Sellers, Don't Count Your Chickens Yet

Just in the last few days, we've started to see homes in Greater New Haven come back onto the market, after a sale fell through.  When we think about how many offers now are made without contingencies, in order to improve a buyer's chances of winning a multiple bid situation, the percentage of DFTs (deal fell through, as we call them in the trade) is actually higher than it appears.  People who made contingency-free offers did not always leave themselves wiggle room to get out of a contract, so that the sellers likewise couldn't get out.  Those contracts would therefore be sticking, meaning that the 80% or so of sales with contingencies are producing 100% of the DFTs.

Why would that be happening?  There is always some amount of buyer's remorse. That house you were bidding on the night before doesn't seem as great in the light of day.  However, it is likely that more homes are coming back onto the market because the buyers can't perform. Either they can't borrow enough money--maybe they bid too high in the last round of negotiations, or maybe they never had quite the credit they thought they did--or it's just coming at higher rates, as rates are inching up.  Sometimes it's fees, or flood insurance, or repairs that will cost more that ends the deal.  

In weaker markets, many of those contracts would be adjusted downward by both parties, especially if there are major defects that come to light, or if the home doesn't "appraise out" at the price being paid.  That can easily happen in a rising market, because appraisers can only use closed sales, so current contracts at higher amounts can't be counted.  In this time of short supply, the sellers are more likely to put the house back on the market, and try to resell it at a comparable price.  

When one house has this problem, it can also cause a domino effect, where several homes each depend upon the buyers selling their previous house.  One transaction can ripple through other sales. Even if a sale sticks, a lower price may lower the equity available for the next purchase.

What does all this mean?  It means that the market is beginning to show the downside of rising prices, where buyers face hard upper limits on what they can pay.  Sellers should remain flexible, roll with the punches, and not get greedy.  A deal that seems too good to be true may be just that.  If everyone works together, a good result may occur for all parties.

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 2.0 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”.

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!

Tips For Making Your Multiple Offer Stick

As has been reported in all kinds of media, there is somewhat of a feeding frenzy going on with real estate in Connecticut.  Some of it is outmigration from NY, some is outmigration from cities to suburbs, some is pandemic-related need for more space indoors and out, and some has to do with interest rates and deferred spending.  The result is chaos, as people try to purchase properties that are receiving multiple offers within days of going onto the market, many over the asking price. If you are an interested buyer, how do you help get your offer to the top of the pile?  Here are some suggestions:

1. Eliminate as many contingencies as possible.  Having no mortgage contingency doesn't mean that you can't get a mortgage, just that the sale isn't tentative until you have financing approval.  Other contingencies that you can be flexible on--closing date, inspection requests, or other approvals--should be taken out of an offer, if possible;

2. Don't wait to respond.  Once sellers are engaged in the process, you want them to move quickly to pick you.  In order to aid in that, you should sign or counter as soon as you can;

3.  Consider writing a letter. Say what you like about the house, what you can imagine doing there (raising a family comes to mind), give reasons for the sellers to choose you.  Tug at their heartstrings;

4.  Get all of your checks and approvals in on time.  Dragging the process out, especially when there are viable backup offers, is dangerous.  Remember, to you this may be about you, but to the sellers, it's about them and their timeline;

5.  Avoid trying to renegotiate.  If you go high with an early and enthusiastic offer, don't try to get some of it back during the inspection process.  This is not just an investment, or an arms-length negotiation--it's where you plan to live, and you should let that emotion rule, within reason;

6. Don't sweat the small stuff.  Arguing over the fireplace set or the pool equipment may turn the sellers off, and hurt you down the line;

7. And here's our cardinal rule: Offer the amount you would be sorry to hear that someone else paid for the home.  Forget about what you told the agent your top price was, or what you think you can get with some bargaining.  Pay what the property is worth to you, and don't rethink it, as long as you can afford it.  You will save more with a lower interest rate than you will lose in a few thousand dollars toward the sales price.

Happy hunting!

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”.

 

 

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!

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

 

 



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.”



From the New Haven Register By Dan Haar : Connecticut’s lost decade — and how to avoid a repeat

By Dan Haar, New Haven Register, click to read online

 

 

 

Think back to the first week of 2010.

 

The reigning champion UConn women’s basketball team was steaming toward five more rings in the next seven years. A former Stamford mayor who lost the Democratic primary for governor four years earlier was about to win the seat and hold it for most of the decade.

