Residential market New Year’s outlook: Once-hot market is old acquaintance

When we asked in this month’s edition of the magazine, “What the hell is happening in residential real estate?” The evidence pointed to one irrefutable answer: not a whole lot of good.

Indeed, November brought a tsunami of bad news from some of the residential industry’s biggest players in the U.S., from Redfin to Opendoor to Compass.

Unsurprisingly, year-end figures and 2023 projections released recently — amid economic uncertainty, inflation and high interest rates that at one point saw 30-year fixed mortgage rate surge past 7 percent — are yielding the same answer.

Home sales dropped a little more than 35 percent year-over-year in November, Redfin reported last week — the largest drop recorded by the brokerage since it began tracking sales 10 years ago.

In addition, the median home sale price increased by only 2.6 percent from a year earlier, while new listings dropped a staggering 28.4 percent percent year-over-year, according to Redfin.

The slowdown has hit pretty much everywhere, including Manhattan’s once-white-hot luxury market, which opened the year with strong sales, only to approach the turn of the calendar with just 468 contracts for homes asking $4 million or more, a decline of 44 percent, in the second half of 2022.

In Realtor.com’s 2023 housing forecast, Los Angeles (94), San Francisco (90) and Miami (70) all ranked near the bottom of the country’s largest metro areas.

But there were some silver linings amid the doom and gloom.

The 30-year fixed mortgage rate has receded to about 6.5 percent, giving some hope for a recovery.

At street level, Elliman, despite a $4 million loss last quarter, continued to expand its operations with the announcement of a second office in Boston through the acquisition of Bulfinch Boston Realty.

Elliman’s Eklund-Gomes Team this week signed a five-year deal to re-commit to the brokerage. The 90-person team led by Fredrik Eklund and John Gomes has reeled in more than $4 billion in transactions across Elliman’s 13 markets, the brokerage said.

That’s on top of Elliman’s announcement last month that it was opening three offices in the metro Washington, D.C., area.

And some appear to retain an overriding optimism about a seller’s market at the high end–perhaps thanks to rose-colored glasses. Billionaire casino mogul Steve Wynn has nearly $300 million in properties listed right now spread out in New York City, Sun Valley, Idaho; Beverly Hills, California; and Palm Beach, Florida.

Still, the prognostications don’t look for a particularly strong 2023 on the residential side.

In its 2023 housing outlook, Redfin says next year will bring the slowest housing market in 12 years.

“This has been a generationally bad year in residential real estate, one of the worst years over the past several decades,” Compass CEO Robert Refkin said in a Compass earnings call in September. “ The incredible speed of the decline has been historic. Transactions have fallen significantly as soaring mortgage rates, high home prices, lack of inventory, stock market declines and high levels of uncertainty are keeping many buyers on the sidelines.

“The past 12 months have been tough and the next 18 months appear that they can be tougher.”