in the high-end market is being blamed on the nature of the market. For instance, luxury goods tend to be among the first to face budget cuts in times of economic stress.
Moreover, as luxury properties are usually seen as investments, an expected decline in home values and rents in 2023 will also negatively affect sales and value of such properties. As high-end home sales saw an “outsized growth” during the pandemic, they tend to have more room to fall.
Largest and Smallest Declines
When it came to high-end home sales, expensive coastal markets saw the largest declines. In Nassau County, New York, sales fell by 65.6 percent, which is the biggest decline among the most populous metropolitan areas.This was followed by four Californian metropolitan areas: San Diego, which saw a 60.4 percent decrease; San Jose fell by 58.7 percent; Riverside by 55.6 percent; and Anaheim by 55.5 percent.
The smallest sales decline was in Kansas City, Kansas, at 20.2 percent; followed by Cleveland, Ohio, at 21.5 percent; Virginia Beach, Virginia, 26.2 percent; Milwaukee, Wisconsin, 26.4 percent; and Charlotte, North Carolina, at 28.3 percent.
Redfin suggests that overall homebuyer demand could be creeping back up as mortgage rates decline. “There has been a small shift in the market that’s not fully showing up in the data yet. With mortgage rates falling, a lot of house hunters see this as their moment to come back and compete,” said Seattle Redfin agent Shoshana Godwin.
Home Price Decline in 2023
Redfin is expecting the median home sales price to fall by 4 percent, to $368,000, in 2023, which would be the first such annual decline since 2012. Elevated mortgage rate is pegged to be the main reason behind the drop in sales. If there is no shortage of homes, the fall will be bigger, it stated.New listings are expected to decline through most of 2023, keeping total inventory close to historically low levels while also blocking prices from plummeting. Existing home sales for 2023 are estimated to be at 4.3 million, lower than 2022 by 16 percent.
According to the S&P CoreLogic Case-Shiller Index, home prices had fallen in July from the previous month, the first-ever time since 2012 that there has been a national decline.