 

Obamacare was adopted but not yet in place. The Sandy Hook tragedy was three years away. And the Great Recession had hammered Connecticut along with the rest of the nation.

 

As the decade opened, Wall Street had started back upward but Main Street still reeled at rock bottom, facing a tough slog. Exactly ten years later, the nation has recovered heartily and then some, under two presidents.

 

Connecticut? A lost decade by just about every economic measure.

 

A lost decade — and worst of all, we’re not in the clear yet. One more decade like the one that just ended and we are basically western New York, a place with some great assets that’s on the way to someplace else, looking to recapture its old glory.

 

The hopeful news is, we can still avoid another 10-year meltdown. We need some demographic breaks, a solid dose of attitude changes and an embrace of the elusive political middle.

 

Let’s look at the numbers first.

 

A lost chunk of the state

 

Connecticut’s jobs count, the most important measure of how we’re doing, grew by 4 percent in the decade, a total of 66,000 positions if we count annual averages including preliminary 2019 totals through November. By contrast, Massachusetts and the United States both added 15 percent.

 

Those are just numbers. Consider what it really means. If Connecticut had gained jobs at the same rate as the nation, we would have added another 179,000 — enough to support as many households as there are in New Haven, Hartford, Fairfield and Greenwich combined.

 

 

It’s as if we lopped off a hefty chunk of the state, heavily populated by young college graduates. And the housing market reflects that haircut.

 

When the decade started, a single-family house at the median among all sales — where half sold for more and half less — stood at $242,000, in shooting range of the Massachusetts median of $285,000, according to The Warren Group, which tracks house sales. As of 2019, Connecticut was up just 8 percent to $261,000.

 

In Massachusetts, that median house in 2019 fetched an even $400,000 — a 40 percent jump. And although there are no official figures for national median prices, one fastidious website calculates the U.S. gain at 44 percent for the decade.

 

 

What does that mean for the typical Connecticut homeowner? If you owned a house that was worth $350,000 in Connecticut a decade ago, you missed out on $112,000 of price gains that people in Massachusetts and most other states realized in just those ten years. Some parts of Connecticut, notably Fairfield County, fared even worse.

 

Shrinking in an expansion

 

If you’re counting income, we’re still the richest state in average income per person and we’re in the top ten in how much typical families earn. But we’re slipping there, too. That’s harder to measure because the reported numbers bounce around due to small Census sample sizes.

 

We do know this: The biggest picture of all — the total value of goods and services produced — shows Connecticut’s lost decade at its starkest. The total product for Connecticut actually shrank by 0.5 percent, adjusted for inflation, when we compare the average for all of 2009 with the average for the 12 months ending last June, the latest data we hav

 

That’s a shrinking economy after the U.S. recession ended, friends. One slice that meant thousands of livelihoods — the manufacturing of non-durable goods such as food, pharmaceuticals and household items — slipped by almost half, to $6.9 billion a year. The much larger, higher paying finance and insurance sector cratered by 23 percent.

 

Massachusetts, ignited by the allure of Boston and explosive gains in bio-sciences, shot ahead by 20 percent overall even as we shrank. And the nation as a whole, which grew slower than Connecticut from 2005 to the end of 2009, expanded by 19 percent in the decade that just ended.

 

What Connecticut doesn’t have is an unemployment problem, as we track the nation in jobless rates. That’s partly because we don’t have vast tracts of poverty, another strength of Connecticut. And it’s partly that many people just leave if they’re out of work or under-employed. The Census numbers show an average of 24,000 people a year moving to other states over the last five years, making Connecticut the 4th worst in the continental United States, ahead of only Illinois, New York and New Jersey.

 

 

 

 

I’ve studied Connecticut prosperity full-time for four months shy of 25 years as an economics reporter, columnist and business editor. I knew these numbers intellectually. Seeing them all together, calculating them as a decade in the mirror, I feel a punch in the gut, a wistful tear for lost opportunity as a transplanted Connecticut homeowner by choice, an employee in a struggling industry and the father of a newly minted teacher in Boston who’s not coming back.

 

What happened?

 

We’ve argued the causes of Connecticut’s relentless recession from the very start. Tax increases, driven by decades-old debts and obligations, piled up even as former Gov. Dannel P. Malloy cut the size of government by eliminating more than 5,000 state jobs.

