Reopening Connecticut Real Estate

We don't have to actually reopen Connecticut real estate.  Due to our protected status as an essential industry, we have been allowed to operate all along.  Although we have decided to reopen our offices slowly and carefully, with no walk-in clients for now, and limited office hours, we have kept selling throughout the pandemic period.  Our showings have lessened, there are no public open houses, and most of our activity is done remotely, but demand has been strong.

Especially in New Haven, where people who already had job offers for this summer and fall are looking, there is much more demand than supply.  Due in part to some of the neighborhoods and their open spaces and larger lots, density has not been the issue that it has been in larger cities.  Convenience and closeness are ruling the day, and we can sell whatever we can list in the parts of New Haven near Yale.  

The suburbs are also popular, especially with younger families, and buyers of second homes.  The latter group is driving up the average sales prices.  Again, we can sell what we can list.  It's hard to think about moving in the early stages of a lockdown, but people are figuring it out, and are ready to go when they can.  The mild winter also helped. Prices are strong, due to limited supply.

 Now that more restrictions are being lifted, we expect to see an added month (or two or three) added onto the spring market.  Closings can happen quickly, if everyone is motivated to do so. If you are one of the sellers who thought that no one would buy now, it's not too late to list!  

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.

Report from Nashville

It was almost surreal to be in Nashville this week.  After not having been there for the past nine years, it was hard to believe the growth and change.  82 people a day are moving to Nashville, and it seems as though everyone else in the country is visiting the Country Music Hall of Fame.  The streets downtown are as crowded at night as Times Square, and it's the country's #1 destination for bachelorette parties--who knew?

Corporations are moving to Nashville, and bringing plenty of employees with them.  Cranes and other signs of growth abound.  Prices for homes in the tonier neighborhoods are very high, and new hot spots are appearing.  Although they saw the same Great Recession as everywhere else, it certainly seems to be over!  Our friends at Zeitlin Realtors are looking to have a booming year, and were busy right through their traditionally slow season.  It wasn't springlike weather over the weekend, but the real estate market was.

Other companies also attending reported mixed growth in the first two months, but all are expecting a good year this year.  Rates are still low (but on the bubble of going up), and the main problem is a lack of inventory in many price ranges.  Fingers crossed!

Sometimes It's Good to Lag the Market

In many parts of the country, real estate has fully recovered from the Great Recession, has increased in price, and is levelling off.  Inventory is a problem, because demand in many areas has been greater than supply.

 Not so for Connecticut.  Our poor business climate and high taxes has caused us to underperform everywhere else.  That means that we have yet to see any price increases, and our inventory remains higher than in other places.  And what does that mean?  It means that buying here makes more sense than it does in almost anyplace else in the country, because we share the same low interest rates, without the appreciation that would make housing prices higher than they were a few years ago.  We are still recovering from the downturn, and our jobs did not return in the same categories nor at the same rate as in other states.  That puts us in a different phase of the housing cycle, and makes us expect that this year will be strong. 

Certainly the weather is helping!  It's over 60 degrees today, and it already feels like spring.  So what does spring mean to us?  It's time to buy!

Time to Move Forward?

I just read the report of a study saying that Americans now have the greatest gap between what they think their homes are worth, and what an independent appraisal shows.  You can see the problem here--how can we sell your property for what you want, if you think it's worth more than the experts do?  That doesn't mean that some buyer might not agree with you about value, but the general idea suggests that many homes wouldn't sell for what the owner would agree to take.  Recently, we had one homeowner who wouldn't accept an offer for the full listing price, because it didn't seem worth it to them to move for that amount. 


This brings me back to the old proposition that it doesn't matter whether you sell low or sell high, as long as you are buying in the same type of market.  Therefore, if you sell your current property for 10% less than you think you should get, if you are honest, you are probably buying your new property for the same differential.  At some point, you need to move on with your life, whether that means upsizing, downsizing, changing towns, or just changing.  It's better to do that when rates are (still) historically low, which will matter more in the end than the price you pay.  And it's better to live your life in the present, not the unpredictable future.

Lessons from Zillow Talk

  I just finished reading the new book Zillow Talk, written by its CEO and its Chief Economist.  It was full of the Freakonomics type of factoids that I love.  Many I already knew, as would most real estate agents, but others were new to me.  Also, Zillow uses all of its data to quantify things we know intuitively.  They also use statistics, of course, to try to prove things we don't necessarily think are true.  That's the beauty of statistics!

We had a lot of fun at a recent sales meeting with where to bet on getting the most appreciation on a home (near Starbucks), what neighborhoods gentrify quickly (gay ones), and what real estate agents sell properties fastest (women).  It was interesting to note that, statistically, newer agents perform just as well as older agents.  The question that the figures don't answer is why that is.  Speculation ranges from the fact that they are more eager and have more time to devote, to the likelihood that newer agents are younger, and more technologically advanced.  Good to know, though, if you want to use your nephew.

One of the most striking propositions was that there is a best time to list.  We know that, of course, and always thought it was right about now.  When Zillow analyzed the sales data from all over the country, however, they determined that the absolute best time to list your home is about 30 days after the bulk of spring listings comes onto the market.  As they put it, "between the time you fill out your NCAA bracket and the time that the winner at Augusta slips on the green jacket."  That's important news for all prospective sellers:  Get ready to list at the end of this month, for best results!

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 New Haven you can say “If market conditions do not change and if no new listings come on the market it will take 9.3 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.”