The pandemic is hammering Americans who don’t have the privilege of working remotely. The wealthy, meanwhile, are benefiting from the surging stock market and mortgage rates near record lows.
(Oct 13): Demand for luxury homes is soaring, underscoring how the pandemic has intensified wealth disparities in the US.
High-end sales jumped 42% in the third quarter from a year earlier, according to a report from brokerage Redfin. That’s the largest jump dating back to 2013. Sales of mid-priced homes climbed just 3%, while affordable purchases declined 4%.
While banks tighten credit for first-time buyers, the pandemic is hammering Americans who don’t have the privilege of working remotely. The wealthy, meanwhile, are benefiting from the surging stock market and mortgage rates near record lows.
The cheaper borrowing costs are driving demand for larger properties with more room to quarantine. And with many corporate workers no longer tethered to office buildings, there’s a shift away from expensive markets like San Francisco, New York and Los Angeles.
“The luxury housing market normally takes a hit during recessions as wealthy Americans tighten their purse strings, but this isn’t a normal recession,” Daryl Fairweather, chief economist at Redfin, said in a statement.
Even with low mortgage rates, first-time buyers could struggle to get approved for loans or find homes they can afford in a market where inventory is scare. And while housing has been a bright spot in the pandemic economy, the migration to the suburbs has been driven by wealthier Americans.
Redfin defines luxury as the most expensive 5% of homes in a given market. High-end sales in Sacramento, 90 miles (145 kilometers) northwest of San Francisco, jumped 86%, more than any other major metro area, as Silicon Valley tech workers moved farther out.
Luxury sales climbed 63% in California’s Inland Empire, east of Los Angeles, and 61% in Oakland, a more-affordable city across the bay from San Francisco. They also increased 61% in Portland, Oregon, and 60% in West Palm Beach, Florida. In New York, expensive sales dropped 2% in Nassau County as inventory tightened.
The demand for high-end homes is driving up prices, which gained 6.5% from a year earlier, while values for the most affordable properties climbed 2.9%, Redfin said.
“Luxury listings are skyrocketing because high-end homeowners have the financial means and the flexibility to move during this pandemic,” Fairweather said. “The growing supply of luxury homes for sale means that wealthy buyers have more options to choose from and a better chance of finding a home that checks all of their boxes.”