Now that the dust has settled, it's a good time to step back and review Louisville's real estate market over the past year. It's no secret that the Federal Reserve's interest rate hikes are cooling the markets nationally and Louisville is no exception with the overall market slowing by 30% in the 4th quarter. Of course, much of this year-over-year "slowing" can be attributed to the base effect of comparing activity against the full pandemic frenzy of 2021 so zooming out for additional context can be helpful. While alarming on its face, this seasonal decrease in sales activity is reminiscent of a normal market (i.e. pre-COVID) and should not be cause for panic as the fundamentals of the Louisville market remain healthy with limited inventory levels continuing to support pricing as the market resets to the new (or rather old!) normal. With the rate of price growth continuing to trend downward each quarter we expect pricing to remain relatively flat in the coming quarters absent a pivot in the Fed's interest rate policy and transaction counts to be primarily driven by inventory levels of homes for sale across price segments.
The Overall Louisville Market
As we anticipated in last year's report, the low inventory constrained sales activity causing the number of sales to drop by 13.4% during the year to 17,203, the lowest level since 2015! With only 1.3 months of homes available for sale, buyers were forced to compete for listings driving the median sale price per square foot up 9.3%, to a record $171.81. Unfortunately, the price increases were not large enough to offset the lower number of transactions, resulting in a 6.2% decrease in total market value to $5.1 billion. For context, this lower amount still remains 22% higher than the total Louisville market value of $4.2 billion reported in 2019 before the pandemic.
High-End Louisville Market
Lower inventory levels have finally caught up with Louisville's high-end market (homes $500,000 and above) with this segment posting its first YOY decline in transactions since the pandemic began with the number of sales dipping by 14.2% in the 4th quarter (for reference, the overall market started posting consistent declines in Q2 of 2021 as inventory dried up). This late-year decline was more than offset by the strong activity earlier in the year so the number of transactions still increased by 11.3% for the full year, but the momentum appears to be shifting. With only 2.3 months of homes for sale, the strong buyer demand continued to push prices higher with the median sold price per square foot increasing by 7% during the year. There were some interesting contrasts among the submarkets tracked, but North Oldham was a standout. Remote work opportunities, award-winning public schools, and plentiful inventory were a winning combination driving a 38% annual increase in sales and an incredible 18.4% price appreciation, the highest of any submarket we track. As always, gains were not evenly distributed so make sure and check out the full 2022 Louisville Market Report to see how your neighborhood did.
As noted in last year's report, "If you have inventory, they will come" remains true for Louisville's highest-end real estate as this market segment continues to benefit from the highest inventory levels with 4.6 months of homes currently available which allowed it to sustain the incredible pace set in 2021. We ended the year with 189 seven-figure properties changing hands, a 2.7% YOY increase in the number of sales. Gains in pricing were respectable with the median sale price per square foot increasing by 6%, just slightly less than the 7% increase for the $500k+ market noted above, but less than half of the rapid price appreciation we noted in our 2021 market report. While inventory remains the most plentiful in this price segment, the bar has been set very high with the past 2 years' performance so we anticipate the economic headwinds will result in an annual decline for this segment in the new year.
As market conditions continue to change rapidly, proper pricing, marketing, and execution are more critical than ever for sellers as mismanaging the early phase of a listing's launch invariably results in extended days on market and lowball offers as buyers conditioned by the recent market frenzy sense opportunity for any listings that linger. Thinking of selling and curious what all this means? Contact us to find out how the market conditions impact your home and what it means for your next home purchase.