Tuesday, May 22, 2018

Academic Calendars and the Spring Real Estate Market

When I went to college, back in the dark ages, my first day of classes was on September 25th, and my graduation was on June 17th.  Things have certainly changed since then!  Most schools now gear up in late August, finish classes at the end of April, and hold commencement exercises in May.  Faculty members, who stop teaching in April, increasingly seem to travel in May, when the weather is nice, but the crowds are missing.

Our New Haven office in particular, which does more than half of its business with Yale affiliates, but all of our offices to some extent, run on an academic calendar, especially given that there are six colleges and universities in the immediate area.  We start to get relocation clients early in the year, often in January or February, after academic appointments start to go out.  Those people start looking right away, and we almost never have enough to show them, since sellers (and other real estate companies) seem to think that May is the time to list.  Actually, our biggest month for writing contracts in New Haven is March!  Once May rolls around, we find that things slow down some, and, after graduation, slow further.  This is less true on the Shoreline, where spring and summer still bring more buyers, but, even there, we see inventory shortages in the early spring.  In places where investment property, or property affected by taxes, the end of the year is also strong.

We now routinely tell sellers, especially in the City of New Haven, to get their homes ready to show by February.  That means, of course, that outdoor work needs to be done the summer and fall before they are ready to sell, since December and January are not ideal for that type of work, if it is even possible then.  This year, we took lots of listings earlier than in prior years, and most of them have sold by now, and many sold very quickly.  We are ready for a new round of listings now!

It obviously makes sense for sellers to be ready when buyers are beginning to look, especially if a house has features that might not stand up as well against a lot of other choices.  Therefore, consider this a clarion call to get your home buffed, fluffed, and ready to go, either when universities come back in the late summer, or next winter, when the new hires get made.  Why not take advantage of the cycle, even if it's not the same as what you may be used to from other places you've lived?

Friday, May 11, 2018

Report from Denver

I just returned from a meeting of similar companies from around the country, held this time in Denver.  We always poll the group about market trends, and there was a great deal of commonality this year. Inventory, or the lack thereof, is the driver in most of the United States.  Even Connecticut is short on supply in the lower price ranges, and in the healthy range for all but the million plus category.  That higher supply in more expensive homes is also true in most areas around the country, but the real story is that starter homes and homes under about $500,000 have marketing times that are measured in days in most communities.  This is driving up prices, which hasn't happened here as often yet, although we are seeing it with well-maintained and desirable homes.  Mortgage rates are headed up as well, so time matters for many lookers.

Another big trend is in marketing.  With the exception of certain kinds of direct mail, mostly postcards about homes just listed or recently sold, advertising is going digital at a rapid rate.  We in Greater New Haven spent more on newspaper ads than almost anyone else, and very few did print advertising at all anymore.  Digital ads (SEM) or organic search tools (SEO) dominate the field, along with costs of website improvements and video production. Lead generation is front and center, often focused simply on how to track leads. Some are even spending money to appear in the answers given by Alexa!

Some things haven't changed much.  Personal relationships still account for most agent transactions, and, although people search for an agent on line (and pay a lot of attention to client testimonials), they are often starting with a recommendation from someone they know.  Good agents still generate a lot of repeat business, and good agents are doing more and more of the total transactions.  Real estate is an expensive business to be in for agents and for brokers (lately, even agents might feel sorry for the pressure put on broker returns!), and more is sold by a few top agents than ever before.  As the market improves, more people are going into the business again, and they are more likely to be younger, but the industry as a whole skews old and non-diverse.

Companies are also consolidating, so that megafirms are more and more a dominant force.  Teams have mostly taken the place of small firms,  and are run as companies within companies.  Legal and ethical compliance are big reasons for this tightening of the market, along with cost drivers that favor economies of scale.  One-half of one percent of brokers did a third of all the business in the last year reported.

Buyers haven't varied in their desires as much as most thought they would, given the demographic profiles we see.  Gen Xers and Millennials nationally still favor traditional homes with outdoor space, and in good school districts.  That's good news for sellers, although the younger buyers are much more concerned with maintenance and walkability scores.  Since there hasn't been enough new housing built in many regions, buyers will eventually have to buy what sellers have to sell, at least in the short run.

