Back to School Bump

August is traditionally a time for lazing around, during the hottest part of the year.  September is another story.  Once kids and teachers go back to school, and the weather changes, people start doing what they put off while the weather was warm.  One activity that reactivates is house hunting.  Regular schedules lead to more predictable weekends, and that leads to open houses.  Buyers often want to conclude sales during the calendar year, for tax reasons or just because the end of the year makes a good deadline for getting it done.

This is especially true in our region, where universities are so dominant, with long summer breaks when many leave town.  In addition, we have great private schools in the region, meaning that families can move without changing schools.  Sellers are also more motivated, and there are some great transactions for buyers willing to move quickly, and close before heating season starts.

If you have hopes of beginning 2020 in a new home, this is the time to get serious, as a seller or as a buyer.  Activity will see a bump beginning next week, and a shorter season much like the spring market will commence. Don't delay!

Current Absorption Rates (Single-Family Residential Homes)

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 Branford you can say “If market conditions do not change and if no new listings come on the market it will take 4.9 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.”



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 Cheshire you can say, “If market conditions do not change and if no new listings come on the market it will take 6.4 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.”



New Mortgage Regulations Put Off Until October

Perhaps in a rare admission that what they are about to do will cause havoc, the Federal government has announced that the new proposed regulations affecting real estate closings will be postponed from August til October.  As far as we can tell,  most closings will be harder to schedule and more likely to be delayed, since any change at all to the documents will require a three-day waiting period, each time something is altered.  This means, in all practicality, that there will be no back-to-back closings, where people sell one house and buy another.  That means no moving from the old home to the new in many cases--a major glitch for lots of families. 


What does the delay mean for you?  You have two more months to get into the pipeline for a mortgage under the old rules.  So hurry up!

Why National Forecasts Don't Always Help Local Sellers and Buyers

It can be very difficult to tell what the market for your own property or potential property might be, if you are reading national news about real estate and the economy.  When you turn to the local news, it can be jarring, to say the least.  Even within a market area, one part or one town can be outperforming or underperforming the others.  What can I tell you?  It confuses us also.

For the past 25 years, the Connecticut market has not matched the national market more often than not.  However, there are two Connecticut markets--all of Connecticut, which includes Fairfield County, which is heavily influenced by metro NYC; and the "real" Connecticut, which is the rest of the state.  Of the top 100 metro markets in the country, only 4 have declined in prices in the past 12 months, and two are here:  Hartford and New Haven.  You may read statistics that don't mirror what you are seeing only in your area, because Fairfield prices did not decline, and this year's Wall Street performance meant that serious money was available to throw at real estate in that region.  The state as a whole was 50th out of 50 states and the District of Columbia in price appreciation (we beat Mississippi) for the prior year, but the entire state was positive for price growth, albeit slightly.

Although mortgage rates, which have a big influence on prices, are largely national, energy prices vary, because of tax rates, and tax rates vary a lot. In addition, we have tax policies here (especially our estate tax and our highly inclusive income tax) which put us at a disadvantage to other states, when people are choosing.  Property taxes directly affect real estate prices, and we are more dependent upon them than are some other states.

 Another factor is our legal system, requiring court involvement in foreclosures.  Connecticut is not alone in being like this, but the states that have lengthy legal foreclosure processes are lagging behind in price appreciation, because those properties have not yet all turned over, and that is holding prices down.  There can be real differences between average prices counting foreclosed properties and short sales, and those which only measure MLS sales, for instance.

Is there an upside, you might ask?  In addition to the recent news that Greater New Haven will be the first part of the state to regain all the jobs lost in the recessions (another factor in the state's lagging performance), there is the obvious:  Since we  haven't seen the rise in prices yet, or the end of short sales and foreclosures, the big bump up that is likely to come is still ahead of us.  That means that, if you are buying now, you will be buying somewhere else at likely a higher price point than you will be buying in Connecticut.  Unless you believe that there will be permanent stagnation in prices here, and we know that all markets in the past have been cyclical, the next part of our cycle is statistically likely to outperform the areas that have already recovered fully.

