Cash Is King: Luxury Home Prices Are Outperforming as Affluent Buyers Dodge High Mortgage Rates

Luxury home prices rose 9% to the highest third-quarter level on record, growing nearly three times faster than non luxury prices. Luxury sales and listings also held up relatively well—a reversal from last year—as a rising share of high-end buyers escaped the pain of high mortgage rates by paying in cash.

The median sale price of luxury U.S. homes rose 9% year over year to $1.1 million in the third quarter, while the median sale price of non luxury homes climbed 3.3% to $340,000. Both were at the highest level of any third quarter on record.

This is according to an analysis that divided all U.S. residential properties into tiers based on Redfin Estimates of the homes’ market values as of Oct. 15, 2023. This report defines luxury homes as those estimated to be in the top 5% of their respective metro area based on market value, and non luxury homes as those estimated to be in the 35th-65th percentile based on market value. 

43% of Luxury Home Purchases Are Paid for in Cash, Up From 35% Last Year

“Wealthy homebuyers have more tools to weather the storm of high mortgage rates,” said Redfin Senior Vice President of Real Estate Operations Jason Aleem. “Many of them can afford to pay in cash, meaning they’re escaping high mortgage rates altogether. Others are choosing to take on a higher rate and refinance later—an expensive option that isn’t feasible for a lot of lower-income consumers. Affluent Americans are still spending big, in large part because of pandemic savings and resilient housing and stock values.”

More than two in five (42.5%) luxury homes that sold in the third quarter were purchased in cash, up from just over one-third (34.6%) a year earlier. By comparison, just 28% of non luxury homes that sold were bought in cash, little changed from the third quarter of 2022.

“While many luxury buyers have the resources to forge ahead even when mortgage rates are elevated, stubbornly high rates and home prices will likely push some affluent house hunters to the sidelines in the coming months,” said Redfin Chief Economist Daryl Fairweather. “High costs, along with the uptick in the number of high-end homes for sale, could cause luxury price growth to cool.”

Housing Supply Is Up 3% in the Luxury Market—And Down 21% in the Non Luxury Market

The total supply of luxury homes for sale (active listings) grew 2.9% from a year earlier in the third quarter, compared with a record 20.8% decline in the supply of non luxury homes. 

Similarly, luxury new listings rose 0.3%, while non luxury new listings fell 22%. Luxury new listings were below pre-pandemic levels, but not by much. Non luxury new listings, on the other hand, stood at the lowest third-quarter level since 2012.

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Lily Katz | Redfin.com | November 3, 2023