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Luxury home demand rises faster than other sectors

By Mike Wheatley | December 15, 2020

Wealthier Americans are upsizing their homes even though the economy struggles amid a never-ending COVID-19 pandemic.

A report in Bloomberg last week revealed that demand for multi-million dollar homes is soaring, with prices rising faster than other segments of the real estate market.

Applications for mortgages larger than $766,000 were up 59% year over year in September, the largest uptick among all price segments, the Mortgage Bankers Association reported. In comparison, applications for mortgages between $150,000 and $300,000 rose by just 13% in the same period.

Other stats show a similar trend. Sales of homes in the $750,000 to $1 million price range have increased 85.5% over the last year, while sales of homes worth $1 million or more increased 106.5%. On the other hand, sales of homes in the $250,000 to $500,000 price range increased only 36.2%, according to data from the National Association of Realtors published recently.

NAR Chief Economist Lawrence Yun told NPR last month that for those who still have financial resources, “they’re just going all in”, buying larger homes for them to ride the pandemic out in.

Wealthy house hunters are searching for luxury homes for sale in the suburbs, and home builders like Toll Brothers are benefiting from the uptick in demand.

“We are currently experiencing the strongest housing market I have seen in my 30 years at Toll Brothers,” CEO Douglas Yearley said in the company’s earnings statement last week. He said that low mortgage rates and “a renewed appreciation for the home as a sanctuary” were boosting demand. “The work-from-home phenomenon is also enabling more buyers to live where they want,” he added.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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