Now Luxury Home Prices Are Plummeting

If the economy really is headed for a “richcession” — where well-heeled folks take a bigger hit than in a normal downturn — the coming storm may have already reached some luxury home markets.

Luxury home prices fell by double digits in several places among the 50 most populous U.S. metropolitan areas during the second quarter of 2023, according to a Redfin analysis.

Nationwide, the median sale price for luxury homes continued to climb, up 4.6% from one year earlier, to a record $1.2 million. But as with price declines in other segments of the market, luxury home prices are taking the biggest hit in the West.

During the second quarter, the median luxury home sale price fell most in:

• San Francisco: -12.7% (falling to $4.8 million)
• Seattle: -12.3% (falling to $2.5 million)
• Oakland, California: -11.1% (falling to $2.8 million)
• San Jose, California: -10.3% (falling to $4.3 million)

In a summary of the findings, San Francisco area Redfin Premier real estate agent Ali Mafi says:

“Buyers are getting big discounts on high-end condos in San Francisco right now — especially those under 1,000 square feet. Those homes are having trouble selling, and some sellers are losing a lot of money.”

For perspective, the 12.7% decline in San Francisco means someone with a home previously valued at $5.5 million would now be sitting on a $700,000 loss.

There are several reasons why luxury home values are now plunging in the Western United States. Redfin notes that because these markets typically have been among the most expensive in the country, they have further to fall.

In addition, stock market declines and recent layoffs have hit the tech industry particularly hard. Many of the markets seeing the biggest declines in luxury home prices are tech hubs.

Redfin adds that San Francisco is just one of three markets that saw new listings rise in the second quarter. That additional inventory also is likely forcing prices down there.

At the other end of the spectrum, luxury home prices rose most in the following markets:

• New Brunswick, New Jersey: 12.1% (rising to $1.8 million)
• Charlotte, North Carolina: 9.2% (rising to $1.3 million)
• Newark, New Jersey: 9.2% (rising to $1.6 million)
• Orlando, Florida: 8.8% (rising to $1.1 million)
• Virginia Beach, Virginia: 7.8% (rising to $997,500)

As Redfin chief economist Daryl Fairweather notes in the summary:

“High mortgage rates are prompting many middle-income homeowners to stay put, but wealthy homeowners can often afford to move even if it means taking on a higher rate and monthly payment. Wealthy buyers are also more likely to pay in cash, meaning they’re less likely to be deterred by elevated mortgage rates.”

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