San Diego luxury home sales are down by more than half as the high-end market sees its biggest drop in at least a decade.
Out of the 50 most-populated metro areas, San Diego had the fourth highest drop in luxury sales from June to August, said a report from Redfin released Thursday. The number of sales was down 55.3 percent from the same time last year.
This story is for subscribers
We offer subscribers exclusive access to our best journalism.
Thank you for your support.
The markets with the biggest drops were Oakland (down 63.9 percent), San Jose (down 59.6 percent) and Miami (down 55.5 percent). The lowest drops were in Kansas City (down 10.4 percent) and Indianapolis (down 7.5 percent).
Redfin defined luxury housing as the top 5 percent of the highest-priced homes for sale. So, what is considered luxury differed greatly across metro areas. For example, the median price of a luxury home in Cleveland was $629,000, compared to $3.3 million in San Diego metro (which includes all of San Diego County).
Rising mortgage rates are cited as the main reason for the entire housing market slowing down. Redfin also said economic uncertainty and a tepid stock market also were dampening sales.
Redfin chief economist Daryl Fairweather wrote in the report that luxury buyers are more likely to pay cash for homes but some do use mortgages as an investment strategy. The thinking is, even if the buyer could pay cash, taking advantage of low interest rates to finance a multi-million dollar house allows an affluent buyer to use other funds in the stock market or for some other investment.
However, Fairweather wrote that higher interest rates cut into that strategy.
“Someone who was in the market for a $1.5 million home last year may now have a maximum budget of $800,000 thanks to higher mortgage rates,” she wrote. “Luxury goods are often the first thing to get cut when uncertain times force people to reexamine their finances.”
The study used a three-month average ending Aug. 31, so it captured the summer as the stock market was hit hard and there was growing concern over the global economy. Redfin said national sales of luxury homes fell 28.1 percent annually, its biggest ever decline since it started keeping records in 2012. It surpassed the 23.2 percent drop at the start of the pandemic when there was an initial flight from real estate.
A red hot housing market for much of the pandemic still means luxury housing is more expensive than it was a year ago. The median price for a San Diego luxury property, $3.3 million, was up 23.6 percent from last year. That compares to the regular San Diego market, with a median sale price of $860,000, up 16.2 percent in a year, Redfin said.
It isn’t just affluent buyers who are skittish about the housing market — it’s potential sellers, too. The number of luxury home listings in San Diego County was down 32.9 percent from June to August, Redfin said. Oakland had the biggest drop at 40.7 percent.
San Diego luxury real estate agent Brett Dickinson, with Compass, said a lot of potential sellers own their homes outright and are well off enough that they don’t feel pressure to put their homes on the market right now.
“Financially, it doesn’t make sense for them,” he said. “They are taking a wait-and-see approach.”
Price reductions at the luxury level tend to be quite high. Here are a few examples:
Dickinson’s view was that the luxury market was fine and going back to normal after a particularly crazy pandemic buying season. For example, he said there were about 45 single-family homes for sale in La Jolla about two months ago, but there are now around 90. Dickinson said it’s easy to freak out that inventory is shooting up, but it ignores that there are normally around 150 to 200 homes for sale around this time.
He argued that San Diego’s luxury market was better positioned to weather the storm than other markets because of tech companies, like Apple, increasing their footprint here, as well as the strong biotech industry.
* * *
Year-over-year comparison by Redfin from June to August
Oakland: Down 63.9 percent
San Jose: Down 59.6 percent
Miami: Down 55.5 percent
San Diego: Down 55.3 percent
Seattle: Down 52 percent
Las Vegas: Down 50 percent
San Francisco: Down 49.6 percent
Anaheim: Down 49.3 percent
Sacramento: Down 48.3 percent
Los Angeles: Down 44.3 percent
Get U-T Business in your inbox on Mondays
Get ready for your week with the week’s top business stories from San Diego and California, in your inbox Monday mornings.
You may occasionally receive promotional content from the San Diego Union-Tribune.
Officials say building construction has begun at the future site of a factory where Ford and a South Korean company have joined forces to build electric trucks and batteries in rural west Tennessee
Grain futures were lower Friday in early trading on the Chicago Board of Trade.
Top allies of ex-President Donald Trump are creating a new super PAC that’s expected to serve as the main vehicle for his midterm spending and could become a key part of his campaign infrastructure if he moves forward with a 2024 White House run
General Motors says it will spend $760 million to renovate its transmission factory in Toledo, Ohio, so it can build drive lines for electric vehicles
The Treasury Department says it will allow American tech firms to expand their business in Iran to boost internet access for the Iranian people
U.S. Sen. Raphael Warnock is urging the U.S. Treasury secretary to use “flexibility” in defining how automakers and consumers qualify for a revised tax credit for Americans buying electric vehicles