December 2022 Boca Raton Area Luxury Market Report from Jean-Luc Andriot and The Institute for Luxury Home Marketing

As I am a member of The Institute for Luxury Marketing, I thought I would share with you their December 2022 report for Boca Raton - Delray Beach.

It is your guide to a general analysis on the trends and comparative data on the top-residential markets in the Boca Raton - Delray Beach area.

Statistics are separated between single family homes and condominiums / townhomes in Boca Raton - Delray Beach.

At the national level:

Taking the Long View

Markets Continue to Cool

The most notable trends in the current market are the continued decline in the volume of sales and inventory levels as well as the number of new listings entering the market. To some degree, this is not unexpected as we head towards the quieter real estate months of winter, but these numbers are still reflective of a cooling market.

Of equal notability is the large disparity between the median list price of properties still on the market compared to the median sold price for recent sales. This is true in both the single-family and attached property markets as the disconnect between seller and buyer expectations continues.

While this disconnect is hindering sales in the market for homes that have been on the market for a long time without a price reduction, for homes price correctly there seems to be little downward pressure, especially as the average days on market remains in the 20s, rather than in the 50-60s typically seen in pre-pandemic times.

More of a Lull Than a Crash

Despite the decline in the number of transactions over the last few months, there are no critical signs of distress in the luxury market. Low inventory levels are containing the ability for buyers to low-ball, home values continue to remain fairly stable, and many homeowners still retain their low interest rates, they so are not yet feeling the strain of additional mortgage costs.

Purchases during the pandemic were made to fulfill the need for a refuge and space and although these might not be the top priority in the current market, homes were mostly bought with longterm ownership in mind. While priorities may have shifted, the ownership mindset has not. The affluent are content to look beyond the short-term turbulence and focus on the future opportunity, whether that is one or even ten years away – hence the reason we see such a low percentage of “highly motivated to luxury sellers” in today’s market.

Although we have seen prices fall modestly during the last four to five months, prices remain at near record levels across North America, and it is unlikely that a significant decline in home prices will happen unless there is a drastic change either in the economy, through recession, or a huge increase of new inventory.

Revaluating Expectations

All markets tend to be cyclical, so it was not unexpected to see the return of more moderate conditions earlier this year. The major difference was how swiftly this change occurred, as the impact of a weakening economy took its toll on the luxury market.

Buyers and sellers must now simply start to reevaluate their expectations in this cooling market. The rush is over, as is the likelihood of fast investment returns and unfettered selling and buying of luxury homes. The cost of borrowing money will likely remain at higher rates for some time, so homes will need to be purchased with a long-term view in mind.

That being said, the last few years have left their legacy for the luxury market. While it might only  represent a small percentage of the overall real estate market, luxury homeownership’s influence is growing. Not only has the purchase of homes valued over $1 million (a figure considered by the National Association of Realtors to be a benchmark for luxury) tripled from 2.6% to 6.5% since 2018, but demand for multiple luxury properties has soared over the last two years.

This phenomenal increase has been driven by a growing affluent demographic who consider owning a luxury property a necessity in their asset portfolio. All indications are that this trend is here to stay, albeit that demand is set to return to a more sustainable level.

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