The luxury housing market is flourishing despite greater stagnation
The stagnant housing market in 2024 is one that the real estate industry can’t wait to get out of, but that can’t be said for the niche luxury market.
The Red Paper 2025 of The Agency shows the luxury market taking a sharp departure from the broader existing home sales market, which could be near an all-time low with fewer than 4 million sales.
The number of homes sold for $1 million or more rose 5.2% in the first half of 2024, and the average price of luxury homes rose 14.2%. That’s compared to a 12.9% decline in overall home sales and a 5% increase in the average price.
Increased mortgage rates have hampered the broader housing market in 2024, but the luxury segment is somewhat insulated from it as 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% so far in 2024, while the Dow Jones is up 17.9%. Luxury buyers who were already homeowners also saw an increase in home equity.
Looking ahead to 2025, the Agency says geopolitics will have an impact on the luxury market. Escalating wars around the world and hard-right politicians winning elections could shift to where the ultra-rich want to park their money.
That’s not necessarily bad for the luxury market in the United States. Once the presidential election is over, buyers and sellers may gain more clarity on US policy, and international turbulence could push the wealthy to the US if it is perceived as more stable.
And even if international buyers don’t comply, the agency says the transfer of wealth between generations will boost the luxury market. According to the report, approximately $31 trillion in wealth will be transferred by 1.2 million people over the next decade, and an estimated $20 trillion of that will be passed on to 155,000 individuals.
Most of the wealth will go to older millennials and younger members of Gen X.
