What’s Causing the Current Housing Market Uptick?

It seemed for some years that Connecticut, alone among almost all the states, would never see the benefits of a better residential real estate market.  While recovery is spotty, both in terms of price and number of units, there has definitely been a feeling of optimism all year.  Despite a bitter winter, sales began early and continued strong.  Despite talk of fiscal woes, and estate taxes especially, in Connecticut, people were looking.  And, despite the recent Federal tax act, with its threat of limiting property tax deductions for blue states, they are buying.

The strongest correlation between the housing market and the economy has always been, for us, the consumer confidence index.  When people feel bullish about the future, the real estate sector gets stronger.  Consumer confidence has jumped this year, and we can tell.  Even though many uncertainties exist for taxpayers, employers and employees, and all Americans, homeowners and would-be homeowners are apparently responding to a few clear points:  We can see upward pressure on wages, in part because unemployment is low; interest rates, although there has been some movement, remain very favorable, and mortgage availability has eased in some areas; and, perhaps most importantly, the stock market has created a great deal of new wealth, and many stockholders think that they should cash out, at least partially, while their gains are still high, and that money has to go somewhere.  Real estate, with its versatility of use (investment, vacation, or primary residence), its tangibility, its prominent place in the defining of the American dream, and its centrality in life passages and aspirations, fits the that bill for many.

Don’t think that real estate professionals are crying wolf when we urge fiscal prudence in State and local spending, or when we call for repeal of onerous provisions in Connecticut’s estate tax, because the tide could turn again, if consumers once again switch to pessimism about the future.  For now, though, it appears that buyers are planning to “seize the day” and diversify into property.  And that’s good news for sellers, and all of us.

Set A New Deadline

We are just coming off of what turned out to be a very busy December.  There were lots of changes, of course, with the new Federal tax bill, but it was--and still is--very unclear as to whether some things should have been done last year, or will be more advantageous to do in 2018,  Nowhere is that more true than in the real estate realm.

So, while uncertainty generally slows a process down, last month it sped up.  When I tried to think of why that would be, I realized that the end of a calendar year is a powerful and motivating deadline.  All sorts of people rush to finish projects and clear off their to-do lists before a year ends.  This year, despite all the potential changes, was no different, and even busier.

It made me conscious of the fact that the real estate market has been slowed down by people feeling that there was no pressure to make decisions.  Instead, they thought that properties would continue to be available, maybe even for less, into the foreseeable future.  Our job as agents was to try to create urgency.  That was often hard.

Therefore, our hope for next year is that all potential and current clients have a self-imposed deadline of some sort.  Whether their hope is to move, sell, or redeploy assets, everyone needs a finish line to cross.  Uncertainty can be problematic, but, if it lasts too long, more is lost by waiting than by simply moving on.

Greater New Haven, or Connecticut as a whole, residential, commercial, or investment, buy, sell, or rent--all are choices.  Just make one, and you will feel accomplished and relieved.

What Will 2018 Bring?

The latest Federal tax bill is only hours old, but pundits have been debating various proposals and exclusions for months.  People are frantically trying to figure out what it means for real estate, and what to do before the end of the year.  Unlike making a charitable contribution, it isn't quite so easy to implement changes in the next ten days.  However, we can see that some are trying.

It's unusual for us to still be getting offers and selling at this season, when thoughts often turn to shopping and partying.  This year, the phones are ringing more, and more transactions are coming together.  There aren't too many of those buyers and sellers who expect to close instantly, so it's a sign of something else, and we hope that it's a sign that people are moving on with their lives.

They hesitated during the presidential election, they hesitated during the first few months of Trump's term, but they finally seem to be inclined toward action.  Whether that's just life, or it's in reaction to the various proposals is hard to know, but I'd bet on the former.  I think we all know that mortgage rates are heading up, and that, in the end, that makes more difference to buyers than almost anything else in a purchase.

There hasn't been enough time for digestion of all of the parts of the tax bill, so we aren't even sure what 2018 will bring.  However, it is the time of the year for predictions, so here goes:  Connecticut is going to be hurt under the bill, and more people will leave the State in 2018.  Since not all of them will be able to sell their houses, they will reduce prices on big, expensive homes.  At some point, those properties will seem like a bargain to those who have lived elsewhere, or in times past, and they will start to move.  Some of them will be sold as second homes, since those mortgage deductions were preserved in the final bill.  Buying real estate will seem prudent compared to betting that the stock market will keep going up.

Millennials will be a major force.  They may need help, and we may see more sellers taking back money, as used to happen in different cycles of the market.  Big employers may turn to housing allowances, in order to attract employees from out of the area.

On the commercial side, we will see more and more 1031 tax-deferred exchanges, as those were preserved as well.  Investment real estate will be strong in Greater New Haven, where properties seem inexpensive compared to Boston and New York.  The State Legislature may actually listen to the new commission on fiscal health, and make changes that will cause business to expand or relocate here.

And our New Year's resolution here in Connecticut?  We will continue to do our best to sell our beautiful State and region, in little pieces.  Happy New Year to all!