The sky isn’t falling as we enter 2023 when it comes to real estate, but there aren’t a whole lot of rainbows up there, either.
A number of stories last week point to the year shaping up to be a rough one.
Compass, the No. 1 residential brokerage firm in the U.S. in terms of sales volume, announced it’s subletting its corporate headquarters — with its agent-facing offices to remain open — while also engaging in its third round of layoffs over the last year.
In New York, the residential and commercial markets had a rough fourth quarter. Tight inventory and high mortgage rates squeezed residential sales in Manhattan, leading median sales prices of condos and co-ops to drop 5.5 percent.
The Manhattan office market didn’t fare any better, with leasing in the borough plummeting 43 percent year over year in the fourth quarter, as tenants took just 4.9 million square feet in the final three months of 2022, the lowest quarterly total since the second quarter of 2021.
Things appear to be rough all over. Home prices across Southern California have slipped for the sixth straight month, the result of increasing monthly mortgage rates.
Los Angeles’ sagging market doesn’t expect to improve any time soon, with a new transfer tax set to go into effect in April that’s expected to have a widespread impact on the city’s luxury residential market, and its commercial sector as a whole.
The market shift has been felt in formerly white-hot areas like Miami, where inventory is ticking upward and brokers are advising clients that the pandemic boom times are over.
In the Midwest, sales of Chicago-area homes priced $1 million or more dropped by more than 35 percent in the last quarter of 2022 compared to the same period the year prior.
Overall, pending U.S. home sales during the four weeks ending Jan. 1 dropped 32 percent from the year prior, the lowest level since at least 2015, Redfin reported. Austin, Texas, joined Las Vegas and Phoenix as the municipalities seeing the biggest declines of more than 50 percent.
Not that everything is doom and gloom. Thad Wong, of @properties, Chicago’s largest independent residential brokerage, said in “The Closing” interview for The Real Deal’s January issue, that his firm is expanding.
And one person’s down market is another person’s treasure. Firms like Maverick Real Estate, which was also profiled in this month’s issue, that deal in distressed debt — particularly one as aggressive as Maverick — can thrive in this environment.
Of course, no one has a crystal ball as to what the rest of the year will look like, and there’s still plenty of time for a turnaround, especially with a traditionally strong spring market on the horizon.