The Luxury Real Estate Market Finally Takes Off – Like a Rocket!
Ever since the real estate market in San Diego stabilized last spring, e.g. after the first 1-2 months of the initial COVID-19 panic, the housing market has taken off with prices and sales increases like we haven’t in almost 2 decades. This is true for all segments (i.e., price points) in the market but especially in the luxury market. The last time the luxury market increased this much – again, with sales and price increases – was the period of 2001-2006, when median home prices doubled in a 5-year period, and just before the 2008 market crash.
The chart on the left shows the number of closed “luxury” homes sales by month going back to the year 2000. Reports on Housing, the publisher of these charts, considers luxury homes in San Diego County to be those priced at $1,250,000 and above (the top 10% of the market). You can see that from May-June 2020, there were less than 200 luxury sales per month, which then doubled in the next 6 months to well over 500 luxury home sales per month by the end of 2020, when we normally see a seasonal slowdown in the market. You can see that although luxury sales have dipped a bit from that peak, the number of sales in 2021 is still much higher than in previous years.
This next chart shows the number of luxury sales going back to 2018 and compares each of the years since then. You can see that luxury sales jumped dramatically in July 2020 (the green bars) and continued for the balance of 2020; that trend has continued for the first 2 months of 2021 (red bars). March numbers are not in yet. This is a trend that we seeing with our clients but we are not exactly sure how to explain it. The number of sales and home prices have both increased in San Diego County – prices by about 12-11% in 2020. But the luxury market, which has always matched or lagged behind the rest of the market, has far exceeded regular market dynamics by a lot. Why is that?
Some economists believe it has to so with wealthier individuals and families faring better during the pandemic with stocks rebounding after the mini-crash last spring; low interest rates means cheap money; and how wealthier folks generally have more disposable income and home equity, and were ultimately have not been affected that much by the economic downturn. With our clients, we are seeing stiff competition at the higher price points – especially between $1,000,000 – $2,000,000 with multiple offers, and homes selling quickly and over the list price, similar to other market segments.
One final chart visually showing this dynamic with luxury sale outpacing the rest of the market. This chart shows the total number of home sales for each year since 2008. You can see that with 37,269 homes sales in 2020, that pace exceeded those in 2019 and 2018, but did not exceed the highest number of sales during the 2015-2017 period. This market dynamic surprised a lot of us. Anecdotally, our luxury clients are telling us that they want to finally get a larger home, with a bigger more usable backyard, and more rooms since parents and kids are all spending more time at home these days.
There’s no way to tell how long this trend will continue but it’s an interesting detail of the San Diego market that we noticed and wanted to share with you. If you have any questions about this post or anything else, please contact us.
-Kevin & Diane
March 26, 2021