It's always dangerous to postulate about why certain market conditions exist, but I think I'll take a crack at it, since it's been going on for some months now. To begin with, our market has been lagging behind nearly every other market in the country, and that's been happening for years. At some point, we all knew that Connecticut would get lifted, at least to some extent, by the rising tide that's been lifting other boats, so to speak.
We also know from history that activity ramps up when interest rates rise. Although this seems counter-intuitive, it occurs because people don't believe that rates will ever rise until they start doing so. It's probably really more like a hope that they will continue to go down, than the real sense that buyers are ignoring the bottom of the curve. Plus, they think, and they are correct, that 4% on the way up is the same as 4% on the way down, so it won't matter if they wait. We in the industry put this more in the category of bottom-fishing: Everyone is hoping to be the one who got a mortgage for the lowest interest rate possible.
Experts have been talking about the lack of supply for a few years now, which is what has caused spikes in prices and decreases in days on the market in other places. Part of that is because of the lack of new supply, and that was more acute in Connecticut, because of our poorer economy. Now it's true here as well. The years of a bad market have caused sellers to hesitate before selling, and buyers now face a dearth of choices in many areas and price ranges. This is particularly true at the lowest price points, where first-time homebuyers are competing with each other for the homes that have come on the market. Many sellers also wait for spring before listing, and this year's snow (even today's snow!) made that more likely. Buyers in our region tend to want to buy sooner than sellers want to sell.
Employment is also tightening, which is driving up wages. That means that more people can afford to buy a home, and that those who already own homes can afford to trade up more easily. Rising wages also increase the consumer confidence index, which I have long found to be a very important predictor of real estate activity. In turn, that makes buyers think that they can stretch further to purchase, because they believe that their wages will continue to rise. They may be right about that, and there are many reasons for that to be so--one is that there are fewer undocumented aliens and immigrants filling those jobs out there. Another is that the baby boomers are hitting retirement age.
The new tax rules are so complicated for many taxpayers that, in a funny way, they may be helping also. Since it's hard to know what effect the new provisions will have on any given individual or family, some are choosing to buy now, especially since this year's taxes were not affected.
Other reasons may also exist, but the ones above seem to be driving the market, despite the old saws of bad weather and wrong season, which have not held true this winter in our area. Let's hope that the standard spring market kicks in anyway, and that our good fortune will continue throughout 2018!
