Tips for Buying a Home in a Wild Market

OK, so you've decided to buy a house.  You aren't sure what you want exactly, but think you will know it when you see it.  There are some strong preferences, and a price range--actually two, one if you buy finished, and one if you need to do a lot of renovation.  Where should you start?

1--Develop a good relationship with a real estate agent.  Much of what comes onto the market now is spoken for ahead of time, if people know it is about to be listed.  You need to have a professional ear to the ground, as well as your own.

2--Get prequalified.  You may want a loan, even if you don't want a mortgage contingency.  Be sure you are right about how much you can borrow.

3--Sign up for an automated search.  This seems obvious, but don't wait until the weekend to look at everything at once.  Check your results every day.  

4--Be flexible about traveling to visit listings.  Try to be available on relatively short notice, so that you will look at homes before they are gone.  Even if the house isn't for you, you are developing a better sense of what you want.

5--Keep a running ranked list in your head.  Every time you see a house, slot it into your ranked list.  If it wouldn't make the top three, you may not even need to see it.

6--Don't get seduced by details.  Don't ignore number of bedrooms, neighborhood, or price, just because it has a nice hot tub.  Stick with what you need.

7--Have a mental budget for repairs.  Know what certain things will cost, at least in ballpark terms.  You don't want to have to put in contingencies, or run around getting quotes, if you could do that ahead of time.

8--Be prepared to act quickly.  In this market, speed counts.  Have your limits firmly in mind.

9--Don't play games. A couple of thousand here or there won't matter as much as the interest rate.  Offer what you would be sorry to hear that someone else bought it for, if you could have afforded that amount.

10--And, last but not least, keep a sense of humor and perspective.  Roll with the punches.  You will get a home eventually.  Sometimes you avoid a mistake, or gain new knowledge.  Try to have patience--you will probably need it!

One Year Later

Many publications are marking the one-year anniversary of the pandemic's start, so here's ours for Greater New Haven real estate.  Connecticut shut down earlier, and more fully, than most other states, so we immediately felt the effect.  While our offices were forced to close until March 23rd, many things were cancelled or postponed right away--except closings.  Attorneys and lenders pushed to get those sales through before the "lockdown", and they largely succeeded.

After that, our offices were largely shuttered until July.  Some agents worked, some did not.  Few had showings at the beginning, and there were no open houses.  New listings slowed to a trickle for those first few months.  Once the weather got warm, and the infection rate declined, things changed again.

We started to see a movement toward open space, yards, home offices and gyms, and the suburbs, beginning in the second quarter.  While most who moved out of NYC were choosing Fairfield County, we did see some sales, especially for vacation homes.  What we also saw were local buyers, moving into space that they could work and live in, for the foreseeable future.  

When the lack of listings combined with the demand for more space, the market heated up.  Prices began to rise, and multiple offers were legion.  Even relocating buyers from other parts of the country, whom we thought were gone, jumped into the action.  Soon, we were selling almost everything we could list.

The third and fourth quarter saw a continuation of that increased activity, with each month outperforming its corresponding month from the year before, and no typical seasonal slowdown.  We worked right through the holidays, and are seeing strong demand as we head into what would have been the typical start of the spring selling season.

Low interest rates, stimulus checks, and continued employment for many have added to the mix.  It's a great time to buy, and our prices are still lower than in many other regions, leaving room for appreciation, even at a higher sales price.  

When will the party end?  When we run out of product.  Just as a social gathering can wind down when the refreshments run out, we need more to sell, if we are going to continue to satisfy buyers.  Connecticut is still third on the list of outmigration states, so people are leaving.  Let's hope enough of them sell property here to keep up  with the demand caused by household formation, upsizing, and transferring in to our beautiful region.  

For Real Estate in Greater New Haven, March is the New June

 For the past couple of years at least, March has been the biggest sales month for our New Haven office.  Yale University, Yale New Haven Health System, and other educational institutions have the greatest impact on this result.  Academic and medical positions usually begin on July 1st, and the offers for those jobs typically start coming at the beginning of the calendar year.

