Luxury home sales fell 28.1% year-over-year during the three months ending August 31, the biggest decline since Redfin began tracking luxury home purchases in 2012, Redfin reports. The recent decline in high-end home sales comes amid uncertainty in a tumultuous housing market as interest rates surge and experts warn of a possible recession in the year ahead.
For luxury buyers, higher interest rates can amount to a monthly housing bill that is thousands of dollars more expensive, and as home prices continue climbing to new highs, even those with million-dollar budgets are getting less bang for their buck. Pricey California markets saw the largest declines in luxury home sales, led by Oakland, San Jose, and San Diego, which all saw decreases of more than 55%.
Rising interest rates, inflation, a tepid stock market and economic uncertainty are causing luxury buyers to back off. The average 30-year fixed mortgage rate eclipsed 6% last week, hitting the highest level since 2008. While high-end buyers are more likely to pay in cash, many still take out mortgages—sometimes as an investment strategy. The story in the luxury market is similar to the story in the overall housing market, but more extreme, said Redfin Chief Economist Daryl Fairweather.