Economists are often asked to oversimplify a topic or position in the market at a specific moment in time. We experience this when writing reports and being interviewed for television segments, but the reality is that it’s impossible to summarize an incredibly complex situation in just a few sentences. Real estate is diversified on a micro level; from varying geographies to price points, use cases, etc. There are consequences to action, and its often the second and third order events that are the most impactful, as they are missed in the vast number of predictions. COVID lockdowns and the subsequent housing boom is a prime example.
Our goal in this end-of-year newsletter is to clarify the chatter from the reality and provide insight from macro and micro metrics plus boots-on-the-ground agents who live and breathe their markets every day.
After a strong first half of the year, we felt a slowing in early fall, when the NYSE reached a 2022 low and the average 30-year mortgage rate rose from 3.16% to 7.2% in 10 months, effectively increasing the median homeowner monthly payment by more than 55%. People started acting from a place of fear due to economic uncertainty, inflation, stock market volatility, negative click bait, and later, a crypto bust. And scared people do irrational, often desperate, things.
The irony is that by the time main street starts talking about inflation, recession, etc., we are likely already in the thick of it, or even through the other side. We believe that housing costs, including rental prices, are on the path to stabilizing.
Of the 51 regional housing markets tracked by Black Knight, all 51 have seen prices fall from 2022 peak, creating opportunity for those who stayed ready to purchase.
The average 30-year mortgage has been hovering around 7% for the last quarter of 2022, still below the 50-year average of 7.77%. As a nation, we are recovering from recency bias related to the last decade of ultra-low rates, but more moderate rates are likely here to stay for awhile.
Inputs into individual mortgage rates go well beyond the Fed Funds Rate, and include metrics on inflation, unemployment and jobless claims, credit scores, down payments, and demand for mortgages. With demand for new mortgages down over 40% from last year, reaching the lowest level since 1997, and refinance demand down 87% from last year, lenders are looking to buy downs and sweeteners to spark interest in the slower market. This is the opportunity many side-lined buyers had been hoping for.
As of mid-December, inflation is still running at a 7.1% annual rate, well beyond the 2% goal, but the end-of-year rally served as a bright spot none-the-less, reassuring weary investors that they worst may indeed be behind us.
Moving forward, we expect see a more cautious and less aggressive Fed, focused on easing extreme volatility, giving Americans time to catch their breath and monetary policy makers time to see the ongoing, rolling effects of previous decisions. It is clear that we should not interpret a slower pace of rate hikes and moderating inflation as an easing, but more of a plateau and holding pattern to curtail the stickier, long-term effects of inflation.
New York City is a place know for extremes, and 2022 has been no exception. Return-to-office saw many migrate back to the city, even if on a part time basis. Those who missed the vibrant lifestyle of Manhattan have begun to even keel in a lifestyle split between The Hamptons, Florida, and their urban abodes.
John Carbone, Managing Director, Nest Seekers Park Avenue, explains: “Market activity is more or less what we historically saw pre-pandemic across all boroughs and all asset classes. The most interesting aspect of this year was the ultra-high end of the market continuing its pull away from the realities faced by the sub-$50MM market. In 2022 we saw a proliferation of eight- and nine-figure properties come to market and sell across new developments and established buildings alike. I suspect that the economics of the very top of the market will set the stage for many more blockbuster transactions in the coming year. Like exceptional art, there will always be a market for exceptional properties.”
Average Listed Price: + 3.3% in November y/y
Average Sold Price: + 7.1% in November y/y
Average Days on Market: - 6.9% in November y/y
Total Transactions: - 59.6% in November y/y
Average Listed Price: - 20.9% in November y/y
Average Sold Price: + 5.6% in November y/y
Average Days on Market: + 12.8% in November y/y
Total Transactions: -.4% in November y/y
Average Listed Price: - 2.4% in November y/y
Average Sold Price: -.6% in November y/y
Average Days on Market: - 22% in November y/y
Total Transactions: - 33% in November y/y
Greenwich is a town of 65,000 +/- people spanning ~60 square miles, and combines New England countryside living with small, but bustling, villages/town centers. Transaction volume in the market has been more resilient that in other areas of the country, showing a more or less flat number of total active sales and minimal movement in days on market.
Vincent Zappier, Operations Manager in Nest Seekers’ Greenwich office explains: “Greenwich remains a desirable and convenient respite to city life, with incredible schools and the lifestyle desires for families and individuals.”
Greenwich, Riverside, Old Greenwich, Cos Cob
Single Family Average Listed Price: - 11.53% in November y/y
Single Family Average Sold Price: - 12.49% in November y/y
Single Family Total Active Sales: Flat in November y/y
Single Family Average Days on Market: - 2.31% in November y/y
Mountain luxury is no longer defined as strictly being on the ski hill; there is strong desire for summer activities like golf, mountain biking, fly fishing, sailing and hiking, and local festivals, thus continuing to attract many new residents to the towns of Aspen, Vail and Breckenridge.
Nest Seekers Agent Kyle Coy explains: “Colorado resort destinations saw list prices increase almost 20% y/y and sold prices increase 15% on average. Inventory is holding relatively flat though the number of transactions is down significantly.”