Every year, we say that we need to try to get listings on the  market sooner.  And, every year, we end up with buyers who don't have enough property to view when they come to search.  Some of that is due to weather, which can cause deferral of repairs and improvements that many sellers make before putting a home on the market.  Some of it is the just the normal slippage of chores that don't get done when they should, or jobs that take longer than expected.

A big part, however, is that people think of May as the time to list, and June and July as the time for closings.  We need to be clear that the sales season is now year round, and that early spring is the best opportunity for a seller to list, in our opinion.  In the way that the first offer is usually the best offer, an early buyer is often the most motivated.  Spring brings lookers, and nice Sundays are great for open houses, but those who need to be settled by July want to get the move done early.

One of the best things about that for sellers is that there will be more product to choose from when they have sold their current homes, since many people still wait to list, for all the reasons stated.  This year is shaping up to be a great year for real estate, but that doesn't always mean that all buyers and sellers will be happy.  Time is of the essence, and product is needed to sell before buyers can buy. 

Let's get this show on the road!  List now, and reap the rewards.

Winter Wonderland Tips for Showing Houses in the Snow

Now that much of the country is blanketed with snow, we can enjoy the fact that we are used to snow in Connecticut.  We own shovels, snow blowers, and plows, plus ski pants, boots, and mittens.  With snow all over the country, it becomes easier to look at real estate in places with the equipment to do so.  Plus, it's a lot warmer here than in much of the Midwest, or even Texas!

Traditionally, buyers haven't really looked much at homes in the winter, and sellers haven't listed that early.  This year may be very different, since supply is short, and people should be willing to look whenever there is property to view.

If you want to list your home now--and we would highly encourage that--you should do a few things.  One is to make sure that your driveway is plowed, and your steps and walkways are completely clear.  If they are not, you need to use a lot of salt or sand, which will track into your clean home.  It's also a good idea to have a fire going, if you have a fireplace, the heat turned up in any case, and something that smells good in the oven or on the stove. 

Hygge is one of the hottest terms of the decade, and cozy is definitely a selling point.  Make your home look, feel, and smell cozy, and you will be well on your way to an offer.  Lean into what you cannot change--if you can't make your backyard look like a party setting in the snow, try a snowman, for added atmosphere.  If you don't have flowers blooming, consider wreathes of dried flowers.  Bird feeders might bring a spot of color, if you are lucky.

We know that you need all those heavy outdoor clothes, but find a place to store them for showings.  It's hard to declutter in snowy weather, but well worth doing.  And find a place for all those winter implements, so that buyers can dream of summer.  Maybe pool toys by the back door instead?

Millennials Should All Be Buying Houses Now

 Although the rate of homeownership for people 25 to 34 is lower than in previous generations, 1 in 3 millennials owned homes as of the end of 2018.  Many more of them are looking and buying today, in a market with interest rates that should make everyone look up and take notice.  Some rates are now as low as 2.5%, and we all know that what your interest rate is matters more than the price of the home, within reason.  Over the life of a mortgage, you will be saving tens of thousands of dollars by buying when rates are so low.

Even if the economy during a pandemic weren't enough to drive rates down, the presidential election would be.  Every four years, there is a downward spike before Election Day, which gives you six weeks or so to capitalize on that trend and buy.  As our agents know, I remind buyers every year at this time that it's the best time of the year to buy a house, and, every four years, it's slightly better.  My running friend Ray Fair, a Yale professor who predicts presidential elections, has a model that favors an incumbent with a low unemployment rate and a high growth rate.  Presidents instinctively know this, and do their best to improve re-election chances by boosting the economy wherever possible.  This year is no exception, and, if you are in the market to move, it's a great chance for you to do so.

Greater New Haven has also been featured as a region where renting is more expensive than owning, so there's another reason to become a homeowner.  Why pay rents that are higher than in some other places, due to the number of students on top of regular demand, when you could own for a lower monthly outlay?

Not convinced yet?  If you think you might be working from home in the foreseeable future, this is the time to make sure that you have a comfortable place to live and to work.  Demand is high, and supply is low, but our prices are still lower than many other metro areas, and have not really gone up in many years.  While they are rising now, you still can get into the market before you get priced out.

You don't have to be a millennial to buy, and to buy now, so the reasons above apply to all age groups.  While younger buyers are looking to leave cities, start families, and build equity, there are plenty of factors to cause everyone to start searching.  Happy hunting!

