Luxury home prices hit an all-time high to end the year with the typical U.S. luxury home selling for a record $1.17 million, up 8.8% from 2022, according to a new Redfin report. 

The price of luxury homes rose twice as fast as the price of non-luxury homes at the end of last year and a record share of high-end buyers paid cash for those purchases. Non-luxury home prices rose 4.6% year over year for comparison. 

Redfin categorizes luxury homes as those projected to fall within the top 5% of their specific metropolitan area in terms of market value. Non-luxury homes are identified as those expected to be within the 35th-65th percentile based on market value.

The notable uptick in prices, accompanied by a surge in new luxury listings and improved sales, signals increased activity among affluent homebuyers and sellers, according to Redfin.

In Chicago, luxury home prices rose 9%, while new listings fell 4.4%.

Additionally, nearly half of the fourth quarter’s luxury home purchases (46.5%) were made in cash, an increase from 2022’s 40% and a new record high, the report also found. 

Redfin attributes the accelerated rise in luxury prices, compared to non-luxury prices, to the ability of these buyers to make cash purchases, unhindered by current mortgage rates

“A lot of luxury buyers are coming in with cash, snapping up expensive homes,” said Heather Mahmood-Corley, a Redfin Premier agent in Phoenix. “High-end homes are selling fast, especially in desirable areas like luxurious Scottsdale, or Tempe, which West Coast transplants love because it’s centrally located. One client recently bought a house in Tempe, flipped it, and it sold for $1.4 million in two days.”

Another factor pushing up luxury home prices is inventory, similar to what we’re seeing in the non-luxury market. Even though there’s been a surge in listings year over year, inventory is still below pre-pandemic levels. 

New luxury listings increased nearly 20% year over year in the fourth quarter, marking the largest increase in more than two years, bringing the number of new luxury listings to just under 53,000 the report said. 

Meanwhile, new non-luxury home listings fell 3% year over year, but the good news there is that it was the smallest decline in a year and half.  

“More luxury listings will temper price growth as the year goes on,” said Redfin Senior Economist Sheharyar Bokhari. “Overall, that’s a good thing for the high-end market: Sellers will still fetch fair prices, buyers will have more to choose from and sales should tick up.”