Welcome to San Diego Blog | October 22, 2021

A Hot Luxury Market

In 2021, one in six closed sales were luxury.

In June of last year, housing climbed out of the COVID lockdowns and resurfaced firing on all cylinders. It was as if someone had flipped a switch. Then in 2021, the real estate market evolved further, from red hot to white-hot. Overnight, the real estate industry had become accustomed to throngs of showings, multiple offers, and homes selling for more than their asking prices. A surprising twist was that the luxury housing market surged right along with the lower price ranges and at a record pace.

What sparked the wave of luxury sales? The run-up on Wall Street has certainly helped. After the S&P plunged 32% at the beginning of the pandemic in March 2020, it nearly doubled since, swelling by 94%. It surpassed the prior, pre-COVID, record height in August 2020. The record-low interest rate environment is a key factor in luxury’s elevated demand as well. And, the inventory crisis does not only include the lower ranges, luxury buyers have been confronted with an extremely limited supply of available homes to purchase. 

The luxury home market in San Diego County, defined as the top 10% of all closed sales, is currently at $1.25 million in 2020 but is set to move to $1.5 million at the start of 2022. In September, there was 636 luxury closed sales. That would be a record level in any other year, but not this year. April through August was all higher, with an 805-peak reached in June. Last year’s record, 554 luxury sales, was achieved in October and surpassed the prior annual record set in June 2017 by 65%. Even with September’s slight seasonal dip in home sales above $1.25 million, it is still 25% higher than last September. 

Through September in San Diego Country, closed sales are up 17% year-over-year for all price ranges (keep in mind, with a delay in last year’s Spring Market due to COVID, closed sales in 2020 were up sharply July through the end of the year and the peak month was October).  At the current pace, sales in 2021 are the highest since 2016. A deeper look reveals that the higher ranges are performing stronger than the entry-level. For homes priced below $750,000, year over year there were 1,469 fewer closed sales, 8% less. For homes priced between $750,000 and $1.25 million, there were 3,432 additional closed sales compared to last year, 63% higher. And for the luxury range, over $1.25 million, year-over-year there were 2,550 additional closed sales, a shocking 91% more, almost double last year’s record pace. 

There are more closed sales in the luxury range than ever before. The torrid pace does not look like it going to abate anytime soon based upon current luxury supply and demand. The supply is down by 40% year-over-year, demand is up by 10%, and the Expected Market Time is down from 80 days last year to 44 days today. Last year’s low, 69 days, was achieved in September and, at the time, was the lowest market time level ever for homes priced above $1.25 million in San Diego County, extremely hot for luxury. That puts today’s 44-day level into proper perspective. The pace of luxury is mind-blowing.

The housing market has been nothing short of insane, and luxury is no exception. With home values surging, the top 10% of the market is rapidly changing. Starting in 2022, in looking back at all 2021 closed sales, luxury will become all homes priced above $1.5 million in San Diego County. 

A warning to luxury sellers: luxury may be hotter than ever before, but it still is not as hot as the lower price ranges, especially homes priced above $2 million. It takes a little bit longer to sell homes priced above $2 million. It is not an “instant market” like everything priced below $2 million. There are not as many multiple offer situations, there are fewer showing, and fewer homes sell above their asking prices. 

Active Listings

The current active inventory dipped by 2% in the past two weeks.

The active listing inventory shed 48 homes in the past couple of weeks, down 2%, and now sits at 2,620 homes, the lowest level for this time of the year since tracking began in 2012. The supply crisis will only become more acute and intensify as the year rolls to an end. November and December are cyclically the lowest months of the year for the average number of homes placed on the market, and this year will not be an exception. Plus, many unsuccessful sellers will throw in the towel and choose to enjoy the holidays. How many unsuccessful sellers are there in today’s insanely Hot Seller’s Market? Surprisingly, 1,007 sellers, 38% of the active inventory, have been on the market for over a month. They are prime candidates to throw in the proverbial towel. 

Last year in mid-October, there were 3,976 homes on the market, 1,356 additional homes, or 52% more. The 3-year average from 2017 to 2019 (intentionally omitting 2020 due to COVID skewing the data) is 7,034, an extra 4,414 homes, or 168% more, more than double compared to today. There were a lot more choices back then.

For September, there were 662 fewer new FOR-SALE signs in San Diego County compared to the 3-year average from 2017 to 2019, 16% less. Every single missing sign just adds to the inventory crisis.



Demand was down slightly in the past couple of weeks.

Demand, a snapshot of the number of new pending sales over the prior month, decreased from 3,131 to 3,107 in the past couple of weeks, shedding 24 pending sales, down 1%.  Demand typically drops about 2% during this time of the year. Today’s strong demand reflects the low mortgage rate environment. According to Freddie Mac’s Primary Mortgage Market Survey®, mortgage rates have been hovering around 3% for a few weeks now. Low rates continue to juice the market. Despite demand remaining elevated, as fewer homes enter the fray, expect demand to drop with fewer opportunities to purchase. It will slowly drop from now through mid-November, prior to Thanksgiving, and then it will plunge during the Holiday Market and reach its lowest level of the year upon ringing in the New Year. 

Last year, demand was at 3,639, 17% more than today due to a delay in the Spring Market because of COVID.

With a small drop in the supply and an even smaller change in demand, the Expected Market Time (the number of days to sell all San Diego County listings at the current buying pace) dropped from 26 to 25 days, an extremely insane, Hot Seller’s Market (less than 60 days) where there are a ton of showings, sellers get to call the shots during the negotiating process, multiple offers are the norm, and home values are rising rapidly. Last year the Expected Market Time was at 33 days. The 3-year average from 2017 through 2019 was at 75 days, much slower than today, but still a Slight Seller’s Market. 

Luxury End

The luxury market improved slightly over the past couple of weeks.

In the past two weeks, the luxury inventory of homes priced above $1.25 million shed 33 homes, down 4%, and now sits at 742, the lowest level since last March. Luxury demand decreased by 3%, shedding 15 pending sales, and now sits at 507. With the supply of luxury homes priced above $1.25 million falling faster than demand, the overall Expected Market Time decreased from 45 to 44 days, an extremely Hot Seller’s Market for luxury. 

Expect the luxury market to slightly cool as housing transitions further into the Autumn Market. 

Year over year, luxury demand is up by 45 pending sales or 10%, and the active luxury listing inventory is down by 489 homes or 40%. The Expected Market Time last year was at 80 days, extremely hot for luxury, but nearly double the time to sell compared to now, indicating just how hot the luxury market is today. 


For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time increased from 23 to 30 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 31 to 28 days. For homes priced between $2 million and $4 million, the Expected Market Time decreased from 59 to 48 days. For homes priced above $4 million, the Expected Market Time decreased from 201 to 182 days. At 182 days, a seller would be looking at placing their home into escrow around April 2022. 

Copyright 2021 – Steven Thomas, Reports On Housing – All Rights Reserved.   


Written by: Mia

Categories: Market Trends

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