All-time record highs reached for luxury real estate prices.

• According to Redfin, luxury real estate sales experienced their best year-over-year growth in three years, with an increase of more than 2%.
• During the period, the median price of luxury homes reached a new high of $1,225,000.
• Interest rates and supply are the reasons why real estate experts and brokers differ in their opinions.

The real estate market is currently divided into two segments: a thriving luxury sector and a struggling mainstream market facing higher interest rates and limited supply.

Despite a 4% decline in overall real estate sales nationwide in the first quarter, luxury real estate sales rose more than 2%, achieving their best year-over-year growth in three years, according to Redfin.

High mortgage rates and limited supply are causing real estate experts and brokers to attribute the divergence in the market. While most homebuyers are struggling to afford homes with mortgage rates above 7% for a 30-year-fixed loan, affluent and wealthy buyers are able to purchase homes with cash, making them less affected by high rates.

In the quarter, nearly half of all luxury homes, as defined by Redfin as homes in the top 5% of their metro area by value, were purchased with all cash, according to Redfin. This represents the highest share in at least a decade. In Manhattan, all-cash deals reached a record 68% of all sales, according to Miller Samuel.

Luxury-home prices are rising at a faster rate than the broader market, with median prices increasing nearly 9% in the quarter, reaching an all-time record of $1,225,000.

"High-end home buyers are confidently purchasing properties now, as they believe prices will continue to increase, according to David Palmer, a Redfin agent in Seattle, where the median-priced luxury home sells for $2.7 million. These buyers are approaching purchases with more optimism and less apprehension."

The luxury market is experiencing an increase in sales due to the availability of more homes for sale. Wealthy sellers who buy with cash are not as concerned about trading out of a low-rate mortgage, which has allowed for more inventory and sales in the upper end of listings.

In the first quarter, the number of luxury homes for sale increased by 13%, while the rest of the housing market experienced a 3% decline, according to Redfin. Although overall luxury inventory is still "below" pre-pandemic levels, the number of luxury listings that were added to the market during the first quarter increased by 19%, the report stated.

High-end home prices are rising, causing homeowners to feel that now is a good time to sell and cash in on their equity, according to Palmer.

While not all luxury markets are experiencing growth, the strongest price increases are occurring in unexpected areas. Redfin reports that Providence, Rhode Island, had the fastest growth in luxury prices at 16%, while New Brunswick, New Jersey, saw a 15% increase. In contrast, New York City experienced a 10% decline in luxury prices.

Seattle experienced the most significant growth in overall sales of luxury homes among metro areas, with a 37% increase. Austin came in second with a 26% rise, while San Francisco saw a 24% increase in sales.

In Seattle, luxury homes sold the fastest, taking a median of nine days to sell, while Oakland and San Jose in California also experienced quick sales.

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