2022 was a year of extremes. We started in January of ’22 in an incredibly hot market… low inventory, high prices, multiple offers and big price premiums. We ended the year with excess inventory, prices no longer appreciating (perhaps even declining slightly – see my write-up from December, and graph further down in this article), and many homes selling at a discount.
You can see in April 2021 the price premium peaked at ~112%, and then again in March and April of 2022 at ~106%. And that is where a long steady decline began, finishing out 2022 at 91% in December (based on preliminary data).
I looked at home price appreciation in Austin, comparing a month with the same month the prior year for year-on-year (YoY) appreciation. For example, according to MLS data, the median sold price in December was 573K, compared to 599K in December 2021, a decline of more than 4%. You can see where price appreciation peaked in mid-2021 (47%).
In terms of buyer activity, it appears that December was not as weak as some of the earlier fall months. You can see buyer activity (defined as new pending transactions) in the graph below – the gap with prior years narrowed as we entered the holiday season.
Here are weekly new pending transactions mapped against the interest rate increases at each Fed meeting. Starting in mid-April, pending sales trended steadily downward, particularly after the Fed raised rates at their May4 meeting by 50 basis points.
After a huge spike in inventory leading to much higher months of inventory, particularly in the luxury price points, the market has balanced a bit more as fewer new listings have come on the market and some inventory has been withdrawn.
New listings spiked in June with a record number of new properties coming to market, and then lagged in the 4th quarter.
Months of Inventory still signal a buyer’s market in the higher price points, but still very much a seller’s market down below $1M.
There is plenty of uncertainty coming into 2023 with discussion about national and global recession risks, as well as questions about how long the Fed will continue raising rates, and how long they will hold them there before loosening policy again.
What does that mean for the luxury home buyer?
There are more choices out there, and fewer buyers chasing them. That suggests there may be more flexibility from sellers on terms.
What does that mean for the luxury home seller?
There is a lot of competition. It is absolutely critical that your house stand out in order to entice buyers. Homes need to be in tip-top condition. I never recommend trying to guess a buyer’s tastes or extensively remodel your house based on assumptions of what will appeal. The best approach is to shift to neutral colors and make sure that the house looks and feels well-cared for.
Trying to make sense of the market? Let me help!
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