Autumn Won't Slow This Market Down

 As I have written before, the strength of the market during this pandemic has surprised us.  Once we all figured out how to handle transactions in a time of COVID, real estate began to outperform most other industries.  That doesn't mean that it's business as usual, though--in fact, we are predicting that the fall will be better than normal.  

Why would that be?  First of all, the market took a pause in what is traditionally the busiest time of year.  This spring was slow, very slow, for a few weeks, and that pent-up demand has been spreading itself out over the remaining months of the year.  It's a seller's market now, which means that demand exceeds supply.  That translates into showings and offers for everything that comes on for sale.  Theoretically, it's easier to spur listings than to convince people who don't want to buy to purchase.  Sellers want to sell for all different reasons at all different times of the year.  They have often waited until spring, because they thought there would be more buyers then.  This year, the buyers have stuck around, waiting for product, so sellers can choose to list now, and sell in the fall, and eager buyers should snap those homes up.

The second factor would be the desire to find a perfect "nest" for a possible winter lockdown.  Especially for those working from home, the need to have a good place to park oneself has spurred looking at new places.  Given the demands on the construction industry, and the disinclination among some to have workers inside their homes, buying what you want and selling what you don't seems simpler. More time to browse the internet has increased interest at most levels of the market. And the net is wider--New Yorkers are now competing for houses here, with outside space and commuting potential.

Perhaps the most important reason for the surge is the current cost of financing.  For those with good enough credit to borrow, there may never be a better time to buy.  Mortgages have occasionally even dipped below 3%.  When I compare that to my first mortgage, a specially CT-subsidized offering at 17 and 3/4 percent, I rush to urge my kids to go get one!  Since they are now renters, I need to add that pool of prospective buyers to the current group, because it's now cheaper to own in our area than to rent, proportionately.  

What are you waiting for?  Call your agent today, and sell or buy post haste!

The View from Here

As we head into Memorial Day weekend--the traditional start of summer (which this year has one extra week between now and Labor Day!)--we can all take a deep breath.  Connecticut, the last state in the country, along with Massachusetts, to reopen, is beginning to do so.  Many of us have enjoyed a meal outside in the sunshine, walked in a park or on a beach, or gone shopping.  Although we need to do so cautiously (and wear those masks!), we can begin to assess the damage of the pandemic.  And also to judge what may remain the same.

Real estate is just that--real.  People want it, they want to own it, and they will borrow to do so.  Now more than ever, many want to live in less dense places.  This is favoring small cities and suburbs.  Surprisingly, we have more open space here than one would think.  60% of Connecticut is forested, and that's without counting agricultural land, recreational areas, and wetlands.  Our appeal to urbanites in the very biggest cities of the Northeast is immense.  We offer proximity and shelter, telecommuting possibilities and open space, easy transportation and recreational choices galore. What could be better?

That is translating directly into the (delayed) spring market.  If we have a listing, we get leads, calls, and showings.  Most things are selling quickly, even if they have been around for a long time.  The upper end is strong, for second homes, transferees, and even downsizers.  The lower end is hot, with first-time buyers bidding on whatever they can afford.  There has even been a surprising benefit to the COVID lockdown.  People look less, and decide faster.  They do their homework, and then they act.  A couple of years ago, those same buyers would dither, waiting to see what else would come on the market, or go down in price.  Now, prices are going up.  Supply is largely responsible, since it is so limited.  Even rentals are competitive, and sometimes lucrative for owners.

 Whether buyers want to live here all the time, or just have a place to shelter in, the next time that becomes necessary to do, they are looking to Connecticut as an attractive choice.  And we certainly are!

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 Branford you can say “If market conditions do not change and if no new listings come on the market it will take 4.7 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.”

 



 

FAQ Regarding Real Estate Activity During Covid-19



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 Haddam you can say “If market conditions do not change and if no new listings come on the market it will take 5.7 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.”



Disruption in the Supply Chain

When we give advice to people about buying property, we are often guided by standard metrics, whereby the average mortgage is outstanding for about five years, meaning that it gets paid off as people move, or refinanced, at about that point.  That used to be a proxy for estimating how long someone would stay in a home.  Based on that, we would also point out that it took, when the median home price was rising year by year at a steady amount, a few years to break even when selling and buying a new home, considering the costs of moving.

