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 2.5 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”.

 

 

Pay Attention to Where We Are in the Real Estate Cycle

People make money in real estate in all kinds of market conditions, but they don’t make it evenly across all parts of a cycle.  It does matter when you buy and sell.  Some of that is luck, but some is a matter of seizing the opportunity when it presents itself.  Today’s New York Times had a chart of the twenty top metro areas in the country for price appreciation in housing during 2020.  Bridgeport was first, and New Haven was eleventh.  We know that supply and demand were not in sync, and we know that people were leaving NYC to find more space in Connecticut.  We also know that mortgage rates are very, very low at present, and that other markets around the country have already experienced large price increases in recent years, during which period we lagged behind and saw no increases.  Finally,  we know that moving to smaller cities is a current trend.  In fact, the same edition of the NYT featured a large article about techies fleeing San Francisco for Austin.  We are not as big as Austin, but we are also located in between two other major cities, New York and Boston in our case.

What do you deduce when you read the above paragraph?  One possible choice is that you decide that now is a good time to buy, especially where prices have not risen to the highest levels supportable.  Bingo!  Those who ride a market up, and we are still headed up, we believe, see large gains in the early years of ownership.  Although you could also read the above to mean that you should buy anywhere, which is probably also true, there is more to gain in our region, since we began with such depressed prices.  Some of you may remember when those relocating for work got sticker shock when they got to Connecticut, even in our area.  Now many buyers have to spend extra, if they want to roll over all the equity they had in a previous home elsewhere.  It stands to reason that there should be plenty of gain left for those who jump into the market soon.

As the stock market reacts to Biden’s proposals for economic stimuli, think about real estate as well.  Americans in 2020 paid down a great deal of credit card debt, because they weren’t going out and spending money.  Why not use those better credit ratings, and savings, to buy your dream home now?  If you are a seller, there is no reason not to sell now, since you will be buying in the same type of market.  You will be getting the same gains on a new home.  Those who have been meaning to downsize should look to do so now.  Spend these last few weeks or months before the vaccine decluttering and making plans to move.  You will be glad you did!

Don't Let These Interest Rates Go To Waste!

One client we know is refinancing this month, at a rate of 2.34% on a jumbo mortgage. That's hard to believe, but it's important not only to believe it, but to act on it. Rates will most likely go up next year, and they typically go up seasonally as well, with this being the lowest point of the year. Another client, whose primary house we just sold, is going to fix up her second home with a line of credit at these rates. You don't have to refinance, though. We have another client who called about refinancing, and we asked if he had the home of his dreams. When he answered that he would move to the immediate shoreline, if properties in his price range were available, we encouraged him to pursue his dream now. Prices are less important, as we all know, than monthly payments, and it may make a stretch purchase into a doable one. It can also make sense to purchase a home that already has the features you may be lacking, as opposed to doing work on an existing property. Renovations are always cheaper than moving. Another client was thinking about a second home, and this is certainly a great time to acquire one. We advised him to think about a second home as a gathering place for family, and compare it to family travel. Since the latter isn't possible right now, it makes even more sense to invest in property nearby. In fact, a vacation home in Connecticut has never been so appealing, for all kinds of reasons. No testing necessary to visit there! Finally, do you want to buy another pair of leggings, novelty pajamas, or gadget over the Internet? Or would you rather spend your holiday funds on a lasting investment--your dream home? The choice is yours, and the time is now.

March Through July Sales 2019 vs 2020 : New Haven & Shoreline County

 

 



The Housing Scene: In odd lots, bargain pricing and fraud abounds

The Housing Scene: In odd lots, bargain pricing and fraud abounds

 

By Lew Sichelman, Hartford Courant (Click here to read article at the Hartford Courant)

 

An opportunity for first-time buyers to find houses priced below market value is presenting itself in a number of places across the country.

 

Over the 11-week period after March 11, when the World Health Organization declared the COVID-19 virus a pandemic, thousands of sellers listed their homes at a discount, according to Weiss Analytics. Not always by a huge discount — perhaps just a few thousand dollars — but significant enough that bargain hunters should perk up their antennae.

