The Luxury Market: Is now the right time?
What a ride. After a near stall in 2020, we experienced two years of the strongest markets in history, followed by the more "normal" markets currently prevailing in Chicago and most of the country. The Real Deal Chicago recently shared a story on the Gold Coast market, an area we focus on, and a "possible comeback." We were happy to see our 1316 North Astor listing as one of three featured in the story. So far, January is off to a slow start. One of the slowest starts in years. It's all part of the ebb and flow of markets. What we know is that positioning is everything in real estate; when you price, present and market correctly, you dramatically increase your chances of success. Our game plan for the Astor listing was a win. We were under contract in just 82 days with over 10,000 video views. As the story mentions, it had been listed off and on the market for over 3 years with other brokers. We are proud to say our strategy worked. The last few years of aspirational pricing are behind us.
Another success was our December listing at 1430 North Astor, 17a which went under contract in just 12 days with multiple offers. Excellent results in our current market. Proof that when pricing, positioning, and marketing are all equally considered your chances are much greater for success.
Chicago is made up of 77 official neighborhoods and all are experiencing the ups and downs that come with the markets. With a focus on the top 10, we feel Chicago is undervalued and our positive numbers will continue to climb. However, keeping it all in perspective is critical. Much like the story on the Gold Coast, the fact is that one can't ride a wave that's not there. No one and no property is immune to the impact of market cycles. When you hear advice coming your way with no data to back up that advice, that's your exit ramp. Now more than ever, it's critical to look at the data. Betting on anything other than that puts you on a slippery slope.
Multiple sources of reporting tell us that the U.S. luxury home market saw its biggest drop in sales on record in the three months ending in November 2022. Luxury home sales dropped 38.1 percent year-over-year from September to November. That’s the largest decline reported in 10 years of tracking the market. In Chicago, transactions dropped by 35% last quarter compared to the end of 2021. Home sales above the $1 million benchmark within the city proper dropped by about 34 percent.
While a significant drop of double digits in deals for any market triggers concern, most experienced brokers across the country will tell you that 2020 changed it all. That perspective is now in the rearview mirror. Real estate is after all a commodity. As such, it's all part of the supply and demand flow that all commodities are subject to. It goes up and it goes down. And it can happen faster than one would expect.
Expectations: The Larger Market
This month, Goldman Sachs predicted rough times in 2023 for some of the pandemic’s red-hot U.S. housing markets. No surprise here. The investment bank warned that residents in four cities, in particular, could see plummeting values that echo the 2008 housing collapse, according to a note to clients obtained by the New York Post. The “overheated” markets mentioned in the note were: San Jose, California; Austin, Texas; Phoenix, Arizona; and San Diego, California. Austin, ranked the hottest real estate market in the U.S. in 2021 by Zillow, has fallen to 30th for 2023. The company’s report called the market “ice cold” and stated that homes are now spending an average of 68 days on the market, more than any other major U.S. metro. According to Goldman, prices are expected to fall less than 2% in cities like New York and Chicago, and even grow in others, like Baltimore and Miami.
Chicago’s top 10 residential deals of 2022
2022 came in like a lion and left like a lamb as the saying goes. Data from our Multiple Listing Service show that January 2022 was the strongest January in 15 years. Riding high one year ago this month with prices already close to 5% higher were based on the prices already nearly 15% higher than the previous year. In the heat of that market, many chose to ignore the data. Easy to do when you are receiving multiple offers. By December, the smoke cleared. That market was over. Of course, this makes sense as no market can continue to go up.
The highest end of the luxury market had a slightly better showing, due in part to the wealthiest buyer's ability to pay all cash and leave interest rates out of the equation. Two remarkable statistics that drive us forward are these. 134 Chicago-area homes sold for $4 million or more in 2022, up from the 101 sold in 2021. And nine Chicago-area homes sold for $10 million or more in 2022. The top 10 Chicago sales for 2022 were apartments with only one exception of a land sale. Quite the story from our perspective. https://gcluxurygroup.com/blog/these-are-chicagos-top-10-residential-deals-of-2022.
A bright spot that we have already seen and heard ourselves is reflected in a recent nationwide CB survey that shows 90% of the UHNW say that real estate is the way to go and that 2023 will be a healthy market. 80% of those also said they will buy or sell within the next 1-3 years.
It's a new year and already the phone is ringing, the buyers are out and new listings are coming up daily. Crain's Chicago reported last week that a new construction condominium went under contract for 14 million dollars in just two days of hitting the market. That is an excellent way to start the year. After 27 years in this industry I still have the same answer when I'm asked, "is now a good time to buy or sell." Until I figure out how to do the impossible and time the ups and downs of the market, that answer will always be yes. Who you work with matters.
Sources are curated from The Real Deal, The Real Deal Chicago, Crain's Chicago, WSJ, Goldman Sachs, The Hill, and our hard work and experience!