 

We’re in the hole by as much as $100 billion including pensions and future health care for public employees, despite restructuring the debts and benefits multiple times. The problem isn’t today’s benefits, though they’re too high for older state employees. It’s that for decades, Democrats and Republicans alike failed to set aside money.

 

Costs for utilities, education, entertainment and health care have climbed as they have in the rest of coastal America. But the perceived value of living in Connecticut didn’t keep pace in large part because we lacked, and still lack, a true magnet city with enough critical mass to attract millennial college graduates.

 

Leafy suburbs unconnected to major cities fell out of favor and the center-cities Connecticut does have are not able to compete with second-tier metros such as Minneapolis, Dallas and Pittsburgh, let alone the giants.

 

 

Manufacturers slowly moved operations to cheaper places. Corporate headquarters, facing profit pressures, retrenched. A few big events bled thousands of jobs, chiefly rising competition for the native American casinos and consolidation in financial services — especially the breakup of General Electric’s GE Capital. That breakup cost 2,700 lucrative jobs, nine times more than the more widely cited but less important exit of GE’s headquarters from Fairfield to Boston in 2016.

 

The Trump-led tax reform of late 2017 didn’t help. Although high-income earners have seen a nice break, the new limit of $10,000 on federal income tax deductions for state and local taxes hurts the entire Northeast, costing Connecticut residents an estimated $2 billion a year.

 

What we have, in short, is a vicious cycle in which people leave or stay away because costs are high in comparison to perceived value, or they leave or stay away because we don’t have any large cities in Connecticut. And that of course drives up costs further because it lowers the tax base. Warren Buffett, the multi-billionaire corporate investor, didn’t help matters by warning people to avoid states with high unfunded liabilities.

 

Rena Carreiro was among those who felt herself moving sideways during the decade. She had worked as an office manager for a manufacturer since 1993. Over the last ten years the business retrenched in Connecticut, moving work elsewhere.

 

Carreiro performed finance, human resources, production control and inventory tasks, taking on more work as people left. “It was wonderful to learn all those new things,” the Waterbury resident said.

 

But there were few opportunities for career advancement. The company — which Carreiro didn’t want to name — closed her plant at the end of 2019. She landed a job at Parker Medical in Bridgewater, a growing company where she has high hopes and new optimism.

 

Solutions

 

Like Rena Carreiro, we as a state can take measures to avoid another lost economic decade. Here’s a 6-point plan:

 

  TAKE A MIDDLE PATH ON POLICY— Democrats and Republicans need to meet in the middle. That means Republicans need to tone down the two-note chorus about taxes and state employee benefits, and help govern like they did briefly in 2017, when the Senate was split 18-18. And it means Democrats must pull back on the throttle for great programs we can’t afford. It’s no coincidence that Massachusetts does well with Republican governors and Democratic legislatures, and the nation does well under centrist presidents such as Bill Clinton. The middle path means Republicans need to stop trashing the unions and Democrats need to stop protecting every iota of their benefits. Modest givebacks on retiree health co-payments and cost-of-living adjustments won’t kill anyone and will help the state. And the middle path means pushing hard for efficiency gains in government at the state and especially in cities and towns, where property taxes are way too high.

 

  SHOW SOME CONNECTICUT PRIDE — Yeah, that was the name of a basketball team but it’s hard to find a place that trashes itself as much as we do in this state. Knock it off. You know who you are. Connecticut has great education, access to mountains, oceans and countryside and a lot of smart and innovative people. We have good cities, not great ones, with truly notable food and music, and access — there’s that word again — to two of the greatest cities in the world. Lack of growth has left us more open space and less sprawl. Enjoy it. Get psyched. Work hard, play hard and stop feeding the collective depression. It’s a small state, go make something happen.

 

  EMBRACE RISK — What do finance, insurance and defense manufacturing have in common? They’re all built around controlling risk. That’s what we do and it shows in the personality of the state. When it comes to business, we need the culture of put-it-out-there enterprise that seems to make no sense, like Amazon, Facebook, Tesla and Microsoft at their founding. We had it in the 19th and early 20th centuries and lost it.

