For some time, Joe Biden insisted that "Bidenomics is working" and that it was rebuilding our economy "from the middle out and the bottom up, not the top down" or something like that. Of course, he hasn't been touting "Bidenomics" much lately since Americans are overwhelmingly sour on the Biden economy, and taking complete ownership of an economy people don't like by naming it after yourself isn't exactly a winning strategy.
I don't have to tell you that Bidenomics most certainly isn't working — not for most people anyway. But we do have an idea of who is benefiting from it. I'll give you a hint: it's not the middle class.
How can we tell? Let's look at the housing market.
According to CNBC, the housing market is struggling because of low inventory and higher rates. Despite this, the luxury home sector is thriving. Overall real estate sales dipped by 4% nationwide in the first quarter, while luxury home sales surged by over 2%, marking their most substantial year-over-year growth in three years.
Real estate analysts and agents attribute this trend to interest rates and supply dynamics. "With mortgage rates now above 7% for a 30-year fixed loan, most homebuyers are finding prices out of reach," explains CNBC. "Affluent and wealthy buyers, however, are snapping up homes with cash, making them less vulnerable to high rates."
Nearly half of all luxury homes, defined by Redfin as homes in the top 5% of their metro area by value, were bought with all cash in the quarter, according to Redfin. That is the highest share in at least a decade. In Manhattan, all-cash deals hit a record 68% of all sales, according to Miller Samuel.
The flood of cash is also driving up prices at the top. Median luxury-home prices soared nearly 9% in the quarter, roughly twice the increase seen in the broader market, according to Redfin. The median price of luxury homes hit an all-time record of $1,225,000 during the period.
"People with the means to buy high-end homes are jumping in now because they feel confident prices will continue to rise," explains David Palmer, a Redfin agent in Seattle. "They're ready to buy with more optimism and less apprehension."
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"Prices continue to increase for high-end homes, so homeowners feel it's a good time to cash in on their equity," Palmer added.
The luxury market is also benefiting from more supply of homes for sale. Since wealthy sellers are more likely to buy with cash, they are not as worried about trading out of a low-rate mortgage like most homeowners. That has freed up the upper end of listings, creating more inventory and driving more sales.
The number of luxury homes for sale jumped 13% in the first quarter, compared to a 3% decline for the rest of the housing market, according to Redfin. While overall luxury inventory remains "well below" pre-pandemic levels, the number of luxury listings that came online during the first quarter jumped 19%, the report said.
So much for "the middle out and the bottom up," right? Worse yet, while the luxury home market is booming, the implications of the overall market aren't good. According to Fannie Mae's chief economist, a slowdown in the housing market is a major indicator of a looming recession. Though a recession didn't come in 2023, there is a high chance of a recession hitting this year.
