2025 Luxury Market Outlook

February 17, 2025 by trudilee

Sotheby's International Realty recently released it’s 2025 Luxury Market Outlook. As the world’s leader in luxury real estate sales, Sotheby’s serves 83 countries and territories with 1100 offices around the world. 26,300 sales associates represent $143 billion in yearly sales volume.

Market Resiliency

According to Philip A. White Jr., president and CEO, Sotheby’s International Realty: "following a period of high interest rates, global elections and fluctuating economic markers in 2024, the luxury housing market showed impressive adaptability." Despite shifts in the economy and geopolitics, the luxury real estate sector has historically demonstrated remarkable resilience.

Referring to Sotheby’s most discerning investors and high-net-worth individuals as HNWIs, he stated that they continue to exhibit unwavering confidence in premium properties. A report by Bank of America in June 2024 showed that these buyers dedicate up to 32% of their investment portfolios to real estate holdings. This substantial allocation underscores the prestige and value of exceptional properties.

Higher Growth in Home Values

According to an April 2024 report by J.P. Morgan, the luxury end of the housing market has performed well above the non-luxury market in recent years. This report is based on data from Miller Samuel, the National Association of Realtors (NAR) and Haver Analytics. The report found that luxury home prices increased 65% from the fourth quarter of 2019 to the fourth quarter of 2023, compared with a 40% gain in the non-luxury market.

This upward cycle can already be seen in the significant luxury sales and listing achievements made in 2024, White says. Sotheby’s International Realty witnessed unprecedented sales across several key markets last year.

Additionally, luxury properties have listed at record prices, including the historic Hitchcock Estate in New York’s Hudson Valley, listed at US$65 million and a San Francisco property, listed a US$32 million in June 2024. The Wynn estate in Incline Village sold for a record-breaking $64 million. This underscores the strong demand for premium real estate, reflecting just how much buyers value these one-of-a-kind homes.

Stock Market and Luxury Sales

"Despite economic fluctuations, the luxury segment remains vibrant, with noteworthy activity continuing throughout the year around the world. In the luxury realm, the performance of financial markets is a key driver of home sales," says White. HNWIs often make real estate decisions based on the stock market, as fluctuations may influence their desire to invest in luxury properties.

Most analysts expect growth in the S&P 500 in 2025, with UBS predicting a 10% gain in that index, according to its November 2024 report. Housing prices were predicted to rise by 4.8% by the end of 2024, with growth expected to slow to 2.9% in 2025, before rising again in 2026.

According to the 2025 Sotheby’s International Realty agent survey, nearly half of polled agents said that 75% or more of their buyers were paying in cash in 2024.

Pursuit of Lifestyle Drives Sales

Beyond financial considerations, lifestyle factors play an important role in luxury buyer dynamics. There remains a strong desire for high-quality, unique properties that enhance one’s lifestyle.

Prioritizing personal interests and values when choosing a home, a buyer who loves hiking might choose a home in Lake Tahoe because it aligns with their outdoor passions. This shift highlights how lifestyle preferences are becoming a central factor in luxury real estate decisions. Lifestyle is a strong driving force for luxury sales in Lake Tahoe.

According to NAR, homes selling over $1 million in 2024 rose 20 to 30% year over year. You can read the entire report here.

We are seeing the strong demand for luxury homes continue into 2025 in Lake Tahoe. Contact me today for more information about the luxury market in and around Lake Tahoe.