We have known for many years now that people refinance more frequently, or did so when rates were first low on an historic basis.  That's been less true recently, as refinancing is not as common as the rates would predict.

What was news to me this week was a Wall Street Journal article saying that the typical homeowner now stays in a property for 13 years in most places.  Some of that is tax based.  California has long been known for giving an incentive not to move--your taxes get frozen, and, like rent stabilization, that makes people rethink what they would do absent outside considerations.  However, it appears that the supply of homes in most parts of the country limits options for moving.

We don't have the new construction here that exists in places with lots of open space to build outside cities, but we do have a generation of young homebuyers, who don't have enough to choose from, when they go to buy.  That's because, in part, from another group looking at those smaller houses--downsizing older adults.  When new homes do get built, they tend to be large, for the usual economic reasons about lot price vs. home cost.  So there is a disconnect between available produce--often priced in our area between $400,000 and a million--and what buyers want, which is smaller and less expensive.  Homes between $1 and $2 million tend to be in places where older buyers are choosing location, and they are chugging along as well, on the Shoreline in particular.

How can we lower the 13-year figure, and free up homes to start the cycle?  Sellers should list the homes they are thinking about selling.  Buyers are once again out there to purchase!

From the Hartford Courant : These are the only 10 Connecticut towns where home prices have recovered from the recession

(Click here to read on the Hartford Courant's website)

By Kenneth R. Gosselin I Hartford Courant

Home sales in most Connecticut towns have yet to recover from the 2008 recession. An analysis by The Courant of single-family house sale price data from 2007 to 2018 shows sale prices in all of the state’s eight counties remain below the 2007 peak, with Hartford County making the most progress and Fairfield County in the deepest hole.

 

And of Connecticut’s 169 municipalities, just 10 towns and cities registered median sale prices that exceeded or matched their pre-recession values, according to data provided by The Warren Group, which tracks real estate trends in New England and publishes The Commercial Record.

 

Here’s a look at the 10 towns that have recovered: (to see how your town fared, please click here to view interactive map online)

 

West Hartford

Median home sale price in 2007: $305,000

Median home sale price in 2018: $310,000

Percentage change: 1.64%

 

Barkhamsted

Median home sale price in 2007: $239,000

Median home sale price in 2018: $254,250

Percentage change: 6.38%

 

Bridgewater

Median home sale price in 2007: $473,000

Median home sale price in 2018: $512,500

Percentage change: 8.35%

 

Darien

Median home sale price in 2007: $1,330,000

Median home sale price in 2018: $1,330,000

Percentage change: 0%

 

Union

Median home sale price in 2007: $236,000

Median home sale price in 2018: $236,000

Percentage change: 0%

 

Norfolk

Median home sale price in 2007: $303,500

Median home sale price in 2018: $355,000

Percentage change: 16.97%

 

Franklin

Median home sale price in 2007: $212,000

Median home sale price in 2018: $250,000

Percentage change: 17.92%

 

Eastford

Median home sale price in 2007: $232,500

Median home sale price in 2018: $235,000

Percentage change: 1.08%

 

Pomfret

Median home sale price in 2007: $277,000

Median home sale price in 2018: $287,450

Percentage change: 3.77%

 

Andover

Median home sale price in 2007: $247,450

Median home sale price in 2018: $247,500

Percentage change: .02%

Every Segment of the Market is Different

Not only is it hard to judge the quality of the Greater New Haven market by looking at national trends, you have to know town (and neighborhood), plus price range, in order to make a prediction about how quickly a property will sell.  Multiple offers are common on well-priced homes in towns without enough supply, and they are much more likely in price ranges frequented by first-time homebuyers.  And those price ranges are different where?  You guessed it-town to town, and neighborhood to neighborhood.

Even those parameters may not explain everything.  We've seen waterfront property fly off the market lately, mostly in the $1 to $2 million dollar category.  Some of that is by neighborhood, but I think it has more to do with the length of time since the last hurricane on our immediate coastline, plus the consequent lower prices we have been experiencing, which eventually have reached compelling levels.  If that's not squishy enough, there's also the stock market to consider-volatile markets, especially when they are high, tend to lead people to divest stocks and buy real estate.  That's both because they suddenly have more disposable cash, and because they are looking for a tangible place to put it.

