The US housing market has been in dramatic flux since 2022, plagued by oppressive inflation, soaring rental prices and mortgage rates, and swelling demand made worse by a shortage of housing inventory. The continued influence of the pandemic has also reshaped where we live: Ever since 2020, remote work has had many former homeowners from Northern metro areas permanently setting up camp in Florida and elsewhere in the Sun Belt, driving up housing prices in once-affordable cities. (Average home prices in Tallahassee, for instance, surged by just over 30% year over year, according to Redfin data from February.) For designers whose income often hinges on clients’ moves to new homes or renovations of existing ones, keeping a finger on the pulse of these events can be a savvy technique for planning new business strategies.
What’s the current state of the housing market?
According to the National Association of Realtors, in January 2023, sales of existing homes fell for the 12th consecutive month. Last week also marked the sixth in a row that the 30-year fixed rate saw a hike, hitting 7.03% last Wednesday. (This week is a different story, with the fallout from Silicon Valley Bank impacting the market—on Monday, mortgage rates dropped to 6.57% and are now hovering slightly higher.)
The median existing-home price for all housing types in January was $359,000, an increase of 1.3% from January 2022. That said, pending sales (which lead existing sales by one to two months) looked promising, as their figures increased for a second consecutive month—up 8.1% from December 2022. In terms of new builds, though, The National Association of Home Builders reports that sales are down 19.4% compared to a year ago.
Should I be worried about the luxury market?
It definitely isn’t sunshine and rainbows. According to Redfin data for the three-month period wrapping at the end of January, luxury home buying dropped 44.6% year over year—the second lowest level in the company’s records, which go back to 2012. Some of that is due to the sky-high sale volume of the pandemic: The higher they rise, as they say, the farther they have to fall. The lackluster performance of the stock market in early 2023 didn’t help either, as luxury buyers tend to hold more assets there than non-luxury buyers.
But it isn’t all bad news. “Buyers are still engaged and asking their agents to tell them when something interesting comes on the market so they can act quickly,” says Philip White, president and CEO of Sotheby’s International Realty. “What we also found through our 2023 Luxury Outlook report is that, more than ever, buyers are expanding their searches—both internationally and domestically—to find a good deal.” White adds that his company saw examples of that trend in 2022, as the US dollar strengthened against the dwindling Euro. “I envision buyers will continue to look for opportunities,” he says. White adds that luxury sales are often driven by emotion, so “some buyers and sellers may wait for more economic clarity before making decisions, although many of our agents have seen significant activity on the East and West coasts over $10 million, and one of our affiliates in Missouri just sold a property for $13 million, which was one of the state’s priciest homes.”
Despite the general gloomy economic headlines, Bill Caleo, founder of The Brooklyn Home Company, believes that people are willing to invest in the quality of their abodes more than ever. “In recent years, selective design renovations offered an easier option for upgrading amid increased construction costs. Now that material costs have come down 30 to 40% and subcontractors have become available, new development is flourishing again and offering a preferable option for buyers who want turnkey homes with boutique offerings,” he explains, singling out The Butler Collection, a series of chic residences in Brooklyn’s Park Slope neighborhood that his company built using Passive House principles.