Sales of high-end homes soared 26% year-over-year during the three-month period ended April 30, exceeding the 15% increase for mid-priced homes and 17.8% gain for affordable homes, suggesting affluent Americans, flush with cash from the stock market rally are buying up the most desirable properties, real estate brokerage Redfin said on Wednesday.
Among U.S. metropolitan areas, San Francisco saw the largest jump in sales of high-end homes, up 82.4% to $2.16 million; followed by Oakland, up 71.8% to $1.4 million; Miami, up 70.4% to $565,000; San Jose, Calif., up 66% to $2 million; and Las Vegas, up 64.4%, to $433,000.
The increase in high-end sales in Florida is driven by an “influx of affluent out-of-staters,” Redfin said, while the surge in the Bay Area of northern California reflects a “recovery from the massive decline in sales” the area witnessed at the beginning of the pandemic when many residents fled big cities.
Some homebuyers may now be returning to urban hubs, including the Bay Area, as they feel more comfortable about the pandemic finally easing, Redfin added.
Based on Redfin’s own estimates of home market values, “high end” homes across the country had a median sale price of $440,000 for the three months ended Apr. 30, “mid-priced” was at $280,000, and “affordable” at $189,500.
“So far, the economic recovery from the pandemic has disproportionately benefited Americans with bigger bank accounts,” stated Redfin’s chief economist Daryl Fairweather. “This means a lot of the demand for homes is coming from folks who are well-off, while many lower-income Americans sit on the sidelines because they’ve been priced out of the housing market due to surging prices.”
It’s not unusual for higher-end properties to sell faster than those in lower price ranges — the main driver of this phenomenon is the higher percentage of “all cash” transactions in the higher-end housing market, which adds an additional layer of demand for these properties and more potential buyers, Ken H. Johnson, associate dean at the College of Business at Florida Atlantic University and director at American Real Estate Society told Forbes.
The surge in high-end sales is also fueling a rapid acceleration in the prices of these properties, having risen 14.3% year-over-year during the three months ending April 30, versus a 12.4% climb for mid-priced homes, and a 10.2% gain for affordable homes. High-end home prices rose the most year-over-year in Austin, Texas, up 24.1% to $635,000, followed by San Diego, up 18% to $1.05 million, Miami, up 17.7% to $565,000, West Palm Beach, Fla., up 17.6% to $549,000 and Phoenix, up 17.2% to $510,000, all of which are popular vacation destinations with either plenty of space for large homes and or year-round good weather, Redfin said. However, Vincent Shook, a Redfin real estate agent in Phoenix, stated that many buyers with modest budgets seeking affordable or mid-priced homes waited too long to purchase on the false assumption that prices would decline, but now they’re “priced out of the market.”
Not only are sales of homes flourishing, but they’re selling faster than last year. In the three months ended April 30, the average high-end property in the U.S. stayed on the market for 26 days – 23 fewer days than in the same period in 2020. Meanwhile, affordable homes spent just 24 days on the market, 12 days less than last year, while mid-priced homes spent 20 days on the market, 18 fewer days than last year.