- Luxury home sales increased by 41.6% year-over-year during the first quarter of 2021, per Redfin.
- Affordable home sales only grew by 7% in the same period.
- The disparity is a byproduct of America’s K-shaped recovery as wealth inequality deepens.
- See more stories on Insider’s business page.
Luxury home sales are soaring.
They increased by 41.6% in the first three months of 2021 over the first three of 2020, according to a recent Redfin report that defined luxury homes as those selling for an average of $975,000. It’s a sharp contrast from sales for what Redfin deems “affordable” homes (those selling for an average of $184,400), which only increased by 7% in the same time frame.
It’s emblematic of the wealth divide that has deepened in America since the pandemic began, with the wealthy doing just fine and lower-income earners struggling to the point of falling into poverty. This K-shaped recovery is manifest in the housing market.
The report stated that home sales growth is typically similar across price tiers, but the pandemic’s exacerbation of economic inequality has caused it to diverge. “Affluent Americans with the flexibility to work from anywhere are taking advantage of low mortgage rates and buying up high-end houses – particularly in popular vacation destinations -which is contributing to the surge in luxury-home sales,” it reads.
The luxury housing market hasn’t been riddled with the same problems plaguing the more affordable housing market. The latter has seen cutthroat competition rife with ubiquitous bidding wars, as desperate buyers have resorted to all-cash offers, waiving inspections, or forgoing appraisals to win them. It’s resulted in a shortage of homes, Insider’s Taylor Borden reported, with current homeowners afraid to sell their houses for fear of being unable to find another.
But while multimillion-dollar luxury properties are also seeing heated competition with multiple offers and selling for more than the asking price, Redfin’s Chief Economist Daryl Fairweather told Housing Wire, there are enough of them to go around.
Miami saw the biggest increase in luxury home sales (101.1%), which could partially be explained by the number of Wall Streeters who have moved there during the pandemic. California gobbled up the next round of luxury home sales, with San Jose leading the way, followed by Oakland and Sacramento.
It seems that the wealthy are in search of sunshine and space, and they are once again exempt from the many pandemic-related economic problems afflicting many Americans.