After flourishing during the pandemic housing frenzy, the U.S. luxury housing market has plummeted dramatically as economic tides shift amid stubborn record inflation, higher interest rates and a volatile stock market.

Sales of luxury homes sank nearly 45% year over year during the three-month period ending Jan. 31, 2023, according to a March 10 Redfin report. That slump outpaced the record 37.5% drop in sales of nonluxury homes. Redfin defines luxury homes as those estimated to be in the top 5% based on market value.

The hardest hit metro areas include high-end markets on the East Coast and in California. In Miami, luxury home sales fell by almost 69% year over year, the largest decline Redfin recorded in that three-month period. Next came Nassau County-Suffolk County, New York, (-62.6%), followed by three California metros: Riverside (-59.8%), Anaheim (-59.3%) and San Jose (-59%).

Real estate professionals point to economic uncertainty as one of the main contributors to the luxury housing market’s decline.

“Uncertainty is the main factor driving the luxury market slowdown in Los Angeles,” Alin Glogovicean, a Redfin Premier real estate agent, said in a prepared statement. “If you’re investing millions in a property, you want to make sure it will hold its value. Most luxury buyers and sellers are thinking, ‘Let’s just wait and see what happens to the market. When it stabilizes, we’ll be ready to go.’ Everyone is kind of at a standstill.”

A dining table is photographed in one of the Snow Park I residences at The St. Regis Deer Valley at Deer Valley Resort in Park City on Thursday, March 23, 2023. | Ryan Sun, Deseret News

‘Luxury suburb’ of Utah

But certain areas — and certain luxury home types — are at least to some degree bucking the national downturn.

That includes Utah’s “luxury suburb,” in the Park City area — a resort town that exploded in popularity after the 2002 Winter Olympics and attracts celebrities each year for the Sundance Film Festival.

While not immune to economic headwinds, Park City has seen a dip in home sales, but not to the same extent as other upscale markets across the nation. The number of properties sold in the area have dropped almost 30%, from 2,790 in 2021 to 1,962 in 2022, but the average sold price increased almost 10%, from over $1.7 million in 2021 to over $1.9 million in 2022, according to the Park City multiple listings service.

“Utah has a very unique luxury market,” said Thomas Wright, CEO and principal broker of Summit Sotheby’s International Realty, which specializes in high-end real estate in the Park City area and across Utah.

Wright said traditionally, outside of Park City, there haven’t been many luxury homes for sale along the Wasatch Front, but demand for them has grown along with Utah’s economy, and migration patterns from other states have brought those types of buyers to the state.

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“Park City has become a luxury suburb of Salt Lake City,” Wright said. “It used to be a resort market that was kind of geared toward the resort consumer, but now it not only draws the resort consumer because we have the ‘greatest snow on Earth’ and we have incredible access to a brand new international airport.”

“In addition to that, people are deciding to live full time in Park City,” he said. “That dynamic has made the luxury market in Utah stronger, and we’ve avoided some of the challenges that luxury markets in other places have seen.”

Wright said the sale of multimillion-dollar properties in Park City have indeed slowed since the madness of 2020, 2021 and early 2022 died down — but that’s a natural symptom of a “corrected market.”

“But I can tell you, in the first quarter of 2023, we’re already seeing an improvement in all of these numbers,” he said. “I think we found a more healthy equilibrium in the market of supply and demand. It feels like it’s a little bit more balanced and a little less frenzied.”

“When you’ve had the unbelievable market we had during COVID, anything feels like a slowdown afterwards, and I think that’s what people are adjusting to now,” Wright added. “But it really is a strong market. It’s just not like it was during the pandemic.”

What is dampening the luxury market, he said, is a “perception” problem.

“The luxury consumer has the ability to transact really any time,” Wright said, noting interest rates aren’t as relevant to the regular homebuyer because high-end shoppers can often purchase in cash.

“They’re operating more on a perception that it’s not a good time to transact. The uncertainty in the market, with interest rates, the effects on the equity markets, and then the simultaneous failure of banks and the challenges in the banking system have a lot of people in the luxury segment just on pause, waiting to see if it’s a good time to buy or not.”

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A living room is photographed in one of the Snow Park I residences at The St. Regis Deer Valley at Deer Valley Resort in Park City on Thursday, March 23, 2023. | Ryan Sun, Deseret News

Bucking the trend

At Park City’s most elite and posh ski resort, Deer Valley, one new luxury development is about to break ground after nearly all of its yet-to-be constructed residences were quickly snapped up.

“We have a downturn in the market, we have banking jitters going on, and yet with that our project has proved to be very popular,” said Michael Zaccaro, chief operating officer of Falcon Investors, LLC, the managing partner of The St. Regis Deer Valley.

As of earlier this month, only one unit remained available in the second and final phase of The Residences at The St. Regis Deer Valley | Snow Park. The $66 million slope-side project at the mountain resort includes 12 luxury residences in a five-story, 58,000 square-foot building.

