Real Estate Confab: Do Lower Interest Rates Stimulate Demand In Luxury Markets?

In today’s changing market, interest rates are a major concern for all areas of real estate. Although luxury buyers tend to be less sensitive to rate changes than first-time homebuyers, there is increasing interest in how the recent shifts in borrowing costs might affect the timing of high-end purchases. Are luxury market buyers truly less likely to factor in rate changes, or are they opting to wait for more favorable conditions before re-entering the market? We asked leading real estate experts to share their views on whether lower rates could stimulate demand among luxury buyers who have been observing from the sidelines.

Michaela Keszler, Sotheby’s International Realty

Michaela Keszler. Courtesy of Sotheby’s International Realty

Absolutely — even in the luxury segment of the Hamptons market, lower borrowing costs can play a significant role in buyer behavior. While many high-end buyers aren’t as rate-sensitive as first-time or more entry-level purchasers, they still want to be financially savvy. Many of them leverage financing strategically, whether it’s for liquidity, investment purposes, or tax planning. When rates drop, even a small reduction in the cost of capital can be a compelling reason for buyers to act — especially if they’ve been watching the market.

When rates ease and the market shows movement — more accepted offers, more properties going into contract, and more competitive bidding — it creates a sense of urgency. Buyers who may have been sitting on the sidelines feel the shift and don’t want to miss their opportunity. That’s when we often see pent-up demand released, even at the top of the market.

Also, when financing becomes more attractive, buyers may feel more comfortable stretching their budget — moving from, say, a $5M search into the $6M+ range — which increases competition across all tiers of the market. It creates a ripple effect.

So yes, lower rates can definitely be the spark that activates the high-end segment — not necessarily because buyers need financing, but because they recognize a moment of opportunity. They’re ready to make a move when the timing is right.

Maida Srdanovic, Compass

Most luxury buyers don’t rely heavily on financing, but interest rates still influence how confident they feel about timing a purchase. Over the past year, many well-qualified buyers have been holding back, waiting for the right moment. Now that borrowing costs are starting to ease, that hesitation is giving way to more activity. With inventory still tight, especially at the very top of the market, we’re seeing pent-up demand translate into stronger showings and quicker deals. In the $10M+ range, where quality properties are few and far between, it’s less about affordability and more about psychology and timing, and those stars are beginning to align.

Deborah Pirro, Daniel Gale

Deborah Pirro. Courtesy of Sotheby’s International Realty

I do believe high-end purchases are rate sensitive in the sense that a buyer with $100 million budget may end up purchasing something for $25 or $50 million, due to the cost of that money. Rates would have to drop substantially to see any significant pent-up demand come back to the market. When that does happen, prices will further increase due to supply and demand factors.

We will always see extra extraordinary money in this marketplace and deals coming together. More than anything else, this year’s deals have been affected by global events, the initial downturn in the financial markets at the beginning of 2025, and then, of course, the rebound that we have seen in the second and third quarters of those financial markets.

 

Ty Wenzel

Co-Publisher & Contributor

Ty Wenzel, a recent breast cancer survivor, started her career as a fashion coordinator for Bloomingdale’s followed by fashion editor for Cosmopolitan Magazine. She was also a writer for countless publications, including having published a memoir (St. Martin's Press) and written features for The New York Times. She is an award-winning writer and designer who covers lifestyle, real estate, architecture and interiors for James Lane Post. She previously worked as a writer and marketing director for The Independent. She has won multiple PCLI and NYPA awards for journalism, social media and design, including best website design and best magazine for James Lane Post, which she co-founded in 2020. Wenzel is also a co-founder of the meditation app for kids, DreamyKid, and the Hamptons social media agency, TWM Hamptons Social Media.

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