Luxury home sales are following the overall housing market, as near-record-high prices, higher mortgage rates and a tariff-beaten down economy are taking their toll.
Pending sales of luxury home sales declined 9.9% in the February through April period, compared to the same three-month stretch a year ago – and the largest drop since August 2023, when many home shoppers were still reeling from much-higher rates. The drop in luxury home prices was the largest for the month since 2014, according to Redfin.
Bottom-line: Luxury buyers, like many others, are concerned about the economy and Wall Street.
Luxury home buyers take a ‘wait-and-see approach’
Nationwide, completed sales of luxury homes – considered the top 5% of the market – were off 6.5% in April compared to a year ago, a few percentage points higher than the overall market (also known as every day, middle-class folks).
“Many luxury buyers are adopting a wait-and-see approach because of volatility across financial markets and shifting tariff policies,” said Redfin Senior Economist Sheharyar Bokhari. “These high-end buyers often sell stock to help with down payments, but many pressed pause on their home search when the stock market tumbled in April. As a result, what is usually a fiercely competitive space is cooling.”
In California, completed sales of luxury homes fared better, with a modest 2% decline in February through April compared to a year ago. Two regions – Oakland and San Diego – had double-digit declines in luxury home sales compared to a year ago.
Only three of the seven markets had gains in luxury home sales, including San Francisco and Los Angeles up 18.3% and 15.4%, respectively. Those big gains helped curb the statewide decline in luxury home sales.
Slow sales, rising prices
Despite the modest decline in high-end sales, luxury home prices continue to increase, including up 21% in San Jose and 17.5% in Anaheim, largely referred to as central Orange County (see table, below).
So, high-end homes are tracking much like the rest of the market, with sales declining but prices rising.
However, the top end of the luxury market – those head-turning multimillion-dollar mansions – continue to move, since wealthy buyers worry less about mortgage rates and even the roller-coaster ride on Wall Street.
“Even though luxury sales are down overall, the most desirable homes are still being snapped up relatively quickly,” said Bokhari. “That’s because many wealthy buyers have the means to weather economic uncertainty and make large purchases without overextending themselves.”
Few under $1 million luxury markets in U.S.
Despite the decline, luxury home prices continue to soar nationwide and in California. Nationwide, only seven markets have luxury home prices below $1 million, compared to 30 in 2020, according to Redfin.
Those under-million-dollar markets are Detroit, Cleveland, Pittsburgh, Indianapolis, St. Louis, Cincinnati and San Antonio.
In California, Sacramento is the most affordable luxury market, with a median home price of about $1.65 million. Luxury home prices across the state, especially in the Bay Area and Southern California, have soared at least 59% since 2015 (see table, below).
“The Rust Belt’s relative affordability has preserved opportunities for luxury buyers that have all but disappeared in much of the country,” Bokhari said. “These metros haven’t seen as much explosive investor demand or speculative buying, which has helped keep prices grounded. Buyers can get historic charm, large lots, and upscale finishes – often in walkable, tree-lined neighborhoods – for a small fraction of what a similar home would cost in cities like San Francisco or New York.”
Luxury home prices increase in February-April period
| Metro | Sales price | % compared to a year ago | Home sales compared to a year ago |
|---|---|---|---|
| Anaheim-Irvine | $5.3 million | +17.5% | -9.0% |
| Los Angeles | $4.15 million | +6.2% | +15.4% |
| Oakland | $3.0 million | +4.6% | -14.2% |
| Riverside | $1.69 million | +10.1% | -5.2% |
| Sacramento | $1.66 million | +4.7% | +3.6% |
| San Diego | $3.73 million | +9.6% | -13.4% |
| San Francisco | $6.09 million | -1.1% | +18.3% |
| San Jose | $5.5 million | +20.8% | -5.7% |
Source: Redfin
Mortgage refinancing has become a larger percentage of home loan activity. ADOBE STOCK
California mortgage activity gains momentum, while home loans slow nationwide
California, often the center of a booming or collapsing housing market, has bucked a national trend of rapidly declining home loans.
Nationwide, home loan activity declined a hard-to-imagine 14% during the first quarter, compared to the same three-month period last year. A gut punch since the mortgage industry has been dealing with declining demand for much of the past two years.
But California, thanks largely to a resilient economy, has enjoyed a healthy increase in home loans during the first quarter compared to a year ago, according to ATTOM Data.
The state enjoyed an 11.9% increase in home loans issued during the first three months of the year, based on an aggregate of eight regions – from the Bay Area and Sacramento to San Diego.
Five of the eight regions had double-digit gains in activity, including an impressive 22% in San Jose and 16.4% in San Francisco (see table, below).
Lower-priced housing markets in the Central Valley and the Inland Empire (Riverside and San Bernardino counties) reported smaller but still healthy increases in loan activity, especially compared to the national pace.
REFI time for many owners who purchased in recent years
Many of the loans – nationwide and in California – were from refinancing or home-equity loans.
“The red-hot housing market we’ve seen over the last few years meant that most home loans were going toward new purchases, but that appears to be changing,” said Rob Barber, CEO at ATTOM. “Rather than borrowing money to buy a new property, the data shows homeowners are increasingly looking to restructure their existing mortgages or borrow equity from their homes to cover other expenses. If the current trend continues, mortgage refinancing deals will soon make up the biggest share of the home loan market.”
Home-equity and refinancing loans are good for homeowners looking to save some money, pay for a home-improvement project or consolidating high-interest credit-card debt, but bad news for those looking to purchase. In short, home-equity and refinancing loans are often a signal that homeowners are planning to stay put – and likely not sell their home.
| City | Number of home loans | % compared to a year ago |
|---|---|---|
| Bakersfield | 3,444 | +1.8% |
| Fresno | 3,375 | +9.0% |
| Los Angeles | 37,586 | +14.7% |
| Riverside | 21,469 | +5.4% |
| Sacramento | 11,068 | +10.5% |
| San Diego | 12,827 | +15.2% |
| San Francisco | 13,595 | +16.4% |
| San Jose | 5,281 | +21.9% |
Source: ATTOM Data
Wildfires are the greatest natural disaster in California. ADOBE STOCK
Insurance rates eat up pay raises
California’s home insurance crisis has emptied bank accounts and grabbed headlines, especially as State Farm asks for – and gets – head-turning policy rate increases after devastating wildfires in recent years.
Home insurance rates in California are easily exceeding pay increases for homeowners, creating a one step forward, two steps back situation, according to a new report by Zillow.
Homeowners in the Sacramento region, from Davis to El Dorado Hills and Lincoln, have endured the second-largest policy rate increase in the nation at 54% since 2019. The rate hikes outpace the 24% pay increase over that same period.
The Sacramento region has one of the highest wildfire risks but has also escaped a major disaster during the past few decades.
San Diego and Los Angeles had the sixth- and 11th-largest rate increases since 2019, with policies up at least 20 percentage points compared to pay raises (see table, below).
Historically low rates are slipping away
Homeowners, especially first-time buyers and retirees living on a fixed income, are getting farther behind paying more for homeowners’ insurance.
Now, to be fair, California has among the lowest policy rates in the nation, since devastating hurricanes and tornadoes pose little risk in the state. But costs are climbing fast and with every major disaster, such as the wildfires in Altadena and Pacific Palisades in January, rates will likely continue to soar.
| City | ||
|---|---|---|
| Sacramento | +24% | +54% |
| San Diego | +24% | +48% |
| Los Angeles | +24% | +44% |
| Riverside | +23% | +43% |
| San Jose | +24% | +38% |
| San Francisco | +19% | +42% |
Source: Zillow
