Predictions For 2023 Sales Market

inonada

Well-known member
Sales pace will be low, at or below Q4 2022 pace.

Supply for sales will increase, driven primarily by properties w/o a mortgage, as rates have increased the attractiveness of cash over a stagnant sales market.

Supply for rent will increase, driven by economic headwinds and would-be sellers with mortgages reluctant to lose large portions of their downpayment and low-rate mortgages.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
I def agree with point 1. Regarding point 2/3, logical for sure and makes sense, but I wonder if supply will be tight on both sides of the ball for the year ahead as price action is lower than peak levels...will sellers not want to list if they cant get their bid?

Or, will a downturn swell inventory as demand activity stays low?

I do worry about a 2nd wave down in credit/equity markets which would put us in another cycle down, all eyes on the Fed and that terminal and post terminal curve..markets expecting few cuts by end of year, hmm, not sure about that
 

David Goldsmith

All Powerful Moderator
Staff member
There's been tons of stuff taken off market for the past several years. Between interest rates going up and rental rates apparently going down this could squeeze owners into listing. Even if they bought all cash it's going to be much harder to keep tons of equity earning nothing when now you can get four plus percent on a CD. Because now you lose just by holding in opportunity costs.
 

inonada

Well-known member
What David said. A lot of money went into assets earning little yield because of a belief in TINA. After 15 years of ZIRP, the idea of 4% risk-free rates is starting to sink in. Sure, you can sit out the market for 5 years to eventually get your price. But you’ll lose the opportunity for 20% interest, risk-free, in the meantime. That calculation used to be 0%.
 

inonada

Well-known member
Here is something that showed up for rent today that is emblematic of the situation:


It has been for sale on-and-off, first in 2019-2020 and then again since mid-2022:


Original ask of $16M seemed awfully aspirational compared to 2013 purchase at $10M. But they were willing to wait for the right buyer. Now, price is down to $12M. After negotiations and transaction costs, they’re hoping to get just the $10M back. Presumably, they haven’t had much traction on that — hence the rental listing.

Is $55K/mo gonna happen? I doubt it. But where did that number come from? After a decade of I/O payments at 2% on a $6.5M loan ($11K/mo) plus $13K/mo in CC + taxes, the loan just reset to ~7%. It looks like it’ll be staying there for years, at $38K/mo in interest. So $51K monthly nut now…

The choices don’t look great:

1. Hope someone bids on the $12M ask, so you get your $3.5M back and break even. Never mind the 30% inflation increase during the interim.

2. Hope someone rents it, paying double the market rate, allowing you to sit it out without bleeding

3. Spend $51K/mo while it sits on the market, for who knows how long. That’s $600K/yr.

4. Cut to market rent, reducing bleed to $300K/yr, for a few years hoping the market turns.

5. Cut your losses by reducing ask to a market-clearing price, losing half your downpayment.

6. Throw cash at it to reduce interest. Cash that could be earning 5% risk-free elsewhere.
 
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