Inventory is the Key to the Housing Market

Everywhere in the country, there is talk of a red hot housing market, for many reasons.  Low interest rates, pent up spending and demand, and pandemic desire for more space.  Supply and demand, therefore, have gotten way out of  whack.  Today, we circulated an article featuring 76 full-price offers on one home.  

That's true in many regions, but what is happening in Connecticut?  Even that needs to be broken down by county.  Fairfield County is booming, and is absorbing many of the 24,000 people that have moved to Connecticut in the past year.  New Haven County is seeing some of that movement.  West Hartford, one of the most popular towns in Hartford County, is actually down 8% in the first quarter.  Of course, this can all be explained by the old adage:  Location, location, location.  The closer to NYC, the higher the price, and, now, the hotter the market. 

Many families moving here are counting on working from home for at least some of the time going forward, but they want to be close enough to commute when necessary. For now, many are avoiding public transportation, but that number will diminish as vaccinations increase.  Prices are rising rapidly in many towns near the NY border.

Despite all the reasons for the increase in prices listed at the beginning of this post, the real driver is inventory.  Many sellers were burned in earlier attempts to sell, or haven't found a place that they can go.  They are tempted by the demand by buyers, knowing that they may get more than they expected.  However, they also know that when you sell high, you usually turn around and purchase high as well.  

That shouldn't matter.  People should make decisions based on lifestyle, personal preferences, and proximity to friends and family, and let the investment side of the equation take a back seat.  Since selling and buying in the same market is a wash as far as prices go, it should come down to individual choice.  And, if you want to choose a new home, this is certainly the time to do so.  The rapidity of the selling cycle may make life intense for a while, but the uncertainty is short lived, and the benefits of moving last as long as you are in the new property.

So the market comes down to the sellers--will they provide a spring season supply?  We very much hope so.  Sales depend on it.  

A New Problem

I've written before about how many sales are now for cash.  It's ironic, because mortgage rates are still really  low; however, it's hard enough for most people to get a mortgage, both because of credit issues and because of the paperwork requirements and timing, that many are choosing to go the cash route.  Some of those people may go back and refinance later, but they are showing up at the closing table with cash.  56% of our sales in the first four months of the year were for cash!  And that's true around the country, although in some places,  it's due to multiple bids on insufficient inventory, leading to cash offers as a tactic to secure the property by nervous buyers.

 We never thought we'd say this, but the change in closing dates has brought challenges that we couldn't imagine.  One of those is that personal checks, given by buyers as deposits on sales, don't always have time to clear our escrow accounts before the closings.  The big rush to close has been exacerbated, both for weather reasons (a slow start to the selling season and the need to close during the summer), and because many more people are choosing to cut out contingencies as a bargaining chip, so they have fewer things to do before they close.  Also, there are lots of investors, who are buying at what they perceive to be bargain prices, and who may be planning to renovate anyway.

That's what we love about real estate--there's a new set of challenges in every kind of market!