Luxury Housing Market Cools Amid Record-High Prices

Amid a broader reset in the U.S. housing market, luxury home sales are feeling the pressure. According to a recent report by Redfin Corp. (Nasdaq: RDFN), pending sales in the luxury segment fell to their lowest level in more than a decade this April, revealing a widening gap between seller expectations and buyer capabilities.

The Data Behind the Decline

Redfin defines the luxury market as the top 5% of homes in each metro area by price. From February to April 2025, pending sales for these homes declined nearly 10% year-over-year—the steepest drop since August 2023 and the lowest April level since 2014. By contrast, pending sales in the non-luxury market fell only about 3%.

Closed sales in the luxury segment also dropped 6.5%, while non-luxury sales declined by 4.3%, indicating that even affluent buyers are treading carefully in today's high-cost environment.

The Price Problem

"There’s a mismatch between what homeowners want in terms of prices and what buyers can afford to pay," said Daryl Fairweather, Chief Economist at Redfin. Luxury home prices have increased 6.5% year-over-year, but affordability continues to limit buyer enthusiasm.

Among the cities seeing the largest price increases:

West Palm Beach, FL: +25.8% ($4.13M)
Miami, FL: +22% ($4.37M)
San Jose, CA: +20.8% ($5.51M)

Meanwhile, cities like San Francisco, Los Angeles, and Indianapolis saw increases in sales volume, showing that certain luxury markets are still finding momentum.

Luxury Homes Sit Longer on Market

Inventory in the luxury segment rose by 7% in April, but the average days on market held steady at 52—only slightly above last year’s 51-day average. However, with fewer buyers ready to act at current price points, sellers may soon be forced to adjust.

"Absent of that, we’ll see homes sit longer and longer," Fairweather noted. "That’s usually followed by price drops."

Builder Activity Reflects Changing Demand

Luxury builders are also shifting strategy. Toll Brothers Inc. (NYSE: TOL), a leading name in high-end homebuilding, reported a decline in net agreements and is adjusting its pace to align with market demand.

In Q2 2025:

Net agreements: 2,650 homes ($2.6B), down 13% in units YoY
Average sales price: $983,000, down from $1M in Q1 2025
Builder incentives: Increased to 7% of the sales price, from 5-6%

"We believe prioritizing price and margin over pace makes the most strategic sense," said CEO Douglas Yearley during the company's earnings call.

Despite softer demand, Toll Brothers expects to end 2025 with 440–450 active communities, an 8–10% increase from 2024, and anticipates similar growth in 2026.

What This Means for Arizona Homebuyers and Sellers

In high-end markets like Scottsdale and Paradise Valley, these national trends provide important context. Buyers may find increased negotiating power as homes stay on the market longer. Sellers, on the other hand, may need to temper expectations and consider strategic pricing to stand out.

As the luxury sector navigates economic uncertainty, evolving buyer behavior, and high mortgage rates, adaptability will be key.

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