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Affluent Americans are chasing luxury houses

As wealthy Americans took advantage of cheap mortgages, increased savings and the ability to work from home during the pandemic, their demand for bigger homes and million-dollar listings outpaced sales of homes across all other price ranges.

The number of homes sold for more than $1 million rose by 81% to 17,216 in February, from 9,635 a year earlier. At the same time, the number of homes sold for under $100,000 fell 26% to 22,569 from 30,382 a year earlier, the National Association of Realtors told USA TODAY.

In the Midwest, the volume of homes sold for above $1 million doubled in the same period. In the Northeast, the number increased by 98%. In the South, it was up by 94%.

At the same time, a lack of inventory of homes below $250,000 and job losses have caused a fall in sales of homes in that bracket.

More rooms; pricier homes

For Americans of means, the demand for larger homes was driven by a desire for more rooms that could be used as offices and gyms while they worked from home during the COVID crisis, says Lawrence Yun, chief economist for NAR, who adds, “The larger space automatically means that it is more expensive.”

Falling mortgage rates (currently 3.04%) throughout 2020 and early this year also have also boosted sales of luxury homes, Yun says. Luxury homes are those in the top 5% of any market.

While growth in homes sales has been similar across price ranges in the past, it has diverged during the pandemic as economic inequality rises, the Seattle-based real estate brokerage Redfin found in a report given exclusively to USA TODAY.  

Home with a HOUSE FOR SALE sign in the front yard.

Sales of luxury homes in the U.S. rose nearly 42% year over year in the first three months of 2021, far outpacing sales growth in every other price tier, according to Redfin. By comparison, sales of affordable homes (those in 5th-35th percentile) increased 7%, while sales of mid-priced homes climbed just 5.9%.

“There are people who have become much wealthier as their stock portfolios rise and they aren’t spending money on other things besides housing,” says Redfin Chief Economist Daryl Fairweather. “They are not going out to restaurants or on vacations, and they want to spend their money on housing, spending more time at home.”

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