 

Even when sellers don’t drop their asking prices, nearly 7 in 10 would be willing to accept a lower offer just to get to the closing table, according to a LendingTree survey of nearly 1,000 people who currently have their homes on the market.

 

Just over half the sellers polled by LendingTree said they’re “seriously worried” about selling their homes because of the pandemic and resulting economic recession. An additional 36% are “somewhat concerned,” and nearly a third are “extremely anxious” about selling anytime this year.

 

New listings at or below the $200,000 range are the most likely to be discounted, Allan Weiss, a co-founder of the popular Case-Shiller price index, told me in a phone interview. And the lower the price range, the deeper the discount — up to 70% in some places.

 

More often, though, houses are being priced just $2,000-$3,000 below market, Weiss said. Not in every market, but in what he called “micro-clusters” of neighborhoods and communities where house values are no higher than $200,000. Even in spots where median prices are rising, discounted properties can be found.

 

Sellers offer their homes at below-market prices for any number of reasons. They may want to sell quickly. They may owe little or nothing on a property that has increased in value over the time they’ve owned it, so undercutting the market isn’t so painful. But they also may be unemployed and no longer able to handle their house payments.

 

Whatever the reason, many in the lower-price tiers seem to be lowering their expectations. “Every single metric — sales volume, median price — gets worse as you filter down from $200,000,” Weiss told me.

 

At least one-quarter of new listings in the nation’s Top 25 metro areas are discounted, according to Weiss’ analysis. Three small Texas metro areas — El Paso, San Antonio and Killeen — currently offer the largest percentage of properties priced below market. But bargains can also be found in major markets like Wichita, Kansas; New Haven, Connecticut; Akron, Ohio; Portland, Oregon; and Philadelphia, Pennsylvania.

 

Signs of the Apocalypse
Just before the pandemic struck, the co-founder and former CEO of Zillow listed his Los Angles manse for $24 million — nearly $8 million more than the site’s oft-maligned automated valuation Zestimate model says it’s worth. Some realty agents have complained that the popular tool is wildly inaccurate. Meanwhile, some people can never change their stripes. To wit, one of the first people charged with trying to scam the Small Business Administration’s Paycheck Protection Program is a convicted mortgage fraudster.

 

Kurt Sanborn, a former spokesman for the Lowell, Massachusetts, police superintendent, was convicted and sentenced to 27 months in prison in 2014 after pleading guilty to federal mortgage fraud charges. Now he’s been charged with conspiring to seek SBA-backed forgivable loans intended as COVID-19 relief.

 

Speaking of fraud, attempts to electronically intercept real estate transactions remain big business for swindlers.

According to the FBI, these thefts are part of a fraud category that tops the list of high-loss crimes, resulting in almost $1.8 billion in losses to businesses and consumers. By comparison, investment and real estate rental fraud ranked fourth and fifth on the FBI’s list of top crime losses, costing a “paltry” $222 million and $221 million, respectively.

Wire fraud occurs when thieves intercept emails, so real estate agents should never send instructions electronically. If you receive something via email from your real estate or settlement agent, check out its authenticity before doing anything else.

Telephone utility fraud is also on the uptick. In this type of ruse, a scammer calls saying you were overcharged by your (unnamed) energy supplier and are due a refund. In another version, the reprobate offers a big discount. But to verify your identity, they say, we need your account number.

If you are on the receiving end of one of these calls, hang up. The key is that they don’t know the name of your utility or supplier. Moreover, a utility will not call you about a refund or discount, and a licensed and reputable energy supplier is required by law to give you the company’s name and license number.

 

Current Absorption Rate

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 2.7 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.”



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 Madison you can say “If market conditions do not change and if no new listings come on the market it will take 3.3 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.”