You are not alone if all of this seems confusing, or complicated. The advice for sellers is to be cautious, and not be greedy about asking price. And, at the end of the day, if you live here, and you like it here, lifestyle would suggest that you should buy.  And soon, before rates rise.

Are you ready for 2015?

I know it sounds ridiculous, in the waning days of summer (hot and humid, to boot!), to be talking about the beginning of a new year.  But we in the real estate industry know the time cycles of our profession, and we know that someone who wants to be in a new home by the end of the year needs to get on the stick right now. 

Labor Day is the traditional start of the fall market--that brief two months when people rush to do what they didn't do in the spring--and we're ready for it.  Buyers suddenly wake up from the dog days of summer to rush into action, and sellers get serious about getting to closing on properties that they want to sell, especially if there are tax reasons for finishing the transaction this year.

Although these two groups can be a very motivated lot, there still needs to be some urgency in the process, since financing issues seem to take an ever-increasing amount of time, and the very end of the year can be tricky for inspections, closings, and other things.  While the first snow may seem very far away, it's just around the corner, and will throw a wrench into dates seemingly fixed in stone. 

So don't be left out in the cold--act now to achieve your 2014 goals!

Referrals Everywhere

It's been a busy few weeks for people calling me to ask for help in selling real estate here and elsewhere. After all the talk about the Internet as a way to sell real estate oneself, and all the fears about the demise of our profession, it's heartening to see how many buyers and sellers out there know that they can use our help profitably. Even though all the studies show that the vast majority of transactions are done through real estate companies, there is a perception that that time has passed. It is true that the information buyers need can now be found online in many cases. What isn't true is that buyers don't need assistance in interpreting the data, in learning about a region, and in structuring an offer. And sellers are much the same. I've heard some talk about using Zillow to price a property, although it is very unreliable in certain areas. I've also known people who do their own marketing and even open houses. Much more often, though, I've heard people say how much they value having an intermediary in the negotiations, especially when they know the other party. What would seem to be an advantage--familiarity with the other side--makes most sellers and buyers very uncomfortable. The addition of professionals is highly comforting. At a time when saving money is chic, the use of real estate agents and agencies is a clear sign of their value. And you get what you pay for. As they say about lawyers ("he who represents himself has a fool for a client"), so goes the saying for sellers and buyers.

Optimism

Well, I felt a little ashamed as I read the front page article in today's New Haven Register Business section. I guess I'm more pessimistic than others about the Obama recovery plan, and let's hope I'm wrong. After all, the whole point is to make people WANT to buy; it doesn't even really matter whether or not the incentives even make sense. I also read in the New York Times today that most who listened to the President's speech last Tuesday were left with a positive impression of the government's current handling of the economy. That's good news.

I suppose I should be forgiven for being more down than most, since real estate would be at the bottom of anyone's list of thriving industries right now. However, in the end it doesn't matter what I think--it only matters whether others are spurred to action by the program. I have been saying that I think first-time homebuyers are the ones who least need incentives, since they have no history with which to compare today's conditions. In addition, they don't have houses to sell before they can buy. One could look at it another way, though: If those at the beginning of the chain go out and buy property, everyone further along can then sell and buy another property themselves.

As many have said, much of the current crisis comes from a lack of consumer confidence, which is now at its lowest rate since measurement began in 1967. Every recovery scenario depends upon getting that number up, since economics turns out to be more related to what people think in many cases than to what the graphs say. Most of us realize that a great deal hinges on jobs, since almost no one will buy what they don't need if they think they might not have a job in the near future. Convincing people that jobs will be preserved and created is key, and, unfortunately, can't be done in one location or in one sector of the economy.

The next few weeks, which take us into the traditional spring buying and selling season, will be critical for any hope of a real estate recovery this year. I'm keeping my fingers crossed, but you shouldn't bother doing that--just go out and buy some property!