Why Luxury Home Sales Are at an All-Time High

An older woman sits on a couch in a luxury home looking out at the ocean.

The luxury housing market is still red hot. A typical luxury home sold for $1.18 million in the second quarter of 2024, up 8.7% from the same period a year earlier, according to a new report from Redfin. Prices of non-luxury homes rose up 3.8% to a median price of $342,500.

Redfin defines luxury homes as those estimated to be in the top 5% of their respective metro area, based on market value, and non-luxury homes as those estimated to be in the 35th-65th percentile based on market value.

Luxury home sales soar

Sales of luxury homes are on the upswing again, mainly because high-interest rates are not a deterrent, as many affluent buyers buy houses in cash. The weekly average 30-year fixed mortgage rate hovers between 6.95% and 7%. Elevated mortgage rates have driven down demand for the average American homebuyer, but mortgage rates remain irrelevant to cash buyers.

Nearly half (43.7%) of luxury homes bought in the second quarter were purchased in cash. In contrast, non-luxury sales haven’t posted an increase since the end of 2021. In fact, sales of non-luxury homes decreased 3.4% year-over-year, according to the report.

“People with the means to buy high-end homes are jumping in now because they feel confident prices will continue to rise,” said David Palmer, a Redfin Premier agent. “They’re ready to buy with more optimism and less apprehension. It’s a similar sentiment on the selling side:”

Luxury home inventory peaks

In the second quarter of 2024, the total number of luxury homes for sale rose 9.7% from a year earlier, according to the report. That’s compared with a 3.4% decline in non-luxury inventory.

New listings of luxury homes were up 11% from a year earlier, the second consecutive quarter of double-digit increases. That’s roughly four times bigger than the 2.6% increase for non-luxury homes. Inventories peaked for several reasons:

Mortgage rates have a lesser impact on luxury homeowners because they’re more apt to buy their next home in cash or be financially able to take on a higher rate.
Owners of luxury homes, many of whom have substantial equity, are putting their houses on the market to cash in while prices are at record highs.
Luxury home supply has room to grow, as supply remained low during the first quarter of 2023.