Luxury-home sales — those in the top 5% of their area based on market value — declined by a record 44.6% year-over-year to the second-lowest level on record during a three-month period that ended on January 31, according to the real-estate brokerage Redfin.
Tutor, a real-estate agent with more than 20 years of experience who is best known for selling and listing luxury homes, said that now is the ideal time for luxury homebuyers to act, and that prospective buyers intent on staying in their home for at least five years shouldn’t be afraid to go for what they want.
“Buy the house and lock in the interest rate. If interest rates do come down in the next 12 months, you can always refinance and find something a little bit more attractive for you in the long run,” she told Insider.
Tutor’s “Million Dollar Listing” costar and fellow real-estate agent Josh Flagg said that buyers had a tendency to be more cautious during the first few months of the year. Nobody, Flagg said, wants to be the first to buy, out of fear of the market tanking after a multimillion-dollar purchase.
“Everyone’s just watching carefully waiting for somebody to pull the trigger on something to see if there’s any indication of what the year will be,” Flagg told Insider.
Here’s their advice for buyers and sellers in the luxury market.
Sellers: Accept that your home will sell for less than you want
Tutor said the current market may be tough for sellers to wrap their heads around because they may not get what they want for their homes.
“What their homes might’ve been worth last year might be down anywhere from 10% to 20%. That’s scary for sellers out there,” Tutor said.
The Redfin study backs this up: New listings of luxury homes fell by 6.6% year over year.
Still, Flagg told dealers to be realistic: “Do not price the property in an aspirational way — price the property to get multiple offers.” Based on his experience, properties that aren’t priced to match their value on the market are likely to get their prices reduced before a buyer bites.
Price reductions aren’t a bad thing in themselves, but Flagg said it’s still typically a major turn off for luxury homebuyers — “even if it’s a steal.” He said one thing that will never change about homebuyers is their initial impression that a property is “tarnished” if it’s had a price reduction.
Flagg said that Christmas or Thanksgiving is the best time for buyers to house hunt because the market is so slow around that time. For the same reason, he advised sellers to not list their properties for sale around the holidays because they’re less likely to get the price they want.
“But I think that if you price your house fairly and accurately, you’ll get it sold,” Flagg said.
Buyers: Be proactive about loans and timing
Tutor said she advises prospective buyers to get pre-approved for a loan if they can’t pay in cash. She even suggests this for buyers who assume they can easily get the loan they want after they make an offer on a property.
Tutor said she’s seen “quite a few deals where people were promised potentially 20% down on a pre-qualification letter.” However, things would shift, and “about 10 days into the escrow, that 20% went to 30% or 35%. That really shifts a buyer’s perspective on what they can afford,” she said.
Tutor also advises buyers to get out in front of the offer to avoid being unprepared.
“I encourage speaking to a mortgage broker and having multiple people acting diligently on your behalf so that you can pick the best program for you and also have the ability to discuss with that person the potential of refinancing in the next 12 months,” she said, because mortgage interest rates are still relatively high right now.
Tutor said she thinks more sellers will list their homes this year, which will help buyers. “I do think we’re going to see more inventory coming to the market. And as more inventory comes to the market, then we’ll see less competitiveness,” she said.
One theme remained consistent — Tutor and Flagg repeatedly stressed that, as a buyer, “if you see a property you like, go for it. Don’t be intimidated.”
Expanding your search to new cities could be worthwhile
“What did sort of dip down in the last quarter of 2022 has now evened out,” Tutor said, lending an extra layer of confidence for luxury agents in Austin.
She added that this “is really great for Texas.”
With a lower cost of living compared to cities on both coasts, a booming market for tech jobs, and warm weather year-round, Austin continues to be a prime luxury-market alternative for buyers looking beyond California and the East Coast. It’s no wonder that Austin property values have increased dramatically over the past 25 years in comparison to the Texas capitol’s luxury-real-estate market neighbors to the west and the east.