Luxury clientele’s resiliency toward interest rates and a well-performing stock market were primary factors in the luxury market’s positive performance in 2024.
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As the market at large faced a stagnant year, luxury real estate couldn’t be held back.
The high mortgage rates and home prices that crippled the average homebuyer in 2024 had little impact on luxury buyers as the number of homes sold at $1 million and above during the first half of the year alone rose by 5.2 percent on an annual basis, according to Realtor.com data analyzed by The Agency for its Red Paper Annual Wealth Report.
“This year’s report provides unparalleled insights into the evolving trends influencing the global real estate market, the luxury goods sector and the broader wealth landscape,” The Agency CEO and founder Mauricio Umansky said in a statement. “This truly comprehensive and forward-thinking resource empowers our agents and clients with the knowledge, tools, and vision to make informed decisions in a rapidly changing market.”
Homes sales overall dropped 12.9 percent during the first half of 2024, the report notes, making the contrast shown in the luxury market especially remarkable. The median home sale price was up 5 percent year over year during the first half of 2024 while the luxury sales price (homes in the 95th percentile) was up 14.2 percent during the same period.
The Red Paper cites resiliency toward interest rates and a well-performing stock market as primary factors in the luxury market’s positive performance in 2024. Because luxury buyers are more likely to purchase real estate with cash, the relatively higher mortgage rates of around 7 percent that hit the market in the last year did not dissuade those high-end buyers.
Rather, nearly half of all luxury buyers in the U.S. made their home purchase in cash during Q1 2024, according to Redfin data, the report notes, which was the largest share in the last decade.
The stock market’s strength this past year also allowed many luxury buyers to grow their equity, and therefore, increase their purchasing power. The S&P 500 is up 26.9 percent this year and the Dow Jones is up 17.9 percent. When the stock market performs well, it boosts investors’ confidence, often making them more likely to make large purchases, like a real estate investment.
Moving into 2025, The Agency said geopolitics will also impact the luxury market, with more than 70 global elections that took place in 2024. Global wars and right-wing politicians winning elections may impact where the wealthy decide to invest, the report noted. But, with the U.S. presidential election now wrapped, it’s possible that some international buyers will view U.S. property investment as a stable option, especially compared to other regions facing conflict.
Even if falling interest rates and political stability in the U.S. are not enough to draw a large pool of international buyers, The Agency noted that generational wealth transfers should give the luxury market a boost in 2025 and through the next decade.
“Generational wealth transfer is already a motivating factor in purchasing power,” Paul Lester, partner with The Agency in Los Angeles, said in the report. “We see 30-year-old couples who can actively compete for the best properties in the $10 million, $20 million or $30 million range.”
Roughly $31 trillion is expected to be transferred in the next 10 years by 1.2 million people, each of whom has a net worth of at least $5 million, the report said. About $20 trillion of that wealth, based on data from Altrata, is expected to be passed down from individuals with a net worth of $30 million or more. Most of that wealth will be transferred to heirs in the young Gen X generation and older Millennial generation.
The Red Paper also noted that off-market transactions have become a very popular method for selling trophy properties and that the practice is likely to increase in frequency. The privacy and exclusivity involved in off-market deals make them appealing to sellers, while the potential for less competition and fewer bidding wars is attractive to buyers.
In the current low inventory market, potential sellers will also look to off-market shop properties so as not to rack up days on market, while testing the appetite for their listing.
In conjunction with this section, the report included a quote from Umansky himself, criticizing NAR’s Clear Cooperation Policy, which has come under scrutiny in the last few months by industry players.
“When it comes to high-end, multi-million-dollar properties, off-market deals provide privacy and exclusivity for sellers while allowing buyers a chance to avoid the competitive pressures of public listings,” Umansky said. “However, policies like Clear Cooperation run the risk of limiting those choices. Above all, I advocate for policies that have built-in flexibility and allow our clients to navigate the market on their terms.”
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