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Luxury home sales in the United States dramatically outpaced the rest of the housing market in early 2021, fueled by affluent buyers, remote work flexibility, and a less severe inventory shortage at the high end of the market. According to an analysis of the first quarter, sales of luxury properties—defined as the top 5% of the market by value—soared by 41.6% year-over-year. This growth far exceeded that of affordable homes (7%) and mid-priced homes (5.9%), highlighting a significant market divergence.
This analysis is based on a segmentation of all U.S. residential properties into five price tiers, from "most affordable" to "luxury," using Redfin Estimates of market values. The widening gap in sales performance underscores how the coronavirus pandemic has exacerbated economic inequality, enabling wealthy Americans to capitalize on low mortgage rates while many lower-income individuals face financial hardship.
The surge is primarily driven by demand from affluent buyers who have maintained steady incomes and gained the flexibility to work remotely. With historically low mortgage rates—the interest charged on a loan used to purchase real estate—these buyers are actively seeking larger properties, often in desirable vacation destinations. Major metropolitan areas saw universal growth, with Miami leading at a 101.1% increase in luxury sales, followed by San Jose, CA (92.3%) and Oakland, CA (82%).
“Luxury properties, even those in the $3 million range, are receiving multiple offers and selling for well over the asking price,” noted a real estate professional based in Oakland, CA. “The demand for more space and large backyards, driven by pandemic lifestyle changes, is unprecedented.”
A critical factor enabling this growth is a relatively healthier supply of luxury homes for sale. While the entire U.S. market faces a record shortage of inventory, the decline in luxury home listings was the smallest across all price tiers.
| Price Tier | Year-over-Year Change in Homes for Sale (Q1 2021) |
|---|---|
| Luxury (Top 5%) | -5.1% |
| Affordable | -14.9% |
| Mid-Priced | -19.8% |
This slower decline is partly because more luxury homeowners are listing their properties. New listings of luxury homes increased by 15.8% year-over-year, while listings in other tiers generally fell. Based on our experience assessment, luxury sellers may feel more confident because they have a broader selection of high-end homes to choose from for their next purchase, unlike sellers in more affordable segments who are hesitant due to the extreme shortage.
Yes, high-end homes are spending significantly less time on the market. The typical luxury home for sale in the first quarter of 2021 found a buyer in just 61 days, which is 38 days faster than the same period in 2020. This acceleration is more pronounced than in other market segments, indicating exceptionally strong demand for premium properties.
Home prices are rising across all market segments due to high demand, low mortgage rates, and limited supply. The most affordable homes saw the highest price growth at 16.5%, but luxury home prices were close behind with a 14.7% increase. This demonstrates that the competitive market conditions are impacting values at every level.
The luxury real estate market's performance is a clear indicator of shifting economic and lifestyle trends. While growth is robust, market conditions can change, and outcomes are never guaranteed. Prospective buyers and sellers should conduct thorough research and consider their personal financial circumstances.
