Summer is Hot for Real Estate Activity, Too

Normally, most of the country sees a slowdown in real estate activity in July and August.  Although the days are longer, and some people have more time, vacations and outdoor excursions seem to take up the slack.  This year, though, we are seeing otherwise.

Buyers found ways to cope with the spring market, and managed to bid on, and buy, whatever was available.  Lack of inventory, both from COVID fears and for other reasons, put a damper on transactions in most places.  We, and others, sold almost everything we could list, but there still wasn't enough supply to go around. That means that there are plenty of potential buyers out there, even in the heat of summer.  Sellers should not wait until Labor Day to list.  If we could have this kind of group of buyers every year, we would all prefer to spread the season out, and avoid the crush of May.  This year, with school openings up in the air, and not the same everywhere, there isn't the same need to try to move during summer vacation.  In fact, there may be sufficient incentive to choose certain towns now, specifically for their school systems and operating procedures.  

I just went blueberry picking for the first time this summer.  While I do love blueberries, the experience has changed from open picking to a few specific bushes per picker, out of necessity.  It does seem, however, that maybe looking at houses would be as pleasurable as my outing was, and might lead you to the home of your dreams. So maybe that staycation can be put to good use!  Remember, summer is now for sales, and there's no time like the present to begin selling or buying. 

Renting in Connecticut? Think again.

A new study has concluded that Connecticut is one of the most expensive states in which to rent, making it a place where people should definitely consider buying instead.  Our vacancy rate for rentals, particularly in New Haven, is one of the lowest in the country, and that, of course, pushes monthly rental costs up. Because our housing prices in general are 20% below where they were in 2006, there are some relative bargains still to be had on the buying front.  The combination of a rapid rise in monthly rents, combined with a still-depressed purchase market, means that renters should think before deciding not to buy.  And, if you combine those facts with current mortgage rates, they should think twice!


Although there are many articles that warn against buying unless you are going to stay put for several years, the combination of factors above would argue that that length of time might be shorter.  If you happen to get really lucky, appreciation on the home price could pay all of the moving costs and more.  There can definitely be valid reasons to rent instead, but everyone now should be doing the math before making up their minds.

Do the Math

There is a famous aphorism that says that there is no certainty in life, except for death and taxes.  Taxes turn  out to be a big factor in the purchase of property, although we don't really see the certainty involved.  Yes, taxes go up over time, but do they go up at the same rate in every city and town?  Are they phased in the same way everywhere?  Are the same services included?  Are the school systems comparable?

People buying property care a lot about what the taxes are, since what they are really basing affordability on is the amount of the monthly payment of mortgage, interest, insurance, and taxes.  While they may know the first two calculations, if they get a fixed-rate mortgage, they tend to overvalue the current information available, and overrate the problem of uncertainty going forward, about all kinds of things.  For instance, if you take money out of your savings to purchase a home, and those savings were in the stock market, what are you giving up as an alternative return?  You don't know what the stock market will do over the long haul, although you do know that, like real estate, it's generally cyclical.  If you buy rather than rent, will the price of your home increase over the period that you own it? Again, you don't know, although that is usually true, especially if you hold it for a long enough time, and if you buy when prices are not at a peak.  Will your housing needs remain stable for the foreseeable future?  "Foreseeable" would seem to imply that you know what they will be, but life has a way of throwing curve balls, be it a new job, an illness or injury, another child or children, an aging relative, or any number of other variables.  You can't know up front what the market will be like when you sell.  If you wait to buy, will prices and mortgage rates hold steady?  Although we can't know, it's not likely, especially if you wait for a long time. How quickly will rents rise, especially in New Haven, the country's tightest rental market?

I could go on and on, but I've made my point.  So, what's a person to do?  One of the best things I learned in business school was how to make a decision tree.  Since this column does not include a tutorial in econometrics, I'll simplify.  Make a list of the uncertainties, then put them each in either the "Buy Now" column, or the "Buy Later" column, depending upon which way they are each likely to lead you.  Try to quantify the general risk of each one in monetary terms (e.g., interest rates go up 1% vs. taxes go up 8%), and you will get an idea of what the math tells you.  You should, of course, factor in your own particular risk aversion factor (that is, how much uncertainty will bother you), but the numbers will tell you something.  If you find yourself arguing with the numbers, you will be telling yourself something that way, because you will be revealing your gut instinct.  Whatever you decide, it's time to go with that, and act.