QUARTER 3 MARKET STATISTICS

Third Quarter

A notable downshift in demand for luxury properties occurred in the third quarter as hesitancy took root and affluent consumers fully absorbed the shock of interest rate hikes, stock market declines, and inflation. Additionally, July and August are typically slower months for property sales.

That being said, higher interest rates most likely have had the greatest impact on the demand. It meant that luxury sellers would have to trade in a lower interest rate for a significantly higher one as mortgage rates rose to 6% in September, which likely led many of them to simply hold off on listing their homes if they didn’t need to sell.

This would account for why new inventory levels declined from the second quarter to the third quarter. Meanwhile, overall inventory levels increased as a result of older listings remaining on the market longer. This is seasonally unusual for September, which typically sees an uptick in sales activity.

Fourth Quarter

The final quarter of 2022 may be remembered for being one of the most contradictory three-month periods in luxury real estate. By December, the majority of luxury property markets across the U.S. still exhibited conditions more favorable to sellers than to buyers. Prices had not decreased as much as industry analysts predicted in June and July. Yet the number of sales continued to fall.

There are several reasons for these anomalies. The lack of new inventory entering the market continued to limit highnet-worth (HNW) buyers’ choices in desirable locations and therefore the number of sold homes. Furthermore, sellers and buyers could not align expectations on price, causing listings to sit on the market longer.

Inconsistency ruled across locations and markets. While some sellers might have lowered their prices in certain overheated markets, other traditional luxury markets did not see price reductions at all if they were attracting international buyers or the work-from-home crowd.

At the end of 2022, median luxury single-family home prices across 125 U.S. markets slipped only slightly from the second quarter peak but remained flat compared to the start of the year. There are a few reasons thought to be responsible for this decline. Affluent buyers, crunched by higher interest rates, sought smaller, lower-priced homes or paused their purchase plans. Others began to turn their gaze toward second homes and investment properties, which are typically lower-priced.

Time will tell if this modest price decline is a trend that will carry over into 2023, or if the general property market will continue its contradictory reign.

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