2023: The Year of Housing Disappointment

Let’s agree to refer to 2023 as the year of disappointment because:

– Sellers will be disappointed by not selling for what they would have received in 2021.
– Buyers will be disappointed by not seeing significant discounts on housing prices.

While I called the 2021 housing market a “rocketship,” – now it looks like an open window in 2022 helps overstate the actual market damage (as illustrated below in the bottle rocket reply to the swimming pool post – I can’t seem to share just the bottle rocket post!)

But I digress…

Manhattan Is Exiting The Pandemic Era Without Drama

I’ve been the author of the expanding Douglas Elliman market report series since 1991. The anchor and first report of the series covered the Manhattan sales market.

Bloomberg’s coverage included a cool chart and was the 8th most read article on the ±350K Bloomberg terminals world wide.


Elliman Report: Q4-2022 Manhattan Sales

Co-ops & Condos
“The market metric to focus on in 2022 was the surprising restraint of new supply coming into the market.”

– Median sales price slipped year over year for the first time since the pandemic era began but was well above pre-pandemic levels
– The rate of annual sales growth went negative for the second straight quarter
– Listing inventory slipped quarterly but was on par with pre-pandemic levels despite sales slowdown
– Coop median sales price increased year over year for the seventh consecutive quarter
– Condo sales fell sharply year over year but remained above pre-pandemic levels
– All luxury price trend indicators expanded annually for the fifth straight quarter
– Luxury listing inventory expanded annually for the second straight quarter but was sharply below pre-pandemic levels
– Average price per square foot of new development sales edged higher year over year but was sharply below pre-pandemic levels
– New development sales declined sharply from the year-ago surge but remained significantly higher than pre-pandemic levels


Elliman Report: Q4-2022 Northern Manhattan Sales

“Weaker price and sales trends at the end of 2022.”

Co-ops & Condos
– All price trend indicators declined annually and fell below pre-pandemic levels
– Listing inventory declined annually for the first time since the start of the pandemic era

– All price trend indicators declined annually and fell below pre-pandemic levels
– Listing inventory has been rising annually for two years

Business Insider Profile of Me!

The most honest man in real estate thinks the housing market isn’t going to crash

On New Year’s Eve, a Business Insider profile of me entered my inbox. They began the project last spring just as the housing market was pivoting, and thankfully, my comments held up. They reached out to my friends while I worried whether this profile would be negative. I had given up on it until last week when they called to fact-check and asked for some family photos. When the piece came out, several commented on the profile photos they took, and it took several minutes for me to recall when and where they were taken – so much has happened since last spring I was a little foggy. After I read the piece, I was relieved and loved it—a special thanks to Kelsey, Hannah, and Zoe of Business Insider.

New Signed Contracts Show That New Listings Are Falling As Fast

Every month, we publish a series of reports covering contracts signed and listings that entered the market that month. It’s not a look at cumulative activity. These reports cover four regions: New York Metro, Florida, Colorado, and California. And while they all show a decline in purchases year over year, the annual drop in supply is
is astounding and a solid reason why I’ve been saying throughout 2022 that prices may decline modestly, but it doesn’t look like a significant correction is in store.

Elliman Report: December 2022 New York New Signed Contracts
Elliman Report: December 2022 Florida New Signed Contracts
Elliman Report: December 2022 Colorado New Signed Contracts
Elliman Report: December 2022 California New Signed Contracts

A Sampling of Charts – more can be found in our chart archive.

Converting Unused Manhattan Commercial Office Space To Residential Apartments Is Daunting And Oversold As A Concept

Last week, there was a terrific New York Times piece on the challenges of converting unused office space to residential. According to Moodys, only 3% of the city’s office space is suitable for residential conversion.

Throw in zoning changes, the cost of conforming to residential occupancy, and negotiating with the lender who has the office as collateral on a mortgage. If possible, you’ve got five years before this could happen in scale. And with the undecided direction of remote work, who knows what the demand will be in five years?

The Compass Chronicles: January 2023 Edition

I’ve been writing about the real estate brokerage Compass for a decade – why? Initially, their model didn’t work in the first year, and they said they would revert to a “traditional brokerage” (that press release was scrubbed from the internet long ago). That caught my attention. Years later, I still didn’t understand the model even though Softbank was willing to give them billions to make them a unicorn.

Give anyone billions, and they can start a business even when they have no prior professional background if profits are not required. But since profits are required in the real world, the lack of differentiation from traditional brokerages is becoming more and more evident as they have never made a profit and continue to hemorrhage hundreds of millions of dollars each quarter. My observation isn’t intended to malign Compass agents, many of whom are my friends. How is this effort sustainable, as their differentiation is diminished through cost-cutting each quarter when Compass loses an unfathomable amount of money?

Compass puts HQ up for sublease – but still says agent-facing offices will remain open [The Real Deal]

Their response to the cost-cutting was this: “Even if Compass was making billions in profits we’d still be doing this.”

No brokerage I can think of has lost hundreds of millions of dollars during the biggest housing boom of the modern era. So this kind of asset liquidation seems necessary when they lose money.

Change my mind.

Compass turns to cost-cutting as it tackles a ‘generationally bad year’ [Real Trends]

This Year in Aspirational Pricing

This has been quite the year in aspirational pricing. I was counting new super luxury sales up to the end of the year. While 2022 was front-end loaded, U.S. sales at or above the $50 million threshold were the second-highest in history after 2021.

The WSJ chronicled the top sales in Larry Ellison, Ken Griffin and Other Rich Buyers Kept the Luxury Market ‘Separated From Reality’ in 2022

Here’s a chart of U.S. residential single-unit sales at or above the $100 million threshold:

Surprisingly, U.S. sales at or above were the second-highest in history, and closings in the first and last half of the year were split 50/50. Because contracts represent the meeting of the minds between buyers and sellers, the split means that the year was more front-end loaded with contracts due to the spring pivot in fed rate policy.

And for fun, here are charts for the three key regions of super luxury U.S. sales.

New York

South Florida

Southern California

The Leaning Tower of [Manhattan]

Here’s a little background on the state of One Seaport, the Manhattan residential condo tower leaning 3 inches.

The Grand Millenium (The leaning tower of San Francisco) is a more extreme example since it is leaning by 26 inches at the top and has sunk about 16 inches.

Getting Graphic

My favorite charts of the week of our own making

My favorite housing market/economic charts of the week made by others

My favorite random charts of the week made by others


(For earlier appraisal industry commentary, visit my old clunky REIC site.)

Sign Up For The January 24 Appraisal Subcommittee Hearing on Appraisal Bias

The ASC is holding a hearing on the topic of appraisal bias which has been much of the content of Appraiserville these days. The subject of my irritation has been The Appraisal Foundation (TAF), which still doesn’t understand how they fostered the growth of an industry lacking diversity. As a reminder, TAF is the organization that wrote the bat-shit crazy letter, the chickenshit letter and is the subject of an active investigation by HUD on whether USPAP promotes a lack of diversity in the appraisal profession (BLS: 97.7% of appraisers are white)

You can attend in person or online. Register here.

OFT (One Final Thought)

Nirvana pre-fame. Never rule out talking (singing) to a wall.

Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, , or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

– They’ll be sending off rockets;
– You’ll be singing to the sound of rockets;
– And I’ll be single and talking to a wall.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive, and it helps me craft the following week’s Housing Note.

See you next week.

Jonathan J. Miller, CRE, Member of RAC
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog

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