 

  MARKET TO IMMIGRANTS AND YOUNG PARENTS - That’s our sweet spot because it’s more about education and family than urban lifestyle. Connecticut does welcome immigrants in contrast to Trump’s America and that can help us. We do have a good record of attracting people in their 30s. We need to reach those groups more actively with targeted campaigns.

 

  KEEP WORKING ON CITIES AND TRANSPORTATION - Connecticut will never compete on price with North Dakota and Mississippi, nor should we try. Building the place up matters even though it costs money. It’s working in Stamford.

 

  LET EQUILIBRIUM HAPPEN -- State Sen. Matt Lesser, D-Middletown, thinks it’s fine that houses are not overvalued. More opportunity for buyers, he says. It’s a matter of balance and equilibrium. At some point, millennial professionals might figure out that living in a great house in Milford or New Haven’s East Rock neighborhood, with a 15-minute commute, beats five to an apartment in Brooklyn and two hours a day on the subway. That may mean house prices have to fall even further, which sucks for us homeowners. But it’s a path that will work. Embracing equilibrium means understanding that bike lanes in and out of cities, and saving historic landmarks such as the Sanborn Library in Bridgeport, which was tragically demolished in August, will add up.

 

The cul-de-sac

 

Following a balanced path leaves plenty of room for debate over whether we more urgently need to cut taxes — the Republican solution — or, as Democrats insist, increase value by adding amenities to make the state more hospitable.

 

The same argument unfolds issue by issue: paid family and medical leave, a $15 minimum wage, housing subsidies for the poor, housing subsidies for the rich (yeah, apartments in Hartford at a cost of tens of millions for state taxpayers), corporate handouts, expanded Medicaid and on and on. In each one, there is a middle path of compromise that get too little attention. Paid family and medical leave, for example, is too rich a program, too soon, although it’s worthy.

 

All the while, we lost a decade.

 

Twenty-one years ago, a regional economic report warned that Connecticut was in danger of becoming a “cul-de-sac,” an economic dead-end, in part because it lacked “dynamism” in the coming century of urbanization and globalization. Hmmm.

 

“Right now investment is bypassing the state and we have become in many respects that cul-de-sac,” said Donald Klepper-Smith, a longtime economist who has, as of 2020, entered semi-retirement and moved to Massachusetts and South Carolina.

 

Klepper-Smith’s view: We need leadership and strategy to achieve fiscal discipline. “I don’t think it gets fixed in my lifetime because I don’t think we have the political will to fix it,” he said.

 

I’m more optimistic but only slightly. But there are many fronts in this war. Clearly, after the lost decade Connecticut just endured, there is no more wiggle room.

 

Rich Dupont, a manufacturing consultant, is helping the community college system, especially at Housatonic in Bridgeport, train machinists for the thousands of open jobs in advanced manufacturing that will disappear if qualified people don’t materialize. What he says about that battle also applies to the entire state economy.

 

“We are teetering on the edge.”

 

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 Guilford you can say “If market conditions do not change and if no new listings come on the market it will take 6.1 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 North Branford you can say “If market conditions do not change and if no new listings come on the market it will take 6.5 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.”



What Happened to the Middle of the Market?

We just had our Pearce Annual Meeting last week, and we talked about the current state of the market in Connecticut.  Greater New Haven, and especially Middlesex County, are better off than the other counties, since they are both up.  Fairfield is down the most, which is related probably still to the GE move, and maybe to SALT no longer being deductible.  Even in South Central Connecticut, though, we see pockets of hot markets and pockets of slow ones.

First-time homebuyers are clearly out in force, and multiple offers are common below $300,000.  Even things that sold last year can fetch more today, because the supply hasn't increased; in fact, listings are down.  That's what drove the increases across the country in the past few years--lack of supply.  We're seeing it now.

The upper end, especially the areas near Yale or along the coastline, is hopping.  We don't have enough listings to show people, even as we approach the busiest time of the spring.  The waterfront sales, particularly between $1 and $2 million, seem to pop as soon as new properties go onto the MLS.  It could be that it's been seven years since the last major hurricane, or it could just be that, at these prices, waterfront seems very desirable. The volatility in the stock market could also be causing people to rethink their asset allocations, and buy second homes with some of the money that they would otherwise put into stocks, especially since they got back what they lost in the fourth quarter--they may be reaping the gains and reinvesting in real estate.