 

Multiple Offers

I just got off the phone with a disappointed buyer, who thought he had bought a property, and just learned that a higher offer came along before it was signed, and he lost out.  These situations vary, in that some sellers continue to work with the first offer, some let everyone rebid, and some set a firm deadline to decide and sign. What is the same is that there is always at least one unhappy person, who didn't get a property.  In this case, it had been less than 24 hours, but sometimes it can go on for several days or even more.  

There are ways to prevent disappointment.  First of all, don't hesitate.  If you see a great property, make an offer quickly.  Try to make the offer as clean as possible--assume that, in this market, there may be other contenders.  Don't put in contingencies that you can live without having.  Match the seller's dates where you can.  We see so often that people insist on things, and then don't get the property, after which they say that they would have given in.  

I always tell people to make the offer that they would be unhappy to hear that someone else got the property by making.  If you are going to say later that you would have gone higher, then do it upfront.  If you have other access to cash, to make a better offer, don't wait to pull that out.  Go all in.  When listings are in short supply, and they are in Connecticut, that's called a seller's market.  If you are the buyer, that means that you are not driving the bus.  Accept that and act accordingly.  You can even consider writing a letter about why you would be the perfect buyer, and how much you love the home.  It has been known to do the trick on occasion, and it can't hurt.

Don't offer what you can't afford, because you are wasting everyone's time, including your own, but be realistic.  Your parents, or other sources of advice, probably bought their first homes when interest rates were very high, and they may not be accurate on the cost of money now.  Be sure to get preapproved, so that you can react quickly if necessary.  If there is a counteroffer, be prepared to answer almost immediately.  You need to know your top price, just the way you would if you were bidding for art at an auction.

And, if you still don't get the property after following the advice above, don't waste time on regrets.  You did your best, and it is what it is.  Move on, and find the home of your dreams next time.

Reopening Connecticut Real Estate

We don't have to actually reopen Connecticut real estate.  Due to our protected status as an essential industry, we have been allowed to operate all along.  Although we have decided to reopen our offices slowly and carefully, with no walk-in clients for now, and limited office hours, we have kept selling throughout the pandemic period.  Our showings have lessened, there are no public open houses, and most of our activity is done remotely, but demand has been strong.

Especially in New Haven, where people who already had job offers for this summer and fall are looking, there is much more demand than supply.  Due in part to some of the neighborhoods and their open spaces and larger lots, density has not been the issue that it has been in larger cities.  Convenience and closeness are ruling the day, and we can sell whatever we can list in the parts of New Haven near Yale.  

The suburbs are also popular, especially with younger families, and buyers of second homes.  The latter group is driving up the average sales prices.  Again, we can sell what we can list.  It's hard to think about moving in the early stages of a lockdown, but people are figuring it out, and are ready to go when they can.  The mild winter also helped. Prices are strong, due to limited supply.

 Now that more restrictions are being lifted, we expect to see an added month (or two or three) added onto the spring market.  Closings can happen quickly, if everyone is motivated to do so. If you are one of the sellers who thought that no one would buy now, it's not too late to list!  

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!

Calling All Real Estate Listings

Who thought that prices would actually get stronger during a pandemic?  It's not that surprising, when you realize that life goes on, jobs change, and people retire.  They all need to buy and sell, and there just isn't much out there for them to choose.  We have adapted to the post-COVID world as best we can, and are still selling; however, we need more product in order to sell more houses.

The beginning of May has always been a busy time in real estate.  This year is no exception, except that we haven't seen the burst of listings that usually accompany the first flowers of spring.  With little product coming on, some older listings have even gotten multiple offers, even after long periods on the market.  It's clear that, if we had more to sell, we could sell more.

So, if you've been on the fence, now is the time to get off.  The coronavirus restrictions are not going to go away completely for some time to come, and the spring season should give a boost to thoughts of moving.  In addition, good weather makes it easier to social distance, when the outside of a property can be used for parts of showings.  It's also a good time to do home repairs or sprucing up and painting.  Life goes on, and real estate is going on too.  Don't be left behind--act now!

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.”

 



 

Virtual Sales

For quite some time, we've heard stories about places where homes went onto the market, and were sold--on average!--in a matter of hours.  Buyers had to be willing to pounce, and to make as clean an offer as possible, in order to have a chance to buy.  Now, we have our own version of that scenario.

