Despite the 5%-10% increase in prices, he says the Chicago market is fairly accessible. “But the time is now if you are looking at the big picture in the long-term,” adds Jenkins. “By next spring it could be a frenzy again, with multiple bids and more demand waiting in the wings.”

In New York City, prices could be tempered as sellers who have been waiting for a year or more finally list their properties. “It is likely that as interest rates fall, sellers will feel more bullish about the market and finally list their ‘warehoused properties,’” says Jonathan Hettinger, senior global real estate advisor, Sotheby’s International Realty – Downtown Manhattan Brokerage. “This increase in supply could limit the price appreciation we would normally expect in a declining interest rate environment.”

In New York City, the market for luxury properties selling above US$4 million has been somewhat insulated from the rise in interest rates. “This is because many such purchases are done on an all-cash basis,” says Hettinger. “It’s likely that a decline in interest rates will impact lower-priced properties more than those at the top end. Cash buyers always have a major leg-up on buyers who require a mortgage—I don’t see this changing.”

George Ballantyne, global real estate advisor, Gibson Sotheby’s International Realty in Boston, Massachusetts, agrees. “I don’t think I have any luxury buyers who have mentioned interest rates during their search or negotiation,” he says. These buyers have other sources of financing and their offers are not contingent on them obtaining a mortgage, adds Ballantyne.

A similar effect is seen on the West Coast, where “many Bay Area residents have access to substantial assets, whether they are personal or familial,” says Alex Hachiya, senior real estate advisor, Sotheby’s International Realty – San Francisco Brokerage. “Now more than ever, sellers prefer to work with buyers who make all-cash offers.”

Hachiya also echoes a warning about waiting for interest rates to come down, as this “will most likely mean buyers will end up paying a higher purchase price, since additional buyer activity will drive prices up.”

U.S. Equity Markets Play a Major Role in Demand for Luxury Real Estate

In general, a more important factor in the luxury field is how U.S. equity markets are performing and what returns are being generated, says Chan. “If investors are doing well, as they did in 2023 and have so far in 2024, that will boost demand for luxury housing.” Buyers who have seen massive gains in their stock market portfolios may also opt for slightly more expensive homes when interest rates start declining, he says, as a way to secure those profits.