Between $500K and $1 million, however, we have seen many listings languish, even those that we feel are great properties and priced well.  It's also where there is, therefore and obviously, the most supply.  Part of that is due to baby boomers trying to downsize, with taste and property conditions that make millennials balk. The latter group wants perfect homes, decorated and finished to the latest in trends.  Perhaps the speed with which the upper and lower markets are moving will push some buyers into this price range, and that would be good news for everybody.  In the meantime, it's an anomaly, making market conditions hard to describe in terms that are too generic.

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 Cheshire you can say “If market conditions do not change and if no new listings come on the market it will take 5.1 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 Cheshire you can say, “If market conditions do not change and if no new listings come on the market it will take 6.4 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.”



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 5.5 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.”

 

 

Academic Calendars and the Spring Real Estate Market

When I went to college, back in the dark ages, my first day of classes was on September 25th, and my graduation was on June 17th.  Things have certainly changed since then!  Most schools now gear up in late August, finish classes at the end of April, and hold commencement exercises in May.  Faculty members, who stop teaching in April, increasingly seem to travel in May, when the weather is nice, but the crowds are missing.

Our New Haven office in particular, which does more than half of its business with Yale affiliates, but all of our offices to some extent, run on an academic calendar, especially given that there are six colleges and universities in the immediate area.  We start to get relocation clients early in the year, often in January or February, after academic appointments start to go out.  Those people start looking right away, and we almost never have enough to show them, since sellers (and other real estate companies) seem to think that May is the time to list.  Actually, our biggest month for writing contracts in New Haven is March!  Once May rolls around, we find that things slow down some, and, after graduation, slow further.  This is less true on the Shoreline, where spring and summer still bring more buyers, but, even there, we see inventory shortages in the early spring.  In places where investment property, or property affected by taxes, the end of the year is also strong.

We now routinely tell sellers, especially in the City of New Haven, to get their homes ready to show by February.  That means, of course, that outdoor work needs to be done the summer and fall before they are ready to sell, since December and January are not ideal for that type of work, if it is even possible then.  This year, we took lots of listings earlier than in prior years, and most of them have sold by now, and many sold very quickly.  We are ready for a new round of listings now!

It obviously makes sense for sellers to be ready when buyers are beginning to look, especially if a house has features that might not stand up as well against a lot of other choices.  Therefore, consider this a clarion call to get your home buffed, fluffed, and ready to go, either when universities come back in the late summer, or next winter, when the new hires get made.  Why not take advantage of the cycle, even if it's not the same as what you may be used to from other places you've lived?

Differing Reports on CT Real Estate

We get periodic updates from various sources concerning the state of the real estate market in Connecticut.  The latest two that I've read say exactly opposite things.  One said that units are way up, but prices are down.  The other said that prices are way up, but that units are down.

Could both those findings be true?  It doesn't seem likely, but it does show that the market in our area is in transition, and that it isn't all one condition everywhere.  What it most likely means is that there is a lot of interest from first-time homebuyers on the lower end of the price range, so that those prices may be rising.  Once you get to a certain price point, which varies by region, the results show that there are caps on neighborhoods, meaning that homes don't sell above a given price, regardless of quality or size.  Therefore, we can still see downward trends, particularly in the upper brackets.

There are also discrepancies in similar reports, depending on exactly what they measure, and over what time periods.  For us at Pearce, this winter was remarkably good, despite the weather.  We see a lot of "Yale effect", so that our offices are busy when Yale puts out its offers for the following year.  A more traditional pattern of spring-summer sales exists in other locations.

 I guess the real point is that you can say anything at all, and find the statistics that will back you up!  We do know, however, that when the market is changing, it is probably going up.  Downturns tend to be more sudden, and often involve dead stops.  So, if you want to bet one way or the other, I'd say that the market is one in which buyers should move, and sellers should stay flexible.

Why Are We Seeing These Market Conditions?

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!

Should I Wait Until Next Year To Buy? Or Buy Now?

Article is from the KCM Blog, click here to view on their website

 



 

 

Some Highlights:

• The Cost of Waiting to Buy is defined as the additional funds it would take to buy a home if prices & interest rates were to increase over a period of time.
• Freddie Mac predicts interest rates to rise to 5.1% by 2019.
• CoreLogic predicts home prices to appreciate by 4.3% over the next 12 months.
• If you are ready and willing to buy your dream home, find out if you are able to!