There are tremendous benefits to owning a luxury home, not all of them having to do with aesthetics or proving that you can easily keep up with the Joneses!
Some of the benefits include better, more safer neighborhoods, rooms with a view, more space for the family and for all your stuff, and providing yourself with a better quality of life.
But in 2023 luxury real estate seems to be slacking, at least on a temporary basis. This isn’t necessarily due to people who simply can’t afford a luxury home. It might have more to do with people who are buying second homes in states that are more affordable while at the same time, hanging onto their luxury homes located in more expensive, highly taxed states.
Whatever the cause of the sharp decline in luxury real estate from beach resorts in and around the Hamptons to the East, to mansions near Woodinville, Washington to the West, if you’re looking to sell your big home, now is probably not a good time.
According to a new report by The New York Post, if you’re looking to unload your mansion fast, you might want to think about putting those plans on hold for a bit. Says Redfin, the sale of luxury homes have sunk by more than 38 percent year-over-year in the last quarter of 2022. The data goes all the way back to 2012 and is said to represent the sharpest decline in the past ten years. Redfin also pointed out that the drop outpaced what’s considered a record 31-plus percent drop in non-luxury homes during the same decade.
Redfin considers luxury homes to be at the top 5 percent of the market. Non-luxury homes make up the 35th to 65th percentile of all other homes which are based on the overall market value.
Why the Luxury Home Slowdown?
In two simple words: market fears. Rising interest rates, spiking inflation, supply shortages, recession fears, and more have contributed to a major slowdown in the markets. But Redfin states that the luxury housing market realized a sharp decline for other reasons such as luxury goods that naturally get trimmed during a time of economic anxiety and possible recession.
Also, stock and crypto portfolios are down. Plus, when you consider that luxury property is considered an investment and home prices are anticipated to drop hard in 2023, it’s about to become a buyer’s market. All the more reason to hire a reputable real estate agent to keep an eye out on your behalf for a luxury home that sooner than later, becomes for sale.
Increase in Property
While interest rate spikes are said to have had a dramatic impact on the sales of luxury homes, inflation has done damage also. But with the decline in sales, comes an increase in available properties.
Says The New York Post and Redfin, the number of luxury homes for-sale has climbed 5.2 percent year-over-year to around 163,000, while the sale of non-luxury homes has slackened by 5.7 percent resulting in more than 550,000 available dwellings.
If the FED stops raising interest rates which it is projected to do in mid-2023, a buyer’s market will most definitely be initiated. This spells good news for first time home buyers, and real estate agents.
But at present, the majority of luxury homes not selling are located in ritzy areas of the country such as Long Island’s Nassau County which contains the wealthy community of Great Neck and that realized a 65-plus percent massive decline of luxury home sales in 2022 alone.
Redfin claims this is the most hardest hit region in the U.S. However, some reports state that wealthy homeowners are moving to low tax states like Florida and Texas for most of the year, while keeping their luxury homes in Nassau County to use for the spring and summer months.
Other hard-hit areas are located in California, another ultra-high tax state where the average wage earner only takes home a little over $0.40 cents on the dollar. San Diego realized a 60.4 percent slip, while San Jose declined a whopping 59 percent. Anaheim and Riverside each fell about 55.5 percent when it came to the sale of luxury homes.
Owning a luxury home is the epitome of the American Dream for many people. When home prices surged, that dream became dashed. But as a glut of luxury homes eventually enters the market-place at reduced prices, some people will once again see their hopes restored while their real estate agent brings them the good news about a luxury property that fits their budget.