“Demand has been remarkable,” The St. Regis said in a news release earlier this month, when it announced plans to begin construction. Eleven of the 12 residences were placed under contract, even though they didn’t go on the market until late 2022, when the national economy and housing prices began to shift.

The new Snow Park Residences range in size from about 2,200 square feet to over 4,700 square feet, priced from $4.7 million to over $11 million. Among those already purchased include an $11.1 million penthouse, with four bedrooms, 412 bathrooms, five fireplaces, outdoor decks and sweeping views of the Wasatch mountains.

The second phase is scheduled to open in late spring 2025. It follows the first phase of the Snow Park Residences, which included a separate five-story building with nine units. That opened in late 2021 and was a “$35 million sellout,” according to The St. Regis.

It’s the “final opportunity to purchase a new residence” at The St. Regis, said Davis Reis, CEO of Falcon Investors, LLC. “This strong early buyer demand, despite current market conditions, is evidence of the timeless appeal of the St. Regis brand,” he said. The Snow Park Residences, he said, “build on the successful $300 million sellout of the original private residences and hotel condominiums of The St. Regis Deer Valley.”

The fire garden is photographed at The St. Regis Deer Valley at Deer Valley Resort in Park City on Thursday, March 23, 2023. | Ryan Sun, Deseret News

Hotel-branded residences

But it’s not just Deer Valley’s world class reputation that contributed to Snow Park’s quick success, Zaccaro told the Deseret News. He said it’s also likely because of a phenomenon that has helped certain types of luxury homes sell faster than others during the downturn.

As the pandemic housing frenzy has died down, demand shifted from larger, more spacious properties to perhaps smaller, easier to maintain homes that also come with convenient amenities. Specifically, hotel-branded residences have thrived during the housing market downturn, as The Wall Street Journal recently reported.

“People are looking to downsize, maybe it’s a second home or even a third home,” Zaccaro said. “They want easier living. They want to not have to worry about ongoing maintenance.”

Add in the perks of luxury hotel services and exclusivity of private clubs — at The St. Regis, it’s The Deer Crest Club — and that’s helped bolster the popularity of hotel-branded residences, Zaccaro said.

Owners of the Snow Park residences would also have access to The St. Regis’ amenities, including dining at the hotel’s restaurants and bars, the Wine Vault’s 10,000-bottle collection, and The St. Regis’ 14,000 square-foot spa. They’d also have access to the Athletic Club, the year-round outdoor infinity pool, and butler and ski valet services.

In its partnership with Marriott, The St. Regis has long been “recognized as one of the top luxury brands of the world,” Zaccaro said. “When people are able to have a brand new, up-to-date modern residence in a hotel that provides that level of luxury services, it’s a very attractive package.”

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Zaccaro said the latest Snow Park buyers have been mostly top entrepreneurs and CEOs, many of whom have been familiar with The St. Regis and jumped at their last chance to purchase a brand new property in the final phase of the project.

While luxury homebuyers aren’t free from the effects of a downturn — many have lost millions in banking and cryptocurrency issues — it might not stop them from buying if they’re motivated, and especially if they’re simply looking to downsize.

“No one’s immune, but I think the higher-end luxury market buyers tend, in many respects financially, to be perhaps a little bit more conservative and maybe a little bit more protected in terms of the wealth management,” Zaccaro said. “And they’re also generally a little bit longer term in view.”

The overall downturn and economic conditions “do play a substantial role in the tenor of the marketplace,” he said. However, luxury prices also remain up, Zaccaro said, because inventory has also declined, adding to scarcity.

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That’s even though housing prices in the West, including Utah, dipped in early 2023 as higher mortgage rates sharpen affordability issues and price the average buyer out.

“Right now, there are probably far fewer properties on the market than there were a year ago, especially Park City,” Zaccaro said. “But I think the bigger issue than the economic climate for a market such as Park City is the amount of new product that comes on board over the next three to five years.”

Park City sales: Utah’s most expensive home

In the Park City area, even though the number of properties sold declined nearly 30% from 2021 to 2022, the average days on market in the same time frame dipped over 14%, from 56 days in 2021 to 48 days in 2021. The total dollar volume sold dropped 21.3% from nearly $4.8 billion in 2021 to over $3.7 billion in 2022, but the sold price to original list price ratio remains essentially flat at above 97%, according to the Park City MLS.

The highest sold price jumped from $19.4 million in 2021 to $42 million in 2022.

Last year, the purchase of a Park City Mountain Resort property by Russell Weiner, the billionaire founder of Rockstar Energy, broke Utah’s record for most expensive home sold when he bought the mansion for $39.6 million.

Now, Weiner has put that property back on the market for $50 million, The Wall Street Journal reported. It has yet to be sold.

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