By: Mark Pruner
The COVID-19 pandemic is a sea change event for the world and the Greenwich the real estate market. We will have a B.C. market, before COVID-19 and an A.P. market, after the pandemic. The change in our market may even be greater than that wrought by the Great Recession.
I moved here in 1967 and it wasn’t until the Great Recession that we saw the Greenwich real estate market turned on its head. The Great Recession brought on what I call the nesting phenomenon in Greenwich. No longer was a huge house on a large tract of land on a cul-de-sac in backcountry the ultimate house. Post-recession people wanted live to closer to town and transportation. They wanted to be part of a community where they could see people walking by on the sidewalk in front of their house and their neighbor’s kids in the back behind them. The result was increased values in Old Greenwich and Riverside and decreased values in backcountry and mid-country.
There is a very good chance that this pandemic will kill the nesting phenomenon and bring a new normal, A.P. that in some ways is reminiscent of what we saw in the 20th Century.
I. The Pandemic, Renters and Lower Property Taxes
So far, the pandemic has had its greatest effect on rentals and particularly short term rentals. Lots of New Yorkers want to get out of the city to a safer place. Most of them see this as a short-term housing issue and would ideally like a three month rental, but this attitude as evolved this month. As we get further into April many of the prospective renters are saying let’s make it a full summer rental with an early start. Many renters are now looking for 5 month rentals and staying in Greenwich through Labor Day.
The short-term renters maybe able to help lower our property tax rate. They will be a major factor in how our real estate market will do in the A.P. world. They are the ones that are going to tell their friends what kind of reception they got in Greenwich and whether their friends in NYC should be looking in Greenwich.
I wrote an article back in 2018 proposing a “Greenwich card” that would let residents use all of our facilities; beaches, tennis courts, the golf course and our libraries all with just one card rather than the balkanized system that we have now. This summer would be a great time to package all of our cards into one for summer renters and let realtors or landlords apply for the package. Right now, the first thing rather than make the first thing a tenant do. People coming to Greenwich for the summer don’t want to stand in line at Town Hall and the Eastern Greenwich Civic Center.
Many of these summer renters will buy in Greenwich and likely in mid-country and backcountry. This would be a great way to add back value to our Grand List that has disappeared in north Greenwich. More of these people buy the lower the taxes for everyone.
II. Greenwich the New Sweet Spot for Second Homes
The pandemic has exacerbated the animosity that some people in rural areas have for people who own vacation homes. In Nantucket the locals call them wash-a-shores, though usually with a smile on their face. In other parts of the country there is no smile. To see a blatant display of this, check out a Buzzfeed article entitled, “This Pandemic is Not Your Vacation”. The writer who lives in Montana blames the spread of the coronavirus on wealthy people from the cities relocating to their vacation homes. She says, the rich don’t only bring the virus with them, but they “often don’t work at all”, don’t honor social distancing, have a “sense of entitlement”, “are not respecting locals” using all their Internet bandwidth and food, and are “overwhelmingly white”.
This article is clickbait a Buzzfeed specialty. It is designed to get lots of clicks, forwards and social media posts. What this article is saying is that wealthy, white, New Yorkers should stay home and die quietly in their Manhattan co-ops. (Okay, that last sentence was click-bait, but it does illustrate a continuing issue in many vacation areas.) As Dr. Fauci said, this pandemic will not end like turning off a light switch, we are going to see continued restrictions for months and even into next year. Some vacation homes in these rural communities may not feel so “vacationy” this summer.
A good point that the article’s author does make is that these rural areas do not have the medical facilities to handle a major COVID-19 outbreak. This is another area where Greenwich shines. We have a great hospital. I want to thank all the doctors, nurses, staff and volunteers that keep it that way. They have done an excellent job of handling this crisis. Our hospital will give Greenwich a major leg up in an A.P. world.
And, my favorite reason to live in Greenwich is a recent study published in the International Journal of Environmental Health and Public Health, that “found a strong correlation between low exposure to nature during childhood and higher levels of nervousness and feelings of depression in adulthood.” So, if you don’t want your kids to have a lifetime of depression that are better off in Greenwich. (OK, that was clickbait too.)
III. What’s next
The consensus among most agents here in town is that we are going to see a good second half of the year. The first quarter of this year saw sales, contracts and rentals significantly above last year. Even March sales during the pandemic were up 29% over March 2019. For April, the number of transactions flattened last week, but houses sales are still happening. In the first 14 days of the month we have had 14 sales spread fairly evenly throughout the town. This compares to 34 sales for all of April last year.
We will likely see better sales in mid-country and backcountry as people want more space. With luck, and some proper marketing, we may also see the return of our 20th Century pattern of people buying weekend house that they use year round and occupy full time in during the summer months as they commute into the city. We could see a revival of the “summering in Greenwich.”
I also expect that we will see buyers looking at local healthcare as a factor in deciding where to live. (It would be great if Greenwich Hospital had a tour for prospective home buyers.) Not only has Greenwich Hospital done well with handling the COVID-19 crisis they also have excellent maternity care. (“Would you and your husband like steak or lobster for your post-partum meal?”)
IV. The Environment for Sellers and Buyers
Interest rates are low and both buyers and sellers are motivated. Buyers are looking for houses outside of the hot zone and can buy with low financing costs. Sellers have the uncertainty of knowing what is happening in the future and many want to get deals done now.
If you are a seller, now is a good time to talk to your real estate and financial advisors. About a quarter of my time is spent discussing with people what they should do, whether to wait or list. For the pessimist, or as the like to be called, the realist, who see the market going down, now is the time to list. Before real estate I was in the petroleum business and the rule for oil drilling companies is when times are bad sell your rig now, because you will get even less in the future.
For the optimist, who sees demand and prices going up, a major question becomes will we see a return of “the house as an investment asset” its use as way to diversify assets. Much of what drove the housing bubble were sellers buying more house than needed because of the double digit appreciation they could get on the additional investment. We may well see, house prices increase, this year and next if demand is great enough, but is that a reason to hold the asset waiting for additional appreciation. We are in an economy where many assets have single digit returns, but thinking to hold on to your house, because of any expected double-digit appreciation in the future may well result in a long wait.
So, we almost certainly see major, and potentially long-lasting, changes in our market this year and next year. If we as a town take a proactive approach, we can make what happens better. A V-shaped recovery could leave us even better off than last year. Even in a more prolonged downturn, we might see sale rise as we are a small oasis in a large metropolitan area. Let’s pray for everyone and especially those people on the front lines.