Sunday, April 28, 2019

What Happened to the Middle of the Market?

We just had our Pearce Annual Meeting last week, and we talked about the current state of the market in Connecticut.  Greater New Haven, and especially Middlesex County, are better off than the other counties, since they are both up.  Fairfield is down the most, which is related probably still to the GE move, and maybe to SALT no longer being deductible.  Even in South Central Connecticut, though, we see pockets of hot markets and pockets of slow ones.

First-time homebuyers are clearly out in force, and multiple offers are common below $300,000.  Even things that sold last year can fetch more today, because the supply hasn't increased; in fact, listings are down.  That's what drove the increases across the country in the past few years--lack of supply.  We're seeing it now.

The upper end, especially the areas near Yale or along the coastline, is hopping.  We don't have enough listings to show people, even as we approach the busiest time of the spring.  The waterfront sales, particularly between $1 and $2 million, seem to pop as soon as new properties go onto the MLS.  It could be that it's been seven years since the last major hurricane, or it could just be that, at these prices, waterfront seems very desirable. The volatility in the stock market could also be causing people to rethink their asset allocations, and buy second homes with some of the money that they would otherwise put into stocks, especially since they got back what they lost in the fourth quarter--they may be reaping the gains and reinvesting in real estate.

Between $500K and $1 million, however, we have seen many listings languish, even those that we feel are great properties and priced well.  It's also where there is, therefore and obviously, the most supply.  Part of that is due to baby boomers trying to downsize, with taste and property conditions that make millennials balk. The latter group wants perfect homes, decorated and finished to the latest in trends.  Perhaps the speed with which the upper and lower markets are moving will push some buyers into this price range, and that would be good news for everybody.  In the meantime, it's an anomaly, making market conditions hard to describe in terms that are too generic.