Concerns over recession and volatile financial markets have super-prime buyers in New York, the Hamptons and South Florida on pause
2022 was a strong year for luxury sales in the U.S., though a slowing market in the second half of the year may point to trouble ahead for high-end homes, according to a report Wednesday from Serhant.
New York City, the Hamptons—the oceanfront retreat for well-heeled New Yorkers—and South Florida all saw a robust start to 2022, as the boom in home sales and migration was still in full swing. But sales of super-prime properties, those priced at $10 million, sagged in the second half of the year.
“While rising mortgage rates were not the lead cause of the decline in sales at this level, volatile financial markets and growing concerns about a looming recession resulted in many buyers taking a pause,” according to Garrett Derderian, director of market intelligence at the agency and the author of the report.
In New York, last year was a “mixed bag,” he said in the report. Demand from 2021 carried over, leading to a near-record level of closings, but new contract activity dropped significantly.
“While sales were healthy, the best gauge of real-time trends is contract activity,” Mr. Derderian said in the report. “There were 188 [super-prime] contracts reported in 2022, down 42% from 2021 levels. While the decline in new contracts was pronounced, it was the second half of the year when the market noticeably soured.”
Indeed, there were 134 contracts signed between January and June of last year, a 15% annual decline, the data showed. But in the second half of the year, only 54 luxury homes went into contract in the city.
That’s “down a staggering 68% from the same period in 2021 and down 60% from the number of contracts reported in the first half of the year,” Mr. Derderian continued.
Broken down by property type, there was an 18.5% year-over-year increase in condo closings, which were one-third higher than their 2013-21 average, according to the report. The median price slipped 2% to $14.4 million.
For co-ops, there were 40 closings, up 14.3% from 2021, but down 9.1% from their eight-year average. Their median price dropped 15% to $12 million, the figures showed.
“Demand for cooperatives has continued to decline, totaling just 14% of all superprime sales,” Mr. Derderian said. “Still, the highest-priced sale of the year was for an Upper East Side cooperative that traded for $101 million.”
Meanwhile, the Hamptons “had a relatively strong showing in 2022, with both the first and second halves of the year showing a consistent number of trades,” Mr. Derderian said. There were 61 super-prime sales there, a decline from both 2021 and the 10-year average.
The median price in the coastal area rose 8% annually to $14.9 million, the second-highest median price of the last 10 years and just below the 2020 record of $15 million, the report said.
Southampton had the most luxury sales last year, 24, as well as the highest average sales price, $21.1 million.
Like many other super-prime markets, sales activity was front loaded: In the first half of the year, contracts fell 23%, while in the second half, they fell 39% year-over-year, the figures showed.
“New construction and turnkey properties continue to see the greatest level of demand and most limited negotiation, as do homes in prized locations,” Mr. Derderian said.
At the same time, many New Yorkers fled to South Florida during the pandemic, and the luxury market in the area “had an impressive 2022, despite sales and newly reported contracts falling short of ,” the report said.
There were 47 newly reported contracts in Palm Beach last year, down 23% annually, and 98 contracts reported in greater Miami, a 51% decline, the report said. In addition, the median price in the region was up 2% to $15.3 million last year.
“Like New York, the declines were most pronounced in the second half of the year,” Mr. Derderian said, adding that there were reasons to be optimistic about South Florida.
“While part of the decline is the limited number of homes for sale, volatile markets, coupled with recession fears and the concern pricing is at a cycle peak, have slowed the pace of sales,” he said. “Still, with many corporations continuing to move to the region and its tax-friendly environment, we expect pricing to remain relatively stable in the year ahead.”
Via Mansion Global