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Column: January 2019 Market Report Real Estate Sales Hold Their Own

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Government Shutdown Pushes Contracts Down

By Mark Pruner

January 2019 was a lot like January 2018. This year, we had 29 sales and last year we had 30 sales. In most price ranges we had about the same sales as last year.

Sales were up in the $1.5 – 3 million price range, where we had 13 sales, which is more than double the 6 sales we had to kick off January 2018.

On the downside, we had only one sale in the $600K – 800K price range, which was down 6 from last year. We also saw a drop of 2 sales in our ultra-high-end, over $10 million market, from 2 sales last January last year to no sales at all this year.

Then again, we do have three ultra-high-end contracts waiting to close right now which just goes to show that these small changes are just the normal numeric chatter you get in a market with only a few dozen sales in January.

Contracts

What is not chatter is the effect that the federal government shutdown had on our local real estate market. Contracts were down 28% (last year’s 58 contracts fell sharply to only 42 this year). In the $2 million to $10 million price range, contracts were down in every category. For homes below $2 million, the contracts held steady to the same levels as last year. On the good news side, the ultra-high-end (that had no sales last month) does have those three sales pending.

Bottom line: the overall drop in contracts in January does not bode well for sales in February. 

Inventory

On the inventory side, we are having an average year overall, with some noticeable changes at different price levels. Last year we experineced a jump in inventory of homes priced under $1.5 million. That is over, at least for now.

Homes priced in the $600,000 to $1.5 million range are down by 17 listings. That means there are only 69 houses on the market now in that range. The drop in inventory may just seem large in comparison to 2018, when taxes gave us a bump up on inventory. 

At the same time, the inventory in the $1.5 – $ 3 million range continues the trend that we saw in the latter part of 2018 with higher inventory. This may be the next phase of the new federal cap on SALT deductions that drove up lower priced inventory in the first half of 2018 having taken awhile to extend into the higher price ranges.

At the high-end, inventory looks just like last year with more inventory in the $5 – 10 million range and lower inventory over $10 million. I’m working on that with an effort to reach out to high-end weekenders who are tired of the commute and hassles of the Hamptons.

When all is said and done though we are within 1% of the same inventory as last year, up from 2017 just like in 2018.

Bottom line: it’s still to early to tell what the trend will be in 2019 for inventory.

The Overall Market

So, what can we expect in 2019? Several factors point to a better year; we just had a good January for the stock market, unemployment continues to be extraordinarily low and Connecticut, unlike New York and New Jersey, saw an increase in income tax revenue. (I wonder how much of that came from Greenwich.) The Fed also has gotten smarter and sees the extraordinary sensitivity of this housing market to increased interest rates.

On the down side we continue to hear discussions of a coming downturn, which, as companies cut back on spending plans, becomes a self-fulfilling prophecy. Also, as we saw last month FUD (fear, uncertainty and doubt) is a big factor in major purchases like a house. The federal government shutdown really upped the FUD factor.

We are also seeing worrisome bills in Hartford, from a proposal for 82 toll gantries on I-95, the Merritt and every other highway; a proposal for a statewide property tax, which would particularly hurt Greenwich; and even a tax on groceries. Now, the belief of many is that having a governor from Greenwich will stop many of these proposals that may prompt an outward emigration of large taxpayers, but most folks had the same feeling about our most recent governor, who had a pro-business record when he led the city of Stamford.

Lastly, here in Greenwich, property taxes will be going up this year, unlike last year when we had no tax increase. Holding taxes steady did its job and Greenwich is one of the few places in the NY metro area where real estate sales went up in 2018. Our property tax increase in FY ’19-‘20 should be within BET guidelines so that’s manageable. The problem is if the BET gets there with long term bonding.

What will look good on a short term basis, but will greatly restrict our resiliency and flexibility is a move to go to 20-year bonding. Our debt payments may go down for a few years, then we are stuck with paying back the bonds for decades. What long-term bonding really does however is open the floodgates of cash to do every politically expedient project, when we already have over $400 million of indebtedness of various shorter-term maturities. Our Connecticut pension mess started the same way, by elected officials compromising now and sticking some future official with figuring out how to pay the bills when they come due in a decade or more.

Bottom line: for 2019 and most years, I tend to like to look on the bright side. If we get a federal budget, a reasonable state budget, solve the China trade matter and the stock market does okay, 2019 could be a pretty good year.

Mark is an award-winning agent with Berkshire Hathaway. He can be reached at 203-969-7900 and mark@bhhsne.com

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