Real Estate Column by Mark Pruner
On the single-family home side of the market, things maybe heading back to normal, at least we hope so. Our ten-year average of March sales is 37 sales and as of March 18th we have 18 sales, double that and we are pretty close to an average March.
Contracts
The issue continues to be contracts. As of March 18th, we have 60 contracts and on April 1, 2018 we had 106 contracts. So, we have a way to go this month to catch up. Of the 60 contracts, 37 are pending; i.e., without an contingency and the other 23 have a contingency. The principal contingency in most places is a mortgage contingency where the buyer is waiting on the bank’s approval before fully committing.
For the contracts that we do have more people seem to be paying cash and are closing quicker than they would with a mortgage contingency. As with many aspects of contracts you need to take this with a grain of salt, as not all contingent contracts are mortgage contingencies. For example, my listing at 7 Dempsey has a sub-division approval. This contingency will take several more months as the buyers of this 12-acre, mid-country property goes through the land use approval process.
Inventory
On the inventory side we are a little ahead of where we were last year with 578 house listings compared to 567 listing on April 1st last year, but we had a relatively mild winter. At this point its a less than a 2% increase over last year.
Rentals
You might think that if the housing market slows somewhat and people have to live somewhere that the rental market would expand. If you made that assumption, in the main, you’d be wrong. Our rental market is remarkably consistent year to year and by price range. It did vary somewhat because of the Great Recession. We had only 684 rentals leased in 2007 and then two years later in 2009 rentals jumped to 959 leases.
These number are the GMLS leases for all types of rentals; whether 10,000 s.f. mansions, condos or garage apartments. After the Great Recession the rental market, since 2011 the market has been fairly steady. Annual rentals on the GMLS have varied from 739 to 875 closed transactions and averaged 829 rentals a year.
Non-listed Rentals
We have more rentals each year in Greenwich on the Greenwich Multiple Listing Service than we have house sales, but this is not all the rentals. Under $2,000 the majority of listings are done privately, listed in the newspaper, or put on Craigslist. Under this price we have between 100 and 150 rentals per year on the GMLS. The units include everything from one-room-garage and basement apartments to smaller condos throughout town. If place that is livable in Greenwich for under $2,000/mo. it goes pretty quickly.
We also lots of Airbnb listings that fly under the radar. So far, these short-term rentals have not caused significant problems in Greenwich, while at the same time providing additional income for people who can really use it.
Price Ranges
The heart of our market however is between $2,000 and $4000. Last year we had 357 rentals out of the 859 rentals leased on the Greenwich. MLS. This number has gone as high as 375 rentals in 2009. In this price range, you’re mainly looking at condos and apartments, though you do find some smaller houses for rent.
Once you get above $5,000, we mainly have single-family homes. We still have a good number of rentals up to about $6,000 and then it drops off except for the last two years. In 2017 and 2018, we saw a big bump in rentals from $6,000 – 10,000 going from around 90 rentals per year to 154 rentals in each of the last two years.
Above $10,000 listings drop even more, but once you get above $18,000 leases are once again up in the last two years. In 2018,we had 28 rentals over $18,000 and 2017 had 33 leases. This was up from around 20 listings from 2007 to 2016. (At the high-end these numbers should also be taken with a grain of salt since some of them represent summer rentals on Long Island Sound at a much higher monthly rate.)
Seasonality
We have a distinct seasonality in our rentals, though not as dramatic as we do for residences. Rentals peak in May and June and are slower from September to February. We also have a little bump up in August as people rent places before the start of the school year and also before the start of new jobs for recent grads.
So, who rents out their property in Greenwich Connecticut? A surprising number of properties are rented by local Greenwich entrepreneurs and real estate investors. My listing at 181 E. Putnam was bought by a couple that lived there then decided to hold it for both sale and for rent. The house was updated with a new kitchen, living room and a Nest video security system.
Taxes
Real estate rental property not only generates rental income but also depreciation which you can offset against the property’s income sheltering that income for taxes. At sale, however you may well have to recapture this depreciation deduction when you sell. In addition, rental properties are held for appreciation and provide asset allocation for owner’s investments.
Tenants
So, who are the tenants for these places? We have the aforementioned investors, but also young couples who buy a bigger house than they might otherwise be able to afford and rent out part of it for income to pay for their mortgage. We have seniors who like that someone else is on the property with them. We also have people who get transferred overseas and want to rent out the property because they want to come back to Greenwich. You also see the parents of college kids rent out their kids’ bedrooms.
In Greenwich people are always allowed to have tenants in their house unless restricted by a condominium association. While most rentals in Greenwich are for a year we have a surprisingly robust Airbnb market in Greenwich with over 300 listings. So far, the short-term tenants have not proved to be a problem for their neighbors.
Accessory Apartments
Two rental provisions provided by planning and zoning regulations that are often forgotten are the senior accessory apartment and the affordable accessory apartment. The senior accessory apartment allows you to put in a second kitchen, which is otherwise prohibited in the R-7 and larger zones. For the senior accessory apartment, the tenant or the landlord is over 62 years old.
The affordable accessory apartment does not have an age limit but does have an income limit on either the landlord or the tenant. I helped write this regulation and it would be a great way to help meet the state mandate for accessory housing. Were we to meet that mandate, developers couldn’t come in with affordable proposals to put in higher density housing in areas that are zoned for lower density housing.
Rentals come and go, so you something should be along that you like soon.
Mark is an award-winning agent with Berkshire Hathaway. He can be reached at 203-969-7900 and mark@bhhsne.com.