Aspen Single Family & Condos
Average Listed Price: - 2.97% in November y/y
Average Sold Price: + 18.6% in November y/y
Total Sold Listings: - 47.4% in November y/y
Average Days on Market: - 2.78% in November y/y
Vails Single Family & Condos
Average Listed Price: - 14.32% in November y/y
Average Sold Price: + 4.16% in November y/y
Total Sold Listings: - 47.9% in November y/y
Average Days on Market: - 7.49% in November y/y
Breckenridge Single Family
Average Listed Price: + 3.3% in November y/y
Average Sold Price: - 3.5% in November y/y
Total Active Sales: - 48.1% in November y/y
Average Days on Market: + 103% in November y/y
While 2022 has seen overall slowing in many parts the country as a result of repeated interest rate hikes, Beverly Hills has remained one of the strongest and steadiest real estate markets nationwide, with median home prices remaining in the $5M range, up 21% y/y from November 2021.
Top Nest Seekers Beverly Hills agent Alyssa Azzara explains: “While still a Seller’s markets, excessive bidding wars and multiple offers have curtailed from peak 2021. Buyers have benefitted from slight boosts in inventory between October 2022 and November 2022 with minimal pricing fluctuation. Hot properties can be expected to sell slightly above or at ask within 30-40 days on market while average-demand sales are trading slightly below ask and within 60-90 days on average.”
Single Family Average Sold Price: + 1.1% in November y/y
Single Family Total Active Sales: + 1.2% in November y/y
Single Family Average Days on Market: + 1.1% in November y/y
Single Family Total Transactions: - 1.2% in November y/y
The Hamptons continues to be one of the most affluent communities in the country but is not totally immune to changing market dynamics, with 11 of the 12 local regions showing a slowdown in transaction volume.
Jimmy Guiliano, Nest Seekers’ top Hamptons agent says, “Things are definitely slowing down and pulling back slightly… but with the ultra-low inventory prices have not decreased more than 10%. I expect further slowing, because we are struggling with a disparity in mindset; Sellers think it’s still 2021 and Buyers think it's already 2023 which essentially freezes the market.”
Single Family Median Listed Price: + 18.9% in November y/y
Single Family Median Sold Price: + 5.26% in November y/y
Single Family Average Days on Market: + 14% in November y/y
Sale-to-List Price: 96.6% in November 2022
Adding to our established offices in Jersey City/Hoboken and Summit, Nest Seekers welcomed our new Rumson-based Jersey Shore office in 2022, capitalizing on the strong demand for beach homes on the state’s barrier islands as an alternative to the Hamptons.
Hoboken/Downtown Jersey City
Average Listed Price: + 21.1% in November y/y
Average Sold Price: + 21.3% in November y/y
Average Days on Market: - 12.2 in November y/y
Total Transactions: - 42.3% in November y/y
Average Listed Price: - 1.3% in November y/y
Average Sold Price: + 2.2% in November y/y
Average Days on Market: + 11.1% in November y/y
Total Transactions: - 18.2% in November y/y
Average Listed Price: + 12.7% in November y/y
Average Sold Price: + 15.3% in November y/y
Average Days on Market: - 11.1% in November y/y
Total Transactions: - 29.6% in November y/y
South Florida continues to make headlines as Wall Street south, with Goldman Sachs, Citadel, and others shifting their work forces to West Palm Beach and Miami. That said, it’s important to differentiate regions as we are seeing individual microtrends play out in each.
Palm Beach is deep pocketed wealth, with over 80% of transactions happening in cash. Prior to 2020, the large island estates rarely changed hands and stayed generationally within the same families. The slowing in transaction volume of the Palm Beach market is evident, while prices remain stable, after accounting for outlier transactions of $100 million+.
Palm Beach Island
Single Family Median Sold Price: - 30% in November y/y
Condo Median Sold Price: - 13% in November y/y
Single Family Total Sales Volume: - 8.4% in November y/y
Condo Total Sales Volume: - 90% in November y/y
Single Family Average Days on Market: + 240% in November y/y
Condo Average Days on Market: + 76% in November y/y
Miami is tied more closely to the socio-economics and politics of Latin America than the US. We are seeing a surge in demand from Colombian and Brazilian investors after their recent Presidential elections. New construction is at the heart of the Miami luxury market, whereby international investors lock in a price today for delivery in 4-5 years with staged payments throughout that period. This moves money from, often unstable, home countries into US tangible assets.
Single Family Average Sold Price: + 11.48% in November y/y
Condo Average Sold Price: + 8.95% in November y/y
Single Family Total Sales Volume: - 70% in November y/y
Condo Total Sales Volume: - 44.72% in November y/y
Single Family Average Days on Market: - 8.16% in November y/y
Condo Average Days on Market: - 32.43% in November y/y
EUROPE & THE UK
London remains the most expensive of any region in the UK, but it also continues to be the region with the lowest annual growth. In comparison, Portugal’s growth remains strong, with Golden Visa opportunities supporting investment in the country.
Lisbon Average Sold Price: + 3.1% in November y/y
Porto Average Sold Price: + 6% in November y/y
Algarve Average Sold Price: + 17.5% in November y/y
Cascais Average Sold Price: +13.7% in November y/y
Expanding Always, In All Ways
In 2023, rates will remain elevated, inflation sticky, and transactions will slow. It will be an opportune time for savvy buyers to capitalize and reminder that if you’re scared, you miss opportunities. The crypto fall out is not expected to hit real estate directly, though there may be some isolated incidences that are sure to make headlines.
At Nest Seekers, we are focusing on the solutions, not the problems.
We will welcome yet another new office to the Nest Seekers family, with the recent launch of Mexico with over $500 million in new listings.
And true to form in expanding always, in all ways, we are thrilled for the launch of Selling the Hamptons on HBO Max and Crazy Rich Agents on the BBC.