Column: Real Estate – Chugging Along into a Headwind
By Mark Pruner
October is the month that the summer tans from a hot July begin to fade just a little more and that’s a little of what we saw in the real estate market. September was a good month for sales, while October 2018 was only so-so. Having said that, there is some good news for just about price range, and some have some really good news.
$800K – $1M Real Estate Market
On the really good news side, we have the 53 sales from $800,000 to $1,000,000 and an additional 17 contracts waiting to close. This makes a total of 65 homes off the market in a segment where the inventory is only 32 houses. While that’s not lot of inventory in such a busy market, it’s close to double what we had last year at this time when we only had 17 houses.
We have more people than last year who want to sell their houses in this price range. The nice thing for those sellers is that we have plenty of folks that want to buy a home in Greenwich for under $1,000,000. The demand is still outstripping supply as we are down 1.44 months of supply to six months of supply.
I was reading an article this week about how Las Vegas, one of the hardest hit markets in the recession, is once again a hot market. One of the complaints in the article was that builders were concentrating on luxury end of the market at around $400,000, leaving a shortage of lower end houses. In Greenwich the lowest listed price is $500,000 and we have only 13 houses listed under $800,000. If you are a buyer in this price range, there is an easy solution, buy a condo. WE 61 co-ops and condos listed all prices per square foot that are better than Manhattan prices.
The Heart of our Market
$1 – 3M+
Nearly half of our inventory, 46%, is from $1,000,000 to $3,000,000. It’s our bread and butter in real estate. This year the butter has sometimes felt a little more like margarine. On the good news side for sellers, inventory from $1.0 – 1.5 million is down 9 to 59 listings or 14%. Also, good news is that we have sold 174 houses priced from $1.5 – 3 million. This is 19 more sales than last sales which is a 12% increase.
The buyer’s side the new tax law hit the sales from $1 – 1.5 million the most with a drop of 12 sales from last year’s 103 sales to just 91 sales this year. For seller’s the big move to Florida may have run its course as inventory is down. The two effects of lower inventory and lower sales canceled each other out resulting in nearly the same 6.5 months of supply this year as last year.
Once you get above $1.5 million these trends reverse, inventory is up, and sales are up. We had 20 more listing as of the beginning of November in the price range from $1.5 – 3.0 million. We also had 19 more sales in that price range compared to last year. Sellers have it better at the higher part of the price range while buyers have more choices.
$3 – 5 million
We have 151 houses listed from $3 – 5 million and so far this year we have had 41sales which equates to about 19 months of supply. This is a slight increase in months of supply, but nothing worth wasting another sentence on.
$5 – 10 million
The interesting price ranges are from $5 – 10 million. This year the $5 – 6.5 million has been on the good side of the market. Months of supply were about the same as $4 – 5 million and some months, like this one, actually saw slight better supply demand than the $4 – 5 million market segment. While that continues to be true, as the year has progressed the segment from $5 – 6.5 million has weakened, so that now sales and contracts have slipped behind where they were last year.
Having said this, this price segment doesn’t come close to being the weak market that we are seeing from $6.5 – 10 million. In that price segment, months of supply is up by three years due to increased inventory and decreased sales. We had no sales in this price range in October and our contracts were down from 5 last year to only 2 as of the end of October.
This segment had had an outstanding year with sales up significantly from last year and inventory was down 16%. This led to months of supply dropping by 2 years compared to last year. The problem is that months of supply had been 3 year lower earlier this year. Sales have slowed with no sales in October and only one contract pending.
Uncertainty breeds a slow market and with the Connecticut governor’s race and control of the CT Senate up for grabs, we may be on the cusp of a sea-change in Connecticut politics. And, then maybe not so much, which leads to uncertainty, which leads to a drop in contracts and October sales. Overall, we are still up 20 sales YTD over last year.
I was talking to Julianne Ward, an excellent fellow broker here at Berkshire Hathaway who has a broad overview of the market. She pointed out another headwind that our market faces, namely next year’s bonuses, or more precisely what they will be. The Dow has been dropping a lot from its 2018 peak, and its recently been much more volatile, moving hundreds of points down and up on many days. The uncertainty of not knowing whether your compensation will be up or down doesn’t lead to buyers pulling the trigger on new house purchases. It does give those buyers willing to do so, an advantage in this market.
Bonuses, or discretionary compensation, also have been used at more income levels meaning it’s not just the very high-end that are taking a wait and see attitude. Throw in higher interest rates and it’s not surprising we had an October pull back.
Vote on Tuesday!!!
This election can set Connecticut on a new path. We all should be part of making that decision.
Democrats are newly energized and are well-funded from a variety of new sources. The Republicans are seeing a chance to take the governor’s seat and the Senate with multiple newly energized and funded candidates. Ironically, we are seeing the mirror image in the Senate race for Greenwich. Five-term Senator Scott Frantz is opposed Democrat Alexandra Bergstein, whose campaign has a ton of cash. (I do think they are pretty even on yard signs.) This is an election that will be decided who can get their supporters to vote in a “mid-term” election.
For Connecticut this is not a mid-term election. It is as important as it gets. If you care about Connecticut get out and vote on Tuesday, November 6th.
Mark Pruner is an award-winning Realtor with Berkshire Hathaway HomeServices New England in their Greenwich office. He can be reached at firstname.lastname@example.org or 203-969-7900.