By Mark Pruner
Sentinel Dashboard Editor
December is usually a fairly calm month in Greenwich real estate as sales increase somewhat from November which is traditionally a low point for sales. In December we see year-end deals for tax purposes and estate planning unless there is a major tax change we get a moderate bump and end the year with a decent sales month, but December 2016 is not a normal December.
We have a new president coming in and there is great uncertainty about what changes he will and can actually make. At the same time, we are seeing record highs in the stock market and the Fed (unlike the FBI) waited until after the election to make its major announcement of an imminent rate increase.
The result has been an increase in mortgage interest rates and an increase in buyer inquiries. For me and many other agents, December has not been the quiet month it usually is when we are normally more focused on getting ready for the holidays and the spring market next year.
For hard number examples look at the 59 post-election transactions we have had which consists of 54 new contracts and an additional 5 post-election contracts that have already closed. People are also pushing hard to get these contracts to closing.
Despite the increase in contingent contracts overall, we are actually down from 39 contingent house contracts on November 1 to 32 contingent contracts for single family homes. This is because we are up 23 pending house contracts as buyers who did the right thing, and got underwritten pre-approved mortgage applications, are moving to pending status in a couple of weeks rather than a couple of months.
Our most notable sale this week was 7 Cobb Island Dr. which sold for $15.25 million after being on the market for 495 days. The next highest sale however is at $5.3 million and the third highest is at 4.7 million. Only 9 of the 59 contracts were for over $3 million. This is indicative of what we have seen in the 2016 market in general.
The other thing that I think shows that interest rates increase may be driving the jump up in buyer activity more than a Trump glow/stock market wealth effect is that people who need a mortgage and are interest rate sensitive are the large majority of the buyers. We have 21 transactions that have happened post-election that are under $1 million and an additional 22 transactions that are between $1 and $2 million.
You can also see the increased urgency from those people that are getting mortgages when you look at the distribution of contingent and pending contracts. We have slightly more contingent than pending contracts, 29 to 25, however five pending contracts did have a contingency so we’re really looking at a breakdown of 34 to 21.
Also just because a listing never had a contingency doesn’t mean financing isn’t involved. Some buyers who are confident they can get a mortgage and are in a bidding contest or who want to offer a seller a major sweetener will waive the contingency.
Bottom line is that financed properties outweigh all cash deals by a significant margin and show how this bump up in interest rates is putting new urgency into buyers. We shouldn’t however discount the rise in the stock market and a general feeling that businesses will do better in 2017 that are playing a factor.
The increased contracting activity has resulted in a major drop in inventory. We are now under 500 listings when as recently as November 1 we had 591 listings. With only 499 listings and dropping we are down 16% in only 5 weeks. (In some price ranges and some neighborhood doing the unheard of and listing your house in December or early January might be a smart move.)
So is this a Trump Bump? Is the election of a more conservative and more pro-business president spurring people to get out and buy. It certainly seems to be spurring the stock market and that always helps sales but it tends to be on a longer term basis.
When you look at the difference in contingent contracts and pending contracts and the large percentage of purchases under $2 million the bump up in contracts seems to be more motivated by the fear of higher interest-rates then on a future improved economy. You could say it’s more of a Fed Led Bump up in sales, but Trump Bump rhymes better.
MARK PRUNER is a Realtor with Douglas Elliman in Greenwich and was their number individual agent in 2015 – 203.969.7900, mark.pruner@elliman.com.