What are the takeaways here?  Almost everyone thinks that mortgage rates will rise, and prices will rise as well, making now the time to buy.  This is especially true at the high end of the market.  Buyers will still want personal assistance in navigating home ownership, and sellers want that touch as well. Therefore, we will be reaching out to them in new and different ways, but with the same message:  We're here to help.

Thursday, May 3, 2018

Differing Reports on CT Real Estate

We get periodic updates from various sources concerning the state of the real estate market in Connecticut.  The latest two that I've read say exactly opposite things.  One said that units are way up, but prices are down.  The other said that prices are way up, but that units are down.

Could both those findings be true?  It doesn't seem likely, but it does show that the market in our area is in transition, and that it isn't all one condition everywhere.  What it most likely means is that there is a lot of interest from first-time homebuyers on the lower end of the price range, so that those prices may be rising.  Once you get to a certain price point, which varies by region, the results show that there are caps on neighborhoods, meaning that homes don't sell above a given price, regardless of quality or size.  Therefore, we can still see downward trends, particularly in the upper brackets.

There are also discrepancies in similar reports, depending on exactly what they measure, and over what time periods.  For us at Pearce, this winter was remarkably good, despite the weather.  We see a lot of "Yale effect", so that our offices are busy when Yale puts out its offers for the following year.  A more traditional pattern of spring-summer sales exists in other locations.

 I guess the real point is that you can say anything at all, and find the statistics that will back you up!  We do know, however, that when the market is changing, it is probably going up.  Downturns tend to be more sudden, and often involve dead stops.  So, if you want to bet one way or the other, I'd say that the market is one in which buyers should move, and sellers should stay flexible.

Wednesday, May 2, 2018

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Old Saybrook you can say “If market conditions do not change and if no new listings come on the market it will take 5.7 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5 - 7 months.”

Thursday, April 26, 2018

A Different Market

All real estate markets are variable, as are all cycles.  What applies to one property may not apply to another.  Yet there are usually certain truisms that stand out at any given time.  So what are we seeing now?

First of all, inventories have tightened in almost every segment.  There just isn't as much on the market.  Good properties can get snapped up almost instantly, sometimes with multiple offers.  This is particularly true on the lower end of the price continuum.

Secondly, rates have been rising, meaning that time is of the essence.  If you are able to afford a home now, don't wait.  It will cost you more every month in the future, if rates go up further, and inflation is a real fear in this economy.  Even if you are downsizing, money is cheaper to borrow currently.

Thirdly, sellers (who tend to be older than buyers) value different things than do buyers (who tend to be younger).  There is often renegotiation that takes place after the inspections, not because the home is falling apart, but because the buyer intends to do work that the seller might not think is necessary, and which, indeed, may not be.  A seller shouldn't be surprised if a buyer is looking to change the floor pattern, bathrooms, security system, or appliances.  As a seller, you don't have to participate in those choices, unless you want to sell your home to that buyer.  There is an exception here--multiple offers reduce the cost of renegotiation, by changing the power dynamics.

Multiple offers still tend to come on properties that are very well priced, and also on those that are in move-in condition.  Prepping the house well for sale helps with that, as does making your offering price so attractive that more than one party will bid, often above asking.  Not only does that drive up the final sales price, but it cuts down on give backs, since buyers know they are competing.

If you are trading up to a larger and/or more expensive home, you may be better off than those trading down.  Not only is supply more plentiful, but carrying costs are a real concern for many people, and bigger homes can sell at discounts that smaller homes would not have to face.  This provides a real opportunity for those who are willing and able to purchase a large home, and those buyers can end up with a lot for their money.  In addition, they will start with more money, since the smaller home that they are selling is probably increasing faster than the larger one they are seeking to buy.  Every market has pockets of opportunity, and this is one--go over $1,000,000 for the best value.

Finally, don't expect this market to change rapidly.  Every other part of the country has already seen declining and tight inventory, and therefore rising prices.  If it is starting to happen here, remember that it is just starting.  And adjust your expectations--then make your move!