Ultra-luxury home prices have reached new heights thanks to the pandemic’s low mortgage rates. According to Jonathan Miller, Miller Samuel president and CEO, low-interest rates lead to high prices, though the recent increase in prices in top-tier homes is unprecedented.
While median home prices increased around 20% in 2021, homes priced at $50 million and more have seen a price surge of 35%. Florida and New York led sales in the ultra-luxury category, which is no surprise since Florida is such a hot market.
Now that interest rates are on the rise, the question is whether luxury home prices will continue to rise at such shocking rates. While I cannot make a prediction on that front, I do believe that additional housing stock in 2022 will bring relief for buyers who have felt shut out of the market. While rising home prices are a boon for sellers, they have made it harder for buyers to purchase new properties.
In 2022, we can expect higher mortgage interest rates than those we saw over the past two years. I believe we will also see an increase in new construction as supply chain issues get resolved. These two factors may help slow the rate of price increases. That means that while home price increases will likely continue, they will not increase as quickly as they did in 2021.