Buyers who have accepted job offers in our region are looking at properties on line, then having their agents take a walk through the house with FaceTime, then making an offer, usually with an addendum for Sight Unseen Purchase.  Then, normally, if the offer is accepted by the sellers, the buyers come and check out the home in person.  Sometimes, this is within the period for other inspections, and sometimes it is a separate clause.

This isn't really different, from the point of view of the sellers, from the Fairfield custom of having a contingency for an attorney to approve the offer. It's just another hurdle to get over before the sale, and it prevents many unnecessary showings of a property in these uncertain times.  Again, it mirrors what has happened in very hot markets for some number of years.  It takes advantage of technology, allows for social distancing, since the agent can visit alone, and moves the purchase forward as quickly as possible.

These sales are just another example of the creativity required to sell real estate in the time of COVID, and the fact that it's working is a comfort to us all.

FAQ Regarding Real Estate Activity During Covid-19



Unusual, But Still Spring Season

Governor Lamont named real estate as one of the essential industries in the State, and therefore eligible to operate during the pandemic shutdown.  Being good citizens, we closed all of our offices for the duration, and stopped doing open houses, because we believe that it matters greatly to reduce the chain of contacts each person has in a day or week.  It doesn't mean that we have stopped selling property, however.

Given the mildness of the past winter, business was already hopping by mid-March.  We have learned that many people, especially those coming to universities and hospitals to work, receive their offers very early in the calendar year, before there is much inventory to view in the way of homes to buy. We now try to list homes earlier than was customary, so quite a lot of activity had already taken place by the time we shut our offices.

Our agents have adapted to the new normal, and are continuing to show--virtually much of the time--and put offers together.  They have done inspections by Facetime, and closings by Zoom.  They were used to using technology for many things, but have gotten even better.  We have company meetings by Zoom, and even cocktail parties the same way.  It seemed strange at first, but putting in an offer without physically looking at a house has become common in overheated metro areas, where multiple offers rule, and a property's time on the market is measured in hours. Buyers then examine the home after the offer, during the inspection period.

I once bought a house while my husband was away on a business trip, and had only looked through the windows the weekend before he left.  We lived there for twenty years, and raised our family in that house, so we were more than happy with our choice.  Maybe there was some cognitive dissonance at work, or maybe some karma, but homes get found in all kinds of ways.  We are busy finding new ways to help people discover their own.

Current Absorption Rates

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 Bethany you can say “If market conditions do not change and if no new listings come on the market it will take 4.8 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.”

 

 

Letter to Our Clients

Colleagues and Friends:

As many have said, these are extraordinary times. As you know, Connecticut Governor Ned Lamont has issued an Executive Order asking many businesses and organizations to suspend operations, while we battle the Coronavirus outbreak that has disrupted our health and our lives.

As of now, real estate services are exempt from the order to close due to the fact that for some people, moving may be a necessity even in this stressful environment. Some businesses critically need more space to provide for increased demand in certain industries. There are many in our community right now who are in the middle of a real estate transaction, or who find themselves needing to purchase or sell a property due to changes in their jobs or their families.

While we remain available to those who need us during this time, the Governor's order was put in place for a reason, and we are doing everything we can to respect and honor it. That means that at Pearce Real Estate, our primary concern is for the health, safety, and welfare of everyone in our community that is affected, in whatever way, by the current crisis. So, while we are still able to serve you, we will be strongly recommending doing so virtually. When in-person contact is required, we will be sure to do so safely and appropriately to respect the circumstances.

During this time, we feel one of our primary responsibilities is to listen; whether it's about a specific housing need you may have, or just about how this situation is affecting you and your family. Even if you’re not someone who needs to move right now, you may have questions. Please know that we are here to help you make the best possible decisions for your specific situation and help you safely through the process.

We will continue to communicate information we believe to be important to you as circumstances evolve. In the meantime, don't hesitate to contact us.

