Deep-pocketed home buyers who are paying cash to avoid rising mortgage rates are propping up the housing market, as high rates keep many borrowers on the sidelines.
Prices, sales and inventory of luxury homes—defined as the top 5% of the market—are all outpacing the overall housing market, a shift from late 2021 when wealthy buyers began tapping the brakes, according to real-estate brokerage
.
According to Redfin, the median luxury sale price during the third quarter of 2023 rose 9% year-over-year to $1.1 million, nearly three times the annual jump for nonluxury homes, where the median price rose 3.3% to $340,000. While luxury home sales during the third quarter were still down 10.6% compared with the same period last year, sales of nonluxury homes fared worse, dropping 17% year-over-year.
Daryl Fairweather, Redfin’s chief economist, chalked up the disparity to 8% mortgage rates that have roughly doubled since last year, rewarding buyers who don’t need to finance their purchases.
According to Redfin, 42.5% of luxury buyers paid cash during the third quarter, compared with 34.6% during the same period a year ago. Some 28% of nonluxury homes sold for cash during the third quarter of this year and last. “If you can avoid mortgage rates in this market, you have a kind of superpower,” Fairweather said.
Over the past few weeks, he said snowbirds have come down for the winter, prompting market activity to pick up.
Source: wsj.com
