Cash Is King: Luxury Home Prices Skyrocket Twice As Fast As Nonluxury Residences, Hitting Record Heights In Year-End Surge

Prices of luxury homes increased at double the pace of nonluxury homes at the end of last year, reaching an all-time high as a record share of high-end buyers paid cash.

The typical U.S. luxury home sold for a record $1.17 million in the fourth quarter, up 8.8% from a year ago, according to a report from real estate brokerage Redfin. Prices of nonluxury homes increased 4.6% year over year to a record $340,000.

All-cash buyers accounted for a record high 46.5% of the fourth quarter's luxury buyers, up from 40% a year ago.

According to Redfin, luxury prices are rising at twice the rate of nonluxury prices mainly because wealthy buyers can buy homes in cash, making high mortgage rates irrelevant.

"A lot of luxury buyers are coming in with cash, snapping up expensive homes," said Heather Mahmood-Corley, a Redfin Premier agent in Phoenix. "High-end homes are selling fast, especially in desirable areas like luxurious Scottsdale or Tempe, which West Coast transplants love because it's centrally located. One client recently bought a house in Tempe, flipped it and it sold for $1.4 million in two days."

Although low inventory is pushing prices up, the luxury home supply is up from a year ago, but it's still below prepandemic levels, spurring competition from affluent buyers for a limited number of homes.

10 Most Expensive Home Sales In Fourth Quarter

1. Miami: $79 million

2. New York: $75 million

3. New York: $65.6 million

4. Glenwood Springs, Colorado (near Aspen): $60 million

5. New York: $47 million

6. Glenwood Springs, Colorado: $42.3 million

7. San Francisco: $40 million

8. Fort Lauderdale, Florida: $40 million

9. Miami Beach, Florida: $35.4 million

10.  Los Angeles: $34.6 million

The number of luxury listings rose 19.7% year over year in the fourth quarter — the biggest increase in over two years. Listings were up because high-end sellers put their homes on the market to cash out while prices were high: mortgage rates don't scare wealthy buyers as much as middle-income buyers: and new listings had plenty of room to grow from the the end of 2022 — their lowest level in a decade.

"More luxury listings will temper price growth as the year goes on," Redfin Senior Economist Sheharyar Bokhari said. "Overall, that's a good thing for the high-end market. Sellers will still fetch fair prices; buyers will have more to choose from and sales should tick up."

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