The Outlook for 2023

By Camilla McLaughlin

Experts are reporting a more balanced market, with a return to dynamics that vary by location. Here we look at 6 prominent regions.

Looking ahead, economists tentatively call for a soft landing for the economy and housing, even though they agree that the luxury market will be somewhat insulated from dramatic changes.

Listen to some media reports, and it would seem the real estate market has begun a steep slide in the magnitude of falling off a cliff. But talk to experts in the field, particularly luxury veterans, and the story is quite different. Instead of a massive decline in prices, they reference an adjustment in the number of sales. Prices might be off the highs of early 2022 in some places. Almost everywhere else, they hover near or exceed 2021’s highs. Expectations are that real estate in 2022 will close out with a 9.6% gain in overall median prices.

“We’re still much higher than we were pre-COVID; it’s just the trajectory isn’t as steep as it used to be,” shares Caroline Huo, Keller Williams Peninsula Estates in the San Francisco Bay Area. “People are saying, ‘Oh, it’s a buyers’ market; the sky is falling.’ It really isn’t, and I am excited because it’s much more of a balanced market,” shares Huo, who is also director of professional development for Keller Williams Luxury.

“We’re going through a reset, a recalibration if you would. We’re still very much a sellers’ market,” she observes. Properties in the area are still selling with multiple offers over asking prices. Forecasts call for a 10-percent price increase in 2022 for the region.

And instead of Armageddon, Huo sees the current status as a market of opportunities. “Here in the Bay Area, we have not seen buyer opportunities like this in the last 10 or 11 years.”

Microlocal

The timeworn adage — location, location, location — matters more than in recent years. Hyperlocal might be more apt as price segments, property types and local economies have greater influence. Looking ahead, National Association of Realtors chief economist Lawrence Yun expects, “Half the country may experience small price gains, while the other half may see slight price declines.”

“Every location has its own unique story and circumstances. When a market is shifting, all those factors become more essential,” shares Matt Leiva of Keller Williams Chantilly Ventures.

Washington, D.C. Metro

In Washington, D.C., and surrounding areas, there is less change in luxury than in the overall market. In part, Leiva says, this is based on the high average price point of the region as well as an unending influx of newcomers. “Luxury buyers here are not buying based on monthly expenses,” he says, noting a 5- or 6-percent interest rate appears to have little impact on the high end. Inventory remains very low. Days on market in the area, including the Maryland suburbs, range from 7 to 12 days, according to data from the Institute for Luxury Home Marketing. The pandemic headline was “the number of properties sold and how fast those properties sold. With the change, the headline has become who is buying, what they purchased, and, most importantly, why they bought,” says Brady Sandahl of Keller Williams Palm Springs, who also serves as director of growth for Keller Williams Luxury. “During the pandemic, buyers fell in love with the rate and used the rates to justify inadequacies with the house. Today, they have to fall in love with the house.”

Nashville

“What’s interesting for us is the number of luxury sales this month is almost identical to this time last year,” says Alex Brandau with Keller Williams Realty in Nashville. “What has changed is more homes are on the market, especially compared to the end of 2021. Top to bottom, our market is still a sellers’ market, only carrying threeand-a-half months total inventory across all price ranges in Middle Tennessee.”

A majority of the luxury markets tracked by the Institute for Luxury Home Marketing (ILHM) are still considered buyers’ markets. Others are deemed sellers’ markets, and a few are balanced. Homes are selling as quickly as 7 to 12 days in the Bay Area, while the Aspen inventory is projected to take years.

Palm Springs

“Buyers continue to buy, but it’s a different type of buyer,” Sandahl shares. Rather than looking for a safe haven to avoid the pandemic, people today are buying to experience pleasure or opportunity. “We’ve returned to the primary buyer pool we experienced before the pandemic. They’re buying into the Palm Springs and the Coachella Valley lifestyle. For luxury, the lifestyle aspect of purchasing is more significant than the interest rate,” he says.

Austin

The cool down in Austin feels chillier than data suggests as one of the hottest pandemic markets moves toward balance. Days on market continue to increase, but still hover around three months. Agent skills, particularly working with sellers, are critical. “It takes a good, strong agent working with a strong lender” to educate sellers on ways to lower costs for potential buyers,” says Eric Copper, a founding member of the Keller Williams Luxury division.

What’s Back?

More than buyer motivations and sales characterize the overall market. Here’s what to expect:

The 30- to 90-day pause will continue. During the pandemic, agents report it often took time to grasp the impact of changes. Today, buyers often stay on the sidelines, taking a pause while they absorb rate increases.

Negotiations: No one is waiving inspections today. Agents advise sellers not to be surprised by another round of negotiations after the contract is signed, often following inspections or due diligence.

Realistic Pricing: Aspirational prices are passé, but so are lowball offers.

Asheville

“Here, the seller versus buyer market status flips depending on the price point. If we stopped listing homes, we would be out of million-dollar homes to sell in four months,” says Bill DeVore of Keller Williams Asheville. Potential buyers from more expensive regions continue to gravitate here, and DeVore says they are almost always surprised by the prices and taxes.

Luxury buyers in some markets may not be searching for personal homes. Instead, investment properties are in demand, including single-family homes. Demand for potential Airbnb properties is strong in Asheville.

Miami

Upscale buyers today look at real estate as an asset rather than a primary or resort home. Miami achieved platinum status, perceived as a top luxury enclave internationally. Kathrin Rein of Keller Williams Miami Beach is seeing more buyers, both local and international, even though she sees the market plateauing slightly. “Prices are still going up, but not as much as the last three years.” Miami Association of Realtors data shows the overall median sold price down by 2.6 percent, but up over 11 percent year-over-year.

Private Listings: “We’re in a market right now where we have more private listings than we’ve ever had,” shares Sandahl. Sellers want to test their price.

Mortgage Hacks: Look for a growing number of strategies to lower rates, from ARMs to buy downs.

Looking ahead, there are so many wildcards and uncertainties that it’s hard to foresee anything other than the next month or two. There is concern among economists that tech layoffs will have a bigger impact on a few hot markets. NAR’s Yun anticipates a return of buyers, noting interest rates rather than confidence in real estate is keeping buyers on the sidelines.