(Bloomberg) – The demand on luxury real estate has recently been rising, which affirm how the pandemic has increased gaps in US property wealth.
And according to a report by brokerage Redfin, sales of luxury homes increased by 42% in the third quarter of the year. This is a major jump which never happened since 2013. Sales of middle-priced homes increased by just 3%, while purchases of affordable prices fell by 4%.
As banks strain credit for first-time buyers, the pandemic is hitting Americans who don’t have the working remotely privilege. Meanwhile, the wealthy Americans are benefiting from rising stock market and near-record lows mortgage rates.
Banks are also paying for cheaper loaning costs and increasing demand on larger properties with more room to quarantine. With not many corporate workers attached to office buildings, there is a shift away from expensive markets such as San Francisco, New York and Los Angeles.
“The luxury properties market typically faces a hit during recessions as wealthy Americans depress their financial constraints, but this is no ordinary recession” Daryl Fairweather, chief economist at Redfin, said in a statement.
Despite the low mortgage rates, first-time buyers may struggle to get approved for loans or find the property they can afford in an uncertain market. While housing has been a bright spot in the pandemic economy, migration to the suburbs has been encouraged by wealthier Americans.
Redfin ranks luxury homes as 5% more expensive than homes in a particular market. High-end sales in Sacramento, 90 miles (145 kilometres) northwest of San Francisco, jumped 86%, more than any other suburb.
Sales of luxury properties were up 63% in California’s Inland Empire, east of Los Angeles, and 61% in Oakland, the most affordable city on the San Francisco Bay area. It also increased by 61% in Portland, Oregon, and 60% in West Palm Beach, Florida. In New York, sales of expensive homes fell 2% in Nassau County.
Redfin said demand on luxury homes is up 6.5% from last year, while values for affordable properties rose 2.9%.
“Luxury real estate are rising exponentially because high-end homeowners have the financial means and the flexibility to move during this pandemic” Fairweather said. “The increasing of luxury properties for sale means that wealthy buyers have more options to choose from and a better chance of finding a home that fits their needs“.