Some Insights During a Midyear Pause
July 13, 2023
As we transition into the second half of 2023, a seasonal summer slowdown is upon us. The definite lull is dramatically different from the robust activity of the post pandemic summers of 2021 and 2022. Today’s sellers are frustrated by fewer showings, silent open houses, and no offers, not even low, embarrassing bids. Would-be sellers remain hesitant to make a move, reluctant to give up the 2-3% loans they may never see again, contributing to already reduced inventories.
So what are we seeing? And what types of properties are being affected?
The stock of quality, well priced properties is shrinking.
There is no urgency for buyers to make deals.
Transaction volume is falling.
After 10 consecutive months of rate increases, the Federal Reserve held interest rates steady in June when the average rate on the standard 30-year fixed product was 6.81%, the highest level since last fall. Your guess is as good as mine as to the Fed’s action at their next meeting at the end this month and September.
Which properties are being passed over?
Estate sales in need of makeovers, especially since labor and insurance costs continue to rise and supply chain issues continue to be problematic.
Units with high monthly carrying charges added to even higher borrowing costs, are putting many properties out of reach for most buyers with a budget.
What can you do?
Condition is as important as realistic pricing to gain the attention of nervous buyers in a lackluster environment. Virtual staging may get people through the door, but staging will close the deal.
Despite the challenges, some areas of the market are quite positive.
Q2 2023 saw the greatest number of all cash deals on record—nearly two thirds of all transactions, according to real estate appraiser Jonathan Miller. Not surprisingly, the number of cash buyers increases with higher price listings and among new development sales. Cash buyers amounted to 58.2% of buyers for properties in the $500K-$1M price range, rising to 75.4% for properties $5M and up.
After nearly two years of heightened recession talk, that narrative is minimizing somewhat, and higher wages and lower unemployment numbers are being reported just as inflation is beginning to cool.
And there’s more good news. The luxury market had one of the best months ever last month, second only to June 2021 according to Donna Olshan in her Olshan Report which has been tracking contracts signed for properties priced at $4M+ since 2006. In fact, the $5M-$10M range saw the most quarter-over-quarter growth, capturing 6.2% of sales, the highest on record in the last 10 years.
Quarter-over-quarter there was a 32.2% increase in Manhattan residential sales, indicating that the year could have continued growth. To see complete details from Manhattan Market Report Q2 2023, click here.
So what will the summer months be like? If the past two weeks are any indication, the hazy, hot and humid days of August came early. While the lack of inventory usually indicates a seller’s market, dwindling demand suggests price neutrality. This might just be the best time to get a deal for brave buyers who recognize opportunity. Have your broker check on properties which have been taken off the market temporarily, and you may find without competing offers, you’ll be stepping over the threshold of your dream home sooner than later.
For specific advice to your unique situations, please reach out directly, and we would be pleased to guide you.