Redfin has reported that the median sale price of U.S. luxury homes jumped 25.8% year-over-year in Q2, while the median sale price of the country's most affordable homes rose 18.7%. By comparison, prices of mid-priced and affordable homes grew just 16% and 13.2%, respectively.
For the analysis, Redfin divided all U.S. residential properties into five price tiers—luxury, expensive, mid-priced, affordable and most affordable—based on Redfin Estimates of the homes' market values. Any "record" referenced in the report dates back to 2013. It's important to note that year-over-year gains may appear especially large due to the housing-market slowdown in the second quarter of 2020, when activity stalled due to pandemic restrictions.
"Home prices and sales plummeted at the beginning of the pandemic, but have now more than recovered—especially in the luxury and most affordable price tiers—due to low mortgage rates and strong homebuyer demand during the pandemic," said Redfin Chief Economist Daryl Fairweather. "Surging prices can be especially problematic for first-time and lower-income homebuyers, but the good news is that the supply of the country's most affordable homes is growing. That means there could be more homes to choose from and less competition for buyers in that segment of the market."
Purchases of luxury homes in the U.S. surged 88.2% year-over-year in Q2, while purchases of the most affordable homes rose 56.8%. By comparison, purchases of homes in other price tiers increased between 30% and 45%.
Home sales have soared across the board during the pandemic, as Americans have taken advantage of low rates and the flexibility to work remotely. But sales in the luxury and most affordable price tiers have seen especially large increases. For luxury homes, that's partly because affluent Americans have reaped the gains of a strong stock market and swelling savings accounts. For the most affordable homes, it's likely due in part to a rebound in investor activity. Home purchases by real estate investors—who commonly buy lower-priced properties—jumped to a record high in Q2.
"With the pandemic eviction moratorium coming to an end and many Americans priced out of homeownership, investors are keen on buying up inexpensive properties and turning them into rentals," Fairweather said. "A relative abundance of homes hitting the market in both the most affordable and luxury tiers has also enabled purchases in these segments to flourish."
On the other end of the housing spectrum, the number of homes for sale in the most affordable price tier rose 11.3% year-over-year during Q2. The next-biggest increase was in the luxury tier, which saw supply grow 1.3%. Supply in the remaining three tiers either declined or grew less than 1%. The speed in which luxury homes are being bought is increasing, as the typical luxury home that was for sale in Q2 spent just 30 days on the market—34 fewer days than the same period in 2020. The most affordable homes spent 25 days on the market, 17 fewer days than a year earlier. Homes in the remaining three price tiers spent about two weeks on the market, and also sold faster than they did in 2020.
"Some homeowners are putting their properties on the market because they're concerned about being foreclosed upon when forbearance dries up, while other owners of affordable homes are selling because they want to avoid the increase in seller competition that's likely to occur when forbearance ends," Fairweather said.