Thank you for the trust you have placed in us, and we intend to do everything we can to live up to it.

Together we'll get through this.

Barbara L. Pearce

CEO & Chair
Pearce Real Estate

Business Not as Usual

We certainly understand that not all sellers will choose to allow buyers to view their properties.  However, for those who are eager to sell, and who can work with us to keep everyone as safe as possible during this difficult time, there are actions we can all take to make the process as sterile as we can. I want to thank my real estate friends in Nashville, for passing along this checklist as a guide to sellers, and as information for buyers to understand before going into a home for sale.  

Seller Baskets include: 

Hand wipes

Bottle of counter cleaner or counter wipes

Respiratory blend essential oil for the seller to use

Shoe covers 

Gloves 

Ribbon

Signage for home

Signage posted in home and listing instructions are as follows:

• Please do not touch countertops or open drawers. 
• Please leave lights as you found them.  Do not touch switchplates. 
• Please do not use toilets. (include ribbon in seller basket to tie around toilet seats) 
• Please wipe hands before and after touring. Gloves are also here for your use but please still do not touch countertops or drawers. 
• Please wipe door handle upon leaving. And take your dirty wipes, shoe covers and gloves with you.
• Shoe covers can be used as a temporary face mask if you wish.   

Thank you for respecting this home.

****In addition, remind your sellers to wipe down countertops and all door handles to every room after every showing

Move Up and On

Recently, we sent out a chart to our agents of interest rates by the decade.  Rounding off, they are now about half of what they were in the 70s and 90s, and a third of what was common in the 80s.  Given another chart, showing how long people have stayed in their homes before moving, it's worth pointing out again how much of a difference in the true cost of a home the mortgage rate can make.

Many boomers I know are chagrined to find that, even if their downsized home is actually smaller than the home they left (and you would be surprised to find how often it is not!), they almost always spend just as much buying the new home.  However, rates are still so low that we should think of it as buying "up" at a great cost, in much the same way that we might spring for Premium Economy or Business Class on a plane, if the differential is very reasonable.

While spending more on finishes and extras is a luxury, it will eventually increase the resale value if you make a home modern in the way that buyers down the road will expect.  That won't work if it's too personalized, but many currently trending add ons are well worth the price, and, at these interest rates, may not cost as much as they would have cost in a different decade.

So, the message?  Move up and move on.  Buy what you can afford, and don't forget what you are saving in interest costs, as well as common savings on landscaping, gas (being closer in toward a town center saves money and time), and utilities (modern appliances save energy).  Think of it as Business Class at a Premium Economy fare rate, and go for it!

Statistics Can Go Either Way

We all have to be careful not to take statistics too seriously, because we can find ones that support more than one point of view about the market.  In fact, we can support opposing points of view with available data.  One side argues that the residential market is pretty good—low supply, low mortgage rates, eager millennials, influx from NY, and improving job reports.  The other shows a bleaker picture—prices still 10% below 2006, job growth in lower level jobs, outmigration to other states among the wealthier boomers, a lagging economy over 20 years, and high State debt.  What’s a person to think?

 

The answer is, as it always seems to be, it depends.  If you are a seller, this is a good time to sell, given low supply, new household formation, low interest rates, and a mild winter.  If you are a buyer, this is a good time to buy, because of those same low interest rates, the improving position of the State, high quality of life, and room for appreciation, with good prices to be had.  When you take those two things together, you see a fairly balanced market, with both buyers and sellers finding points in their favor, and points against.  At the end of the day, the purchase of a home is about your life, and not just your money. Lower interest rates, over time, make much more difference than the price, within some range. The sale of a home involves being ready for next steps, and wanting to reinvest in smaller houses, perhaps in different places.  Those factors very often outweigh strictly economic concerns.  Like any lawyer, I could make an argument for either side.  Instead, I’ll content myself with saying that cognitive dissonance means that, whatever you do, you can convince yourself that you did the right thing.  And there’s evidence to support that idea, no matter what you do this year.  So follow your instincts, and do what’s best for you and your family.