HousingWire
Wealthy buyers are insulated from higher mortgage rates
The stagnant 2024 housing market is one the real estate industry can’t wait to get away from, but not so for the niche luxury market.
The 2025 Red Paper from The Agency shows the luxury market making a sharp diversion from the broader existing home sales market, which could clock in near a historic low at fewer than 4 million sales.
The number of homes sold at $1 million or higher rose by 5.2% in the first half of 2024, and the median luxury home price jumped by 14.2%. That’s compared to a 12.9% drop in overall home sales and a 5% rise in median price.
Elevated mortgage rates have stymied the broader housing market in 2024, but the luxury segment is somewhat insulated from that because wealthy buyers are less likely to need a mortgage. According to the report, almost half of all luxury purchases in the first quarter of 2024 were made in cash.
And the rich are getting richer thanks to the stock market boom. The S&P 500 is up 26.9% thus far in 2024, while the Dow Jones is up 17.9%. Luxury buyers who were already homeowners also saw a rise in home equity.
Looking ahead to 2025, The Agency says geopolitics will impact the luxury market. Escalating wars throughout the world and hard right politicians winning elections could shift where the ultra-wealthy want to park their money.
That’s not necessarily bad for the luxury market in the United States. Getting past the presidential election potentially gives buyers and sellers more clarity on U.S. policy, and turbulence internationally might push the wealthy to the U.S. if it’s perceived to be more stable.
And even if international buyers steer clear, The Agency says generational wealth transfers will stimulate the luxury market. According to the report, roughly $31 trillion in wealth will be transferred by 1.2 million people over the next 10 years, and $20 trillion of it is estimated to be passed to 155,000 individuals.
Most of the wealth will go to older Millennials and younger members of Gen X.