Real estate forecast slow and steady for 2023
By LISA KLEIN
The real estate boom of 2020 and 2021 seems to be over, with 2022 seeing prices decreasing from their pandemic peak.
However, that is no cause for alarm, with 2023 prices predicted to hold steady and a normalizing market evening things out.
“What you see today is pretty close to what the market should be,” said Chandler Mount, founder/CEO of Affluent Consumer Research Company, during Luxury Portfolio International’s January digital event, SOLRE 2023 – State of Luxury Real Estate.
While 2022 saw noticeable real estate declines, the market was skewed by the wild pandemic market, especially in the luxury sector.
“People wanted a larger size home and luxurious properties,” said Lawrence Yun, chief economist of the National Association of REALTORS (NAR), during the SOLRE 2023 event.
“We saw million-dollar-plus activity just skyrocket during the early months of the reopening of the economy after the lockdowns,” he said. “We really had a boom.”
The COVID-19 real estate zeal died down in 2022, however, with NAR data through November showing a 16 percent decrease in overall sales – the lowest point since 2014 – and days on-market steadily increasing.
“The glut of buying has happened, and now people will be a little bit more patient, taking a little bit more time,” Mr. Mount said.
Throughout the year, rising mortgage rates, which reached a peak of 7 percent, impacted decisions to purchase homes at every price point, although about 26 percent of buyers in 2022 used cash, according to NAR – up from 20 percent pre-COVID and 10 percent historically.
Global wealth grew 13 percent in 2022, and although that peak is declining, affluent homebuyers are still comfortable making big purchases.
“If you’re affluent and you’re looking to get in the market, you’re going to do it,” Mr. Mount said of the findings of Luxury Portfolio International’s 2023 State of Luxury Real Estate report. “They feel resilient, they feel as though they’re able to manage their life, adapt to the situation, and move forward as needed.”
The southern Florida market is an example of affluents’ ability to rise above certain economic shifts.
“Luxury is such a personal matter,” said Steve Walter, Realtor with Walter Group Real Estate/Michael Saunders & Co. in Longboat Key, Florida, during the webinar.
“Macro-economic considerations are really, I don’t want to say irrelevant, but they’re certainly overshadowed by the personal direct needs of each client that we engage with,” he said.
2023 is poised to be fairly steady, with already falling mortgage rates allowing more potential buyers to return to the market while buyers report that they are less likely to purchase with cash in the coming years.
“We feel that the first half of the year could be a little bit sluggish,” said Hoby Hanna, CEO of Howard Hanna Real Estate Services, which has offices throughout the East Coast and Midwest, during the event, adding that “we think we’ll see an uptick.”
“I don’t think we’ll see price drops,” he said. “There is [still] such a demand of buyers and lack of inventory. It’s supply and demand.”
NAR data also forecast very little pricing changes during 2023.
Further, consumers in Luxury Portfolio’s SOLRE survey said that they thought real estate was currently the best investment for them, and international investors, especially, are looking toward big cities again.
The pandemic-fueled move to second-home locations will only continue, however, the webinar panel predicts.
“Office vacancy rate is high and continuing to rise (18.1 percent in 2023 versus 12.2 percent in 2019),” Mr. Yun said. “Working from home could translate into people working from resort destinations.”
The same goes for secondary markets in the United States. Smaller cities and less-urban areas such as in Florida, Idaho, Tennessee and North Carolina, are still seeing huge growth and an increase in real estate value.
“We counted 199 new markets that, pre-COVID, were under $1 million median household list price,” Mr. Mount said.
“There are these areas that focus on lifestyle and living that are attracting people that don’t need to be in a place for reasons of work,” he said. “Hybrid work is a thing, and this class of consumer is just able to do it.”
The number of millionaires, and potential luxury homebuyers, is expected to grow by 40 percent in the next three years, making 2023 a good time for real estate agents to reconnect after the frenzy of the last few years.
“Get back in front of people and express the tools you have,” Mr. Hanna said.
Mr. Walter agreed.
“We’ve had to go back to the basics a little bit – introducing our services, what we can provide to the client,” he said. “It’s engaging with old school professionalism, intelligence, candor and goodwill.”
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