After flourishing during the pandemic housing frenzy, the U.S. luxury housing market has plummeted dramatically as economic tides shift amid stubborn record inflation, higher interest rates and a volatile stock market.
Sales of luxury homes sank nearly 45% year over year during the three-month period ending Jan. 31, 2023, according to a March 10 Redfin report. That slump outpaced the record 37.5% drop in sales of nonluxury homes. Redfin defines luxury homes as those estimated to be in the top 5% based on market value.
The hardest hit metro areas include high-end markets on the East Coast and in California. In Miami, luxury home sales fell by almost 69% year over year, the largest decline Redfin recorded in that three-month period. Next came Nassau County-Suffolk County, New York, (-62.6%), followed by three California metros: Riverside (-59.8%), Anaheim (-59.3%) and San Jose (-59%).
Real estate professionals point to economic uncertainty as one of the main contributors to the luxury housing market’s decline.
“Uncertainty is the main factor driving the luxury market slowdown in Los Angeles,” Alin Glogovicean, a Redfin Premier real estate agent, said in a prepared statement. “If you’re investing millions in a property, you want to make sure it will hold its value. Most luxury buyers and sellers are thinking, ‘Let’s just wait and see what happens to the market. When it stabilizes, we’ll be ready to go.’ Everyone is kind of at a standstill.”
‘Luxury suburb’ of Utah
But certain areas — and certain luxury home types — are at least to some degree bucking the national downturn.
That includes Utah’s “luxury suburb,” in the Park City area — a resort town that exploded in popularity after the 2002 Winter Olympics and attracts celebrities each year for the Sundance Film Festival.
While not immune to economic headwinds, Park City has seen a dip in home sales, but not to the same extent as other upscale markets across the nation. The number of properties sold in the area have dropped almost 30%, from 2,790 in 2021 to 1,962 in 2022, but the average sold price increased almost 10%, from over $1.7 million in 2021 to over $1.9 million in 2022, according to the Park City multiple listings service.
“Utah has a very unique luxury market,” said Thomas Wright, CEO and principal broker of Summit Sotheby’s International Realty, which specializes in high-end real estate in the Park City area and across Utah.
Wright said traditionally, outside of Park City, there haven’t been many luxury homes for sale along the Wasatch Front, but demand for them has grown along with Utah’s economy, and migration patterns from other states have brought those types of buyers to the state.
“Park City has become a luxury suburb of Salt Lake City,” Wright said. “It used to be a resort market that was kind of geared toward the resort consumer, but now it not only draws the resort consumer because we have the ‘greatest snow on Earth’ and we have incredible access to a brand new international airport.”
“In addition to that, people are deciding to live full time in Park City,” he said. “That dynamic has made the luxury market in Utah stronger, and we’ve avoided some of the challenges that luxury markets in other places have seen.”
Wright said the sale of multimillion-dollar properties in Park City have indeed slowed since the madness of 2020, 2021 and early 2022 died down — but that’s a natural symptom of a “corrected market.”
“But I can tell you, in the first quarter of 2023, we’re already seeing an improvement in all of these numbers,” he said. “I think we found a more healthy equilibrium in the market of supply and demand. It feels like it’s a little bit more balanced and a little less frenzied.”
Read More: Housing market: Luxury sales tumble, but not ‘luxury suburb’ in Utah