California’s Being Hit Hard by Decline in Luxury Home Sales

The U.S. luxury home market has seen its steepest decline in ten years, and California real estate is part of that landslide

The pandemic-induced high-end real estate bubble has been broken, especially in California, according to new data provided to the Wall Street Journal.

After riding high following the pandemic—when selling an upscale house nationwide suddenly meant fierce bidding wars and astronomical selling prices—the high-end market has faltered. Some of the reason for the downswing include inflation, recession wariness, and rising interest rates.

A new report by real-estate brokerage Redfin reveals that in the three months from June through August 31 of this year, sales of luxury homes—defined as the top five percent of homes based on estimated market value—declined 28.1 percent nationwide compared to the same period last year. That represents the largest decline since at least 2012, when Redfin began recording such info, and is an even deeper drop than the 23.2 percent decrease seen during the arrival of the pandemic in 2020.

High-end California residences did particularly poorly, according to Redfin’s data. In Oakland, the number of home sales dove by almost 64 percent while San Jose and San Diego were hit by declines of over 55 percent. In Los Angeles, the number of home sales fell by 44 percent.

For comparison, the number of home sales fell 55 percent in Miami and just 12 percent in New York City.

“Six months ago, people were buying homes over-ask and with no appraisal,” San Francisco real-estate agent Herman Chan of Golden Gate Sotheby’s International Realty told WSJ. “They didn’t even bat an eyelash. Now, it’s like crickets.”

In L.A. meanwhile, the future of mansions will be on the ballot in November. A pending “megamansion tax”—a ballot measure that would increase the tax on the sale of multimillion-dollar properties to help pay for housing the homeless—has real estate investors squaring off against the bill’s backers, the grassroots group United to House L.A.,  according to Bloomberg.

A “yes” vote would mean increasing the transfer-tax rate on the sale of L.A. residential and commercial properties worth $5 to $10 million to four percent, and increasing properties valued at $10 million or more at a 5.5 percent rate—both way up from the current 0.45 percent rate.

If passed, the money would go toward building new housing and offering services such as down-payment assistance for first-time home buyers and eviction prevention.

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