People are moving out of pricey markets and into luxury homes
The COVID-19 pandemic has been disastrous on most fronts, but it’s been a boon for the luxury housing market. According to Bloomberg, demand for luxury homes is surging as the wealthy seek property with more space to quarantine, emphasizing the widening wealth gap in America.
A recent report from brokerage Redfin found high-end sales increased 42 percent in the third quarter from a year earlier, marking the most significant spike since 2013. Meanwhile, sales of mid-priced homes increased by only three percent, while affordable home sales declined by four percent.
“The luxury housing market normally takes a hit during recessions as wealthy Americans tighten their purse strings, but this isn’t a normal recession,” Daryl Fairweather, chief economist at Redfin, said in a statement. With many Americans working from home indefinitely, the wealthy are abandoning pricey markets like San Francisco, New York and Los Angeles in favor of high-end homes outside major cities. Areas seeing a major spike in luxury sales include California’s Inland Empire, Sacramento and Oakland, as well as Portland, Oregon and West Palm Beach, Florida.
“Luxury listings are skyrocketing because high-end homeowners have the financial means and the flexibility to move during this pandemic,” Fairweather said. “The growing supply of luxury homes for sale means that wealthy buyers have more options to choose from and a better chance of finding a home that checks all of their boxes.”
Meanwhile, Americans who don’t have the means to simply pack up and relocate to a new luxury home aren’t faring quite so well. While the wealthy benefit from a surging stock market and low mortgage rates, first-time buyer may struggle to get approved for loans or find affordable homes as banks tighten credit.