The U.S. real estate market has experienced just about every end of the housing spectrum over the last decade. Driven by lifestyle changes and the remote work revolution, real estate markets across the nation witnessed booming growth during the pandemic. After two years of record numbers, 2022 brought some more challenges, with growing uncertainty and the fear of a looming economic crisis. As we begin another new year, real estate developers nationwide are wondering if another change is on the horizon. Let’s take a deep dive into the future of the luxury real estate market.
2022 Brought Uncertainty and Building Headwinds
After what many consider one of the best markets in history during the pandemic, the 2022 real estate market was a lot less stable. In the opening months of 2022, the U.S. stock market suffered double-digit declines, and S&P finished the year down 19.4%. 2022 ranked as one of the worst stock market years since 2008 and had a direct impact on wealthy homebuyers. Rapidly rising mortgage rates also drove inflationary trends, putting the brakes on what had been a pandemic-era homebuying frenzy. As interest rates jumped and the stock market declined, the real estate market experienced its first downturn in years.
While many compared this downturn to the 2008 recession, Cotton & Company’s data-driven methodology provided a detailed look into the key differences between the two markets. “In 2008, we experienced a dramatic drop in interest across the board. It was like a faucet that shut off overnight,” shared Cotton & Company president Laurie Andrews. “Even though there was more uncertainty in 2022, we continued to see interest climbing for new home communities. Florida in particular is benefitting from new lifestyle priorities and the State’s favorable tax climate.”
Boca West Country Club, Boca Raton, FL
A Return to Normal Transaction Volume
While 2022 may be remembered as a year of housing uncertainty, real estate will likely return to normalcy in 2023. Mortgage rates are rising but will begin to stabilize, while home sales and prices will moderate after recent highs. With a sustained demand for new homes, inventory is expected to remain tight in 2023, with starts below historical averages. Standing inventory is increasing and returning to more normal levels. Comparisons to 2019 levels should be monitored, rather than year over year projections. Although there will be a flattening of home prices, it’s unlikely that the market will bottom out completely.
“We look forward to seeing the market level out to a healthy volume in 2023,” shared Andrews. “Although we may see a bit of market correction, Florida still has a tremendous influx of luxury buyers from the north due to overall market conditions – lower taxes, less crime, and more freedom. The new challenge is convincing buyers that now is a good time to make that purchase decision.”
Global Buyers Make a Return
Perhaps one of the greater influences on 2023 will be the return of international buyers. For almost three years, restrictions and general caution tied to international travel during the pandemic slowed wealthy foreign buyers from moving to America or investing in new residential offerings. Now, foreign luxury buyers have entered the market once again, boosting home sales nationally. According to the National Association of Realtors (NAR), the number of foreign buyers from April 2021 to March 2022 increased by 8.5% from the previous 12-month period, stopping a three-year hiatus on foreign investment in U.S. residential real estate. The NAR also reported the top international buyers in the U.S. are from China, Canada, India, and Mexico. Florida, California, and Texas are the top U.S. destinations for foreign buyers.
Orchid Island Beach & Golf Club, near Vero Beach, FL
Luxury Residential Trends to Look for in 2023
As more buyers continue to head out into the market in 2023, their perception of new real estate has changed after the pandemic. Today’s homebuyers are looking for a community where they can live, work, and play in style. To be competitive, many developers are integrating a more robust service atmosphere into their amenity plans. New luxury condominiums are being designed with package storage areas, innovative smart home technologies, and communal work-from-home spaces that enhance care and convenience within the private building. There is also an expectation in every development plan, from entry level to luxury, to have easy access to fitness centers, family gathering spaces, outdoor parks, pickleball, and other wellness components.
“It’s no longer just about providing real estate spaces,” shared Andrews. “Today’s developers should look into providing conveniences that allow high net worth individuals to maximize their enjoyment in their downtime. Peace of mind has become the most sought-after amenity of all.”
Peninsula Sarasota, Sarasota, FL
Using Data to Understand Real Estate Market Trends and Evaluate Risk
The real estate marketing specialists at Cotton & Company are keenly aware of how quickly market trends can shift. The company’s daily monitoring of website traffic, time spent researching on websites, and the number of direct inquiries generated provide a detailed look at real-time consumer trends and are key indicators of the strength of the market.
Cotton & Company is a full-service digital real estate marketing firm specializing in the luxury segment. The firm boasts a portfolio of more than 1,700 communities, including luxury condominiums, country clubs, marina residences, resort residential, and master-planned communities. Visit cottonco.com to learn more about their full scope of services which range from branding and website development to sales support, lead generation, and digital/social marketing.
