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Luxury Home Marketing.

“It’s remarkable how resilient the housing market has been,” says Marci Rossell, chief economist for Leading Real Estate Companies of the World. “If you had presented the current scenario of mortgage rates jumping to 7% four years ago, I would have expected prices to be down by 10%, 15%, even 20%. That’s what you would have expected,” she says, adding, “Nope! We’re not seeing that happening.”

Mid-year 2023 price forecasts range from a slight decline of 0.6% (Realtor.com) to a 4% increase (CoreLogic) by mid 2024. Zillow’s revised forecast estimates a 5% hike in home values. Lawrence Yun, chief economist for the National Association of Realtors, projects a 1.8% price growth. Until interest rates come down, Rossell does not expect improvement in inventories. And like other economists, including the Mortgage Bankers Association, she anticipates rates to begin to come down by year end or early 2024.

A “Life Happens” Market

“Consumer demand for housing has defied logic throughout 2023, which is a testament to the demographic tailwinds of today’s market and the inherent desire for homeownership,” said Ali Wolf, chief economist at Zonda Economics. It’s “a ‘life happens’ type of market,” in which sales are driven primarily by changes in life stages and lifestyle, she explains.

In Manhattan, Joanne Hoagland with Compass sees a “necessity versus luxury mindset” affecting sales. “While the $5-wmillion-plus luxury market is moving along at a healthy clip in 2023, smaller units seem to be more consistently trading. Buyers seem less aspirational today than is typical due to uncertainty around economic activity, interest rates still not settled, political activity ramping up ahead of the upcoming elections, et cetera.” Prices continue to edge up in Manhattan.

Underlying demographic forces support high-end sales.

“Consumers at the high end just have a lot of cash on hand, even with the stock market gyrations over the last 18 months. People’s investment accounts are jam-packed and that’s what makes a difference in the higher end,” says Rossell.

According to the Institute for Luxury Homes Marketing (ILHM), the number of luxury home sales edged up month-over-month in 2023. May saw a 33% sales increase for single-family homes compared to April. Also growing was high-end inventory with single-family up 22% and attached 14%, on par with May 2022.

Manhattan

Regarding buyers, Whitney LaCosta, Howard Hanna/Coach Realtors and chairperson at Leading Real Estate Companies of the World, says, “I think they’re broadening their search. It’s no longer somewhere they want to go and be retired; it’s somewhere they want to have an experience and be in different parts of the country or the world. Instead of just visiting, they want to own a home there. They want to have roots in those places where they find joy.”

For example, Nashville’s charisma and quality of life continue to beckon newcomers with homes snatched up in less than a week.

Hyperlocal

Location matters even more. In fact, “hyperlocal” is the way some experts describe the current market. A good example is Florida, a favored pandemic refuge that is just now beginning to see subtle shifts. Tami Simms, a trainer for ILHM and an agent with Coastal Properties Group International in St. Petersburg, Florida, explains: “In my South Pinellas County area, we remain in a sellers’ market, still experiencing a lack of inventory, so properties that are in desirable locations, presented well and priced well, are selling in a matter of days, often at or above list price. Properties that are overpriced or have some sort of deficiency will be rejected by the market and remain unsold until there’s a correction. Down the road an hour, in Sarasota, where the median sold price is roughly 50% higher than ours, it’s a balanced market. Across the state in the Palm Beach area, with a much higher median sale price, they’ve actually shifted to a buyers’ market, so it is definitely hyperlocal.”

Miami once again reported the highest price increase, 5.2%, among 20 cities in the most recent S&P CoreLogic Case-Shiller Index. Chicago edged into second place with a 4.1% year-over-year gain. Both Chicago and Boston are experiencing a normal market, per Case-Shiller, and their suburban areas are even more robust.

Atlanta’s pace continues in 2023, and the city continues to outperform other metros. “Maybe not as crazy as last year, but it’s still very healthy. We continue to have a high demand of people moving here,” says Debra Johnston with Coldwell Banker Realty in Atlanta.

Second homes continue to be prized. In most of those locales, too few homes are the primary constraint. Even states such as Vermont are experiencing a shortage of inventory. Vermont ranked third, behind New Jersey and Indiana, among states with the highest price gains in April, per Case-Shiller. Ten states, including Washington, Idaho, Utah, and Nevada, recorded annual losses.

Despite some buyers pausing, the prices for prime properties and vacation rentals across the board in Europe are trending upward with Americans still very active in markets including Spain, according to recent research from Berkshire Hathaway HomeServices.

“Across Cape Cod, sales are down year-to-date compared to 2022, likely due to a combination of low inventory and general economic uncertainty. It’s now a more balanced environment for buyers, yet price gains seen over the last couple of years are holding. One thing that’s particularly interesting, however, is that sales of $5 million and above are even year over year. This segment of buyers is less likely to be impacted by today’s interest rates, and they view real estate in a premium market like Cape Cod as a safe investment,” explains Paul Grover, co-founder of Berkshire Hathaway HomeServices Robert Paul Properties in Osterville, Massachusetts.

North Carolina’s mountain locales continue to be in demand, particularly for individuals looking to escape the heat. The average list prices here continue to top the $1 million mark. But it’s changed. “Two years ago, people were just writing a check. They weren’t even asking much. Now people are at least doing more research,” says Terry Potts of Country Club Properties. And in addition to retirees, newcomers are apt to own a business and often work remotely.

In May, according to ILHM data, Aspen tracked one of the highest median sold prices in the U.S., charting $20 million for single-family homes. But potential local changes in zoning regarding home sizes could shift future market dynamics.

Boulder, a perennial luxury enclave, continues to favor sellers with luxury homes taking about a month to sell. Still, with the May median price for luxury at $1.6 million, down from $2.3 million last year, buyers have opportunities. Properties are selling for approximately 98% of list.

Twice as Nice

A penchant for two main homes is a growing post-pandemic trend. La Costa sees “a new normal” emerging. “People are adjusting their schedules to be in the office a few days a week. So, they have two homes and can live comfortably in two places at the same time. The trend is particularly apparent in Manhattan, where individuals spend a few days in the city, and then four days in their country home. That country home brings them peace and joy,” she adds.

Research from Coldwell Banker shows secondary home ownership grew significantly during the pandemic. New York has the highest population of individuals who own secondary homes in other cities, followed by Silicon Valley, San Francisco, Los Angeles and Chicago.

The two-home trend also extends across the pond. “As more people are coming back into the office, many are keeping their country homes, but are also buying or renting a smaller London base,” shares Martin Bikhit, co-owner of Berkshire Hathaway HomeServices London.

Suburbs Rule

From Southern Connecticut to northern Virginia to San Francisco’s East Bay, suburban locations dominate the story in many metros. In Westchester County, New York, 2023 charted the highest first quarter median price on record. Sales were down by 32%. On Long Island, the lack of inventory continues to damper sales while demand remains strong.

“The market in New Jersey remains very much in favor for the seller with very high demand and extremely low inventory. Most homes are still seeing multiple offers with homes in my market on average selling 10-17% above their asking price,” shares Frank Isoldi with Coldwell Banker Realty in Westfield, New Jersey.

Although year-over-year home values are down in metros such as Austin, Seattle and San Francisco, recent data shows a possible rebound brewing, particularly in tech hubs.

Among markets to watch, these cities still top the list as real estate changes going into 2024. The current status could portend big changes in 2024 depending on interest rates and the mindset of the upscale consumer. Will it once again be a “new normal” or simply an evolution of today?