October is Luxury Month on Inman. Inman Handbooks offer deep dives on luxury marketing and agent branding, luxury staging, referrals, and more. We’re thinking about what luxury means now, examining how the pandemic is reshaping the needs of luxury buyers, and talking to top luxury agents, all month long.
Even as the coronavirus pandemic roared into high gear in the third quarter of 2020, with the number of confirmed cases peaking at 75,000 on a single day in July and joblessness claims hovering around 1 million a week in early August, luxury sales continued to soar across the three-month period, according to new data analyzed by Redfin.
Sales of homes at the top third of their market skyrocketed by 41.5 percent in the third quarter, according to Redfin.
Such growth, the largest since 2013, is in stark contrast to more modestly priced homes. Sales of medium-priced homes rose by 3 percent while sales of homes in the bottom tier of their market fell by 4.2 percent. Such a spike is at least partially caused by affluent Americans who are looking to weather the pandemic in a large and comfortable home — ideally by the water and with plenty of amenities.
“The luxury housing market normally takes a hit during recessions as wealthy Americans tighten their purse strings, but this isn’t a normal recession,” Redfin’s Chief Economist Daryl Fairweather said in a prepared statement. “Remote work, record-low mortgage rates and strong stock prices during the pandemic are allowing America’s wealthy families to gobble up expensive houses with home offices and big backyards in the suburbs.”
Sacramento, Riverside and Oakland in California experienced the biggest spikes in luxury sales at 86.1, 62.8 and 60.9 percent, respectively. The only two cities that saw the number of luxury sales decline were Philadelphia, at 8.2 percent, and New York’s Nassau County, at 2 percent.
Such trends, uncharacteristic for a typical recession, are having an upward effect on real estate prices. After years of seeing slower price growth than affordable or average homes, luxury homes are now spiking in price. Luxury homes rose by 6.5 percent while affordable homes rose by only 2.9 percent. Homes in the top 5 percent of their market rose by 7.2 percent.
“Prices of the most affordable homes are experiencing relatively slow growth because the families who typically buy these homes have been hit especially hard by the pandemic,” Fairweather said. “So long as the coronavirus keeps people out of work and the government doesn’t provide more stimulus, the owners of America’s most affordable homes will continue to see relatively low property value growth because the folks who would normally make offers on their homes will consider it more financially prudent to continue renting instead.”
But while increased interest normally leads to a drop in inventory, the market boom has pushed many owners to put their home on the market. New listings of luxury homes rose by 44.9 percent compared to growth of less than 5 percent for medium and affordable homes. The number of luxury homes on the market rose by 8.4 percent year over year, even as the number of homes in the other two tiers fell.
“Luxury listings are skyrocketing because high-end homeowners have the financial means and the flexibility to move during this pandemic,” Fairweather said. “The growing supply of luxury homes for sale means that wealthy buyers have more options to choose from and a better chance of finding a home that checks all of their boxes.”