All of this is by way of saying that you cannot simply look at Boston or NYC, and conclude that we must be a blend of those two markets.  One is hot, although cooling on the multi-offer scale (Boston), and the other is suffering from oversupply at the top end and a new mansion tax.  What to do?  Read local, shop local, and use a local Realtor!

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 Branford you can say “If market conditions do not change and if no new listings come on the market it will take 5.0 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.”



Another Example of a Compelling Price

Every so often, I think it's useful to reiterate my advice to sellers that their properties should be listed at what will seem to buyers to be a compelling price.  That means that there is a clear call to action, since the idea is that, at a price that seems really reasonable, others will bid if you do not, so you need to offer quickly to get the property.  Sometimes that price is at or below the price at which your agent expects the property to sell, meaning that you are not planning to do much bargaining downward.

We believe that this is the best way to get more for a property.  It may sound counter intuitive, but it can spark multiple offers and bidding wars, that will drive the price up higher than it would otherwise go.  I know this works, so I try to practice it myself.  I recently listed a property in another area for sale with a local Realtor.  I listed at his recommended price, which was much lower than a previous seller had tried to sell it.  Despite needing work, and having it come on at the end of the spring season, it immediately attracted two offers, and both ended up far over the asking price.  Just like any seller, I wondered whether it had started out too low, but I realized that two separate parties ended up at the same price, so it was most likely the right one.

The lesson:  Price low to attract eager buyers, and end up selling for more.

The Real Estate Market is Hotter than the Weather

Most people think that this time of year is slow for real estate, and that bad weather slows down the market even more.  While that used to be somewhat true, we now can tell-in real time, using Google analytics-that buyers are out in force during the winter months.  In addition, despite the cold, they want to get a jump on the spring market, so they are turning out in force for open houses and appointments to see new listings.

Just as in every other year, in our academic area, we don't  have enough inventory to show the number of buyers coming through.  Also, we are catching the end of the wave that has swept the country from west to east in the past few years, and inventory shortages are driving sales. While other regions have seen a slowdown, we seem to be experiencing a boom, or at least a boomlet.  Sometimes it's good to lag the market!

If you are a seller, this is your moment, and you should seize it.  If you are a buyer, don't be shy about bidding, and bidding on what you may feel is the high end of value.  While the spring market may bring more choices, it will also bring more buyers, so your chances of landing a bargain will not go up.  And think of this--if you are successful in your offer, you can be enjoying your new home by spring, instead of spending your weekends at open houses!

Season's Greetings



Bidding in a Market with Tight Inventory

Currently, the Greater New Haven market is experiencing a shortage of inventory in some price ranges.  Although most of the country has been like this for a while, it has been a long time since it has occurred in Connecticut.  Many local buyers are not accustomed to needing to, or may not even believe that they need to, compete with other offers.  Some people that real estate agents mislead potential buyers about other buyers, in order to encourage interested parties to act quickly, or bid higher.  We are amazed now at how often a house that has been on the market for months, without any interest, suddenly may have two or even three parties competing to buy it.  Once a certain point in the spring has been reached, people feel that they have seen most of what might be coming on, so that they no longer feel that they should wait. Of course, homes that are well-priced and desirable attract interest, and usually these days multiple offers, almost right away.

So my advice to buyers is simple, and fairly obvious.  First, make a list of what you require in a house.  Keep a running preference order for what you’ve already seen, with your first three choices clear.  If those choices don’t change every time you go out, it’s probably time to stop looking. Be honest with yourself, and your agent, about your limits.  It’s amazing how often people tell us their upper price range, and then exceed it. Then, make the cleanest offer you can, with the fewest contingencies and for the shortest amount of time.  Assume that there is other interest in the property,  and follow this important rule:  Bid the highest amount that you would be sorry to hear that someone else paid.  If your reaction to a later record of the sales price is that you couldn’t, or wouldn’t, have matched it, then you did the right thing.  If your immediate thought (never mind what you told your agent about the highest you would go) is that you would have paid that price, then you should have bid more.