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Real Estate Markets Set to Normalize in 2023 After Nearly Three Years of the Pandemic Boom

Updated: Jan 2, 2023

Sales volume has already started slowing and a turnaround is NOT expected until the second half of next year. - Source: By Liz Lucking and V.L. Hendrickson for Mansion Global

Luxury real estate in many markets, including New York City, is set to normalize in 2023.

In the U.S., markets are “coming back to Earth,” according to Jonathan Miller, president and CEO of the New York-based appraisal company Miller Samuel.

What a difference a year makes.

At the beginning of 2022, real estate markets all over the world were up against huge demand, limited supply and high prices. Looking toward 2023, the landscape has changed dramatically since central banks began raising interest rates last spring.

Although home prices are falling and homes are lingering on the market, many in the industry look at the shift as more of a normalization than a correction. Sales activity and price growth from March 2020 to March 2022 was too hot not to cool down.

The process has already started. Global house-price growth for luxury properties—the top 5% of the market—slowed to 8.8% per year in the third quarter, down from 10.9% at their peak in the start of 2022, according to a report from Knight Frank. But when accounting for inflation house prices are actually now declining by 0.3% year-on-year, the report said.

“Clearly the pivot of Fed policy has had an impact on every housing market in the country because rates were too low for too long,” Jonathan Miller, president and CEO of the appraisal company Miller Samuel. “It created this insatiable demand and obliterated supply.”

Sure, there are whispers of a recession. But Mr. Miller thinks it will be light compared to past periods of economic difficulty, largely because of the strong labor market.

Other major cities are facing similar headwinds, including London and Sydney. But places that saw huge influxes of people come to town in recent years, such as Dubai and Miami, are likely to see little or no impact, experts say.

Mansion Global talked to industry experts in seven luxury real estate hubs around the world to get their crystal ball predictions for 2023.


South Florida has been one of the biggest beneficiaries of pandemic migration fueled by the ability to work remotely, low tax rates and the substantial stock market gains realized by many in 2020 and 2021. Demand has been so high that inventory is now extremely limited, keeping prices elevated.

Take Miami Beach, where inventory has dropped more than 60% since the pandemic began, according to data from Mr. Miller, who is the author of market reports across the country for brokerage Douglas Elliman. Or consider Palm Beach, Florida, where inventory “has collapsed,” he said.

“Miami—and I think it speaks to a large portion of Florida—was rebranded as a place to work during the pandemic,” Mr. Miller said. “The ability of remote work and greater mobility generally comes with higher compensation. So there’s been a restructuring of Miami real estate, not just because the significant excess supply has been obliterated, but because it’s providing a pro-business atmosphere that is pulling companies out of high-cost housing markets to Florida.”

That demand continues, remaining “well above pre-pandemic levels,” Mr. Miller said.

“When you compare the third quarter of 2022 to the third quarter of 2019, you’re looking at a market with nearly 60% less supply and sales that are 22% higher,” he explained. “In 2023, we’re expecting more of the same: A limited inventory with relatively stable sales activity.”

So far, low supply has kept prices elevated, Mr. Miller said. The median price of a Miami Beach home in the third quarter was $550,000, and that is 34% higher than pre-pandemic, he added.



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