Well-heeled home shoppers are increasingly paying cash, helping turbocharge price gains for the most expensive U.S. homes.
The median sale price of luxury homes — valued in the top 5% of the market nationally — hit an all-time high $1.23 million in the first quarter, an increase of 8.7% from the same period last year, according to an analysis by Redfin. That's almost twice the increase seen in non-luxury homes.
For homes valued in the middle-third of the market, the median sale price rose 4.6% from a year ago to $345,000, according to the report. Redfin didn't factor in price trends for homes with an estimated value in the bottom third of the market.
One reason for the diverging sales data is that wealthy home shoppers are more likely to have the financial flexibility to bypass financing hurdles by paying in cash. The trend is helping accelerate the growth in home sale prices among the most high-end homes at a faster clip than less expensive properties.
Consider, some 46.8% of luxury homes were bought entirely with cash in the three months ended February 29, according to Redfin. That's the highest share of all-cash luxury home purchases in at least a decade and it's up from 44.1% from a year earlier.
Prices for the most expensive homes have kept climbing even as the inventory of high-end properties has increased sharply this year. All told, the number of luxury homes on the market jumped 12.6% in the first quarter compared to a year earlier, while new listings surged nearly 19%, Redfin said.
In contrast, the inventory of homes in the middle-third of the market fell 2.9% in the January-March period from a year earlier. Home prices are growing more unaffordable for the average American, in part because inventory has been low.
Homeowners have been hesitant to sell because they would then face buying another property at today's higher mortgage rates. Some homeowners have also watched their home equity grow in value, making them even more reluctant to walk away from that wealth growth.
Sales of luxury homes rose 2.1% in the first quarter versus a year earlier, while sales of properties in the middle-third of the market fell 4.2%, according to the report.
Buying a house is costlier than anytime in at least the last decade, with property buyers hit with the double whammy of rising mortgage rates and home prices, Redfin has said.
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