The real estate industry has been grappling with a stagnant housing market in 2024, except for the high-end luxury market which seems to be thriving contrary to the broader trends.
Here are some key insights from the 2025 Red Paper by The Agency:
- The luxury market is diverging sharply from the overall existing home sales market, which is expected to hit a historic low of fewer than 4 million sales.
- Sales of homes priced at $1 million or more saw a 5.2% increase in the first half of 2024, with a significant 14.2% surge in median luxury home prices. This stands in stark contrast to the 12.9% decline in overall home sales and a 5% rise in median price.
- While the general housing market has been hindered by high mortgage rates, the luxury segment remains resilient as wealthy buyers are more likely to make all-cash purchases. Nearly half of all luxury transactions in the first quarter of 2024 were cash deals.
- The affluent are benefitting from the soaring stock market, with the S&P 500 up by 26.9% and the Dow Jones up by 17.9% in 2024. Existing luxury homeowners are also witnessing an increase in home equity.
- Looking forward to 2025, geopolitical factors will play a crucial role in the luxury market. Ongoing global conflicts and the rise of hard-right political leaders could influence where the ultra-wealthy choose to invest their money.
The anticipation is high for the luxury market in the United States, post the presidential election, which could offer more clarity on U.S. policy. Turbulence in international markets might drive wealthy individuals towards the U.S. due to its perceived stability.
Furthermore, The Agency predicts that generational wealth transfers will further boost the luxury market. Approximately $31 trillion of wealth is expected to be transferred by 1.2 million individuals over the next decade, with $20 trillion of it likely to be inherited by 155,000 individuals.
The majority of this wealth transfer will be directed towards older Millennials and younger Gen X members, indicating a promising future for the luxury real estate sector.
