Happy New Year! Now that 2023 has officially begun, it’s a great time to look back on 2022 (and beyond) to better understand where the luxury real estate market stands—and where it might be headed.
December 2022 Sales Data (Guard-Gated Properties)
In December, sales in the guard-gated communities we represent were down 8.2% month over month and 57.9% year over year—while inventory nearly doubled year over year. Rising supply and decreasing demand are indicative of the market becoming more favorable for buyers.
2018-2022 Annual Sales Data (Guard-Gated Properties)
Looking at guard-gated sales charted over the past five years, you’ll see a big uptick in closed sales that began a few months after the initial COVID-19 lockdowns and peaked in April 2021 with 175 sales that month. Since then, guard-gated sales have been trending downward. However, when you look at the yearly totals, market conditions in 2022 were closer to pre-pandemic (or more “normal”) conditions.
There were:
There’s more to this story, though…
Yes, 2022 had a similar sales volume to 2018 and 2019, but that’s mainly because the beginning of the year still had momentum from 2021’s strong market. Things definitely started slowing down in the latter half of last year. There were a total of 94 guard-gated sales in the last two months of 2022—compared to 113 in 2018 and 147 in 2019. This means that the market has less momentum going into 2023.
$1,000,000+ Sales Totals (2018-2022)
Even with the market slowing down in 2022, there were still 1,525 closed sales for homes priced at $1,000,000 and above (with or without guard-gates). To put this into perspective, 2019 had just 586 closed sales in the same price range. How did closed sales nearly triple despite economic uncertainty and rising interest rates? These inflated numbers are evidence of how much prices have soared in recent years; $1,000,000+ sales have increased because there are now substantially more homes valued over $1,000,000 in the Las Vegas market. Things are different than they used to be.
How Interest Rate Hikes Affected Financed Buyers in 2022
Now let’s look at how the Fed’s fight against inflation affected the amount of buyers that obtained financing in 2022. As rates crept upward throughout the year, sales volume decreased significantly for guard-gated homes priced at $500,000 and higher. However, despite mortgage rates more than doubling in some cases, the proportion of buyers that obtained financing decreased only slightly—from 53% of transactions in the first half of 2022 to 50% in the second half. With that in mind, what are the odds of getting a cash offer on your home sale? The higher the price point, the more likely a home is to have a cash buyer—ranging from 40% of the $500,000-$999,999 purchases to 71% of the $4,000,000+ purchases (in the second half of 2022).
Closing Remarks
No one is sure where the luxury market will go in 2023, but it will likely hinge on whether the Fed’s fight against inflation ends up putting us in a recession. No matter what happens, it would be wise to have a team of real estate experts on your side. Whether your goal is to buy, sell, or wait and see, we’re always here to help!
