The first quarter of the year paints a contrasting picture of the U.S. real estate market, with a surge in luxury real estate sales and a decline in overall sales nationwide amidst higher interest rates and low inventory. Luxury real estate sales in the U.S. increased over 2 percent, marking their largest yearly gains in three years as the median price of luxury homes hit an all-time record of $1,225,000 during the period. Despite the surge in luxury property sales, the overall U.S. real estate sector saw a 4 percent decline during the first quarter of 2024, according to real estate broker Redfin.
Cash transactions surge
Real estate experts attribute the market conditions to high interest rates and the decline in supply. Mortgage rates are now above 7 percent for a 30-year fixed loan which makes them out of reach to most home buyers. However, buyers seeking luxury real estate are buying property with cash, making them less vulnerable to high rates.
Redfin reveals that almost half of luxury real estate transactions in the U.S. were cash transactions in the first quarter of 2024. This marks the highest share in over a decade. According to real estate consultant, Miller Samuel Inc., all-cash transactions hit an all-time high of 68 percent of all sales in Manhattan.
Cash sales propel supply
The U.S. luxury real estate market is also witnessing a surge in the supply of homes for sale. Cash transactions have pushed luxury sellers to list their properties since they don’t need to worry about trading out of a low-rate mortgage like most homeowners. This boosted supply and drove more sales.
The number of luxury homes for sale increased 13 percent in the first quarter of 2024. Meanwhile, the rest of the housing market saw a 3 percent decline in listings, according to Redfin. Still, overall luxury inventory remains significantly below pre-pandemic levels despite a 19 percent increase in online luxury real estate listings.
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