The luxury housing market gained significant momentum throughout the COVID-19 pandemic as remote workers flocked to popular vacation destinations to make home purchases with historically low mortgage rates. Now, as inflation tightens its grip on everything from home sales to grocery runs and gas fill-ups, buyers are second guessing their second-home purchases.
Luxury home sales dropped 17.8% year-over-year during the three months ending April 30, the steepest decline since 2020, Redfin reports. As mortgage rates continue to rise, the pool of buyers who can afford luxury properties is shrinking, meaning less competition for those who can still afford a home, but a dead end for already priced out buyers.
The luxury market is cooling as soaring interest rates, a tepid stock market, inflation and economic certainty put a damper on demand. For a luxury buyer, a higher mortgage rate can mean a monthly housing bill that’s thousands of dollars more expensive. The year-over-year cooldown is also a reflection of the market for high-end homes coming back to earth following a nearly 80% surge in sales a year ago.
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