Luxury Market Holds Firm in 2025

NEW YORK – Luxury homebuyers are showing clearer signs of resilience even as broad housing demand softens under persistent macro uncertainty, according to Citi’s latest read on high-end market trends.

Citi analyst Anthony Pettinari notes that luxury sale prices rose 5.5% year-on-year in October, well ahead of the 1.8% increase in non-luxury homes. The segment has outperformed since the start of the year, supported by similar volume trends but slower inventory growth.

Redfin data cited in Citi’s report shows luxury inventories up 6% in October versus a 10% rise in non-luxury supply, helping support pricing momentum even as macro signals send mixed messages.

At the same time, high-frequency indicators point to a wider disconnect between increasingly optimistic sellers and more cautious buyers. Zillow reported a cumulative $25,000 discount on a typical U.S. listing in October, tying the largest on record.

Pettinari highlights “increased discounting in high-frequency data,” pointing to accelerating list prices alongside weaker follow-through from buyers. Pending sales slipped 0.8% year-on-year in mid-November, the first decline in four months, while price cuts climbed to 6.4% of listings.

The average sale-to-list ratio fell to 98.2%, suggesting further room for listing prices to adjust.

More broadly, homebuilders have reported “disappointing demand” this earnings season despite mortgage rates falling roughly 50 basis points in the second half, with many still relying on elevated incentives to sustain sales.

Several also trimmed their 2025 volume guidance and issued below-consensus gross-margin targets for the fourth quarter, underscoring continued pressure on the non-luxury market.

In its report, Citi previewed the homebuilder Toll Brothers’ upcoming December earnings, with the key question being whether its higher-priced buyer base continues to hold up.

Pettinari argues that the company’s affluent customer — with an average selling price (ASP) above $900,000 — remains better positioned to weather affordability pressures and rate volatility.

About 26% of Toll’s buyers paid all-cash in the third quarter, and those using mortgages carried relatively low loan-to-value ratios near 70%.

During the spring, Toll saw stronger demand and “pricing power for its luxury homes” compared with its more affordable offerings, a trend that analysts believe could persist into year-end.

Toll’s backlog is nearly twice its expected fourth-quarter deliveries, limiting downside risk to near-term pricing and volumes. Citi models fourth-quarter deliveries of about 3,350 units and an average selling price of $975,000, both in line with guidance.

Order activity may soften modestly, reflecting the broader residential market, but investors are expected to focus on 2026 guidance. Pettinari anticipates Toll could outline deliveries of about 11,000 homes next year, with stable margins and community count growth similar to 2025.

Still, pockets of regional weakness remain notable. Among the 50 largest metros, 18 posted annual price declines in recent weeks, led by several Sun Belt markets, including Fort Worth, Jacksonville and Dallas.

Slowing rent growth may also keep some prospective buyers on the sidelines, particularly in first-time segments.

Pettinari said the overall sentiment on Toll remains mixed, with shares underperforming the market this quarter but outperforming some larger peers.

“The stock screens as a crowded long per Citi’s Quant Crowding Composite, and in the middle of the pack in terms of short crowding (53rd percentile) making the stock a somewhat debated name,” the note says.

While macro uncertainty continues to weigh on confidence, Citi’s review suggests luxury demand — though not immune — is proving more durable than the rest of the market.

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