High-end homebuyers have started hitting the brakes.

In fact, luxury homes sales have fallen by 28.1% since 2021 during the three months ending Aug. 31, Redfin reported today.

That’s the biggest decline since at least 2012, when homes sales fell 23.2% in the early days of the pandemic, which brought home purchases to a near standstill, the Seattle-based real estate brokerage reported.

Non-luxury home sales also fell the most since Redfin started keeping records in 2012, but just by a hair, plummeting some 19.5% during the three months ending Aug. 31. That tumble edged out the 19% decline the real estate market experienced during the three months ending June 30, 2020.

“The story in the luxury market is similar to the story in the overall housing market, but more extreme," Redfin Chief Economist Daryl Fairweather said in a statement.

Rising interest rates and inflation, coupled with stock market losses and economic uncertainty, have finally taken their toll on high-priced home sales, making purchases less feasible or desirable.

While luxury home buyers are more likely to pay cash, many still take out mortgages, sometimes as an investment strategy, Fairweather said.

“High-end-house hunters are getting sticker shock when they see the impact of rising mortgage rates on paper. For a luxury buyer, a higher interest rate can equate to a monthly housing bill that’s thousands of dollars more expensive,” he said.

With mortgage interest rates more than doubling since last year—from less than 3% to over 6.4% on 30-year mortgages today—wealthy home hunters’ purchasing power has been shaved nearly in half.

“A buyer in the market for a $1.5 million home last year may now have a maximum budget of $800,000 thanks to higher mortgage rates. Luxury goods are often the first thing to get cut when uncertain times force people to re-examine their finances,” Fairweather added.

Deteriorating investment prospects on high-end homes are also discouraging even all-cash buyers, Redfin said.

Home prices in August were down about 6% from their peak in June, the biggest two-month drop in prices in nearly a decade, according to the National Association of Realtors, which just released the new existing home sales numbers.

Moody's Analytics predicts home prices across the country will fall about 10% from their peak, while areas that experienced the most dramatic run-up in prices during the pandemic could see price drops closer to 20%.

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