After a relentless rise in home prices that lasted from mid- 2020 until just two months ago, the real estate market has reset. The number of homes sold and their prices have begun a downward turn. No part of the market has been damaged more than luxury home sales. The area hit hardest by this trend is Nassau County in New York. Total luxury home sales in this market dropped 65.6% in the quarter ending on November 30.
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The recent Luxury-Home Sales Sink 38%, the Biggest Decline on Record report from real estate research firm Redfin covered 60 large counties based on population. Note that sales in these markets rose almost 80% year over year in mid-2021.

One reason for the surge was low mortgage rates, below 3% for 30-year fixed home loans. That figure jumped to about 6% recently, as the Federal Reserve raised rates to combat inflation. It also is likely that as the rich moved out of cities, the demand in areas with expensive homes rose.

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Redfin defines luxury homes as those in the top 5% based on price in each market they cover. High-end homes in the most expensive housing markets overall took the worst beating. In addition to Nassau County, “Next came four California metros: San Diego (−60.4%), San Jose (−58.7%), Riverside (−55.6%) and Anaheim (−55.5%).”

The median luxury home prices in these areas are extraordinarily high. In Nassau County, the figure is $2.4 million, and in San Diego it is $3.2 million. San Jose, the most expensive market in the country, has a median luxury home price just below $4 million. That is about 10 times the median home price for all homes across the United States.

If anyone can afford a downward reset in home prices, it is the very rich. That day has come.

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