Real estate sales in backcountry Greenwich started off with a bang in the first quarter of 2021. So far this year, we have sold 22 houses north of the Merritt compared to 11 in the first quarter of 2020 or a 109% increase. That’s impressive, but what’s really amazing is the growth in contracts up from 6 last year to 23 contracts this year or a 283% increase. At the same time inventory has contracted from 83 listings last year to only 55 listings this for a drop of 34%. It’s a tight market, and buyers are moving fast and keeping us Realtors very busy.
Based on last year’s rate of sales and this week’s inventory we are down to the aforesaid 6.5 months of supply. The tight part of the market is from $1 – 5 million. (Can you have a tight market if you have no inventory and hence no sales from $1.5 – 2.0 million?)
Contracts are doing even better. If you add in our 23 contracts in backcountry (and assume they will close in 45 days) then the months of supply drops to 4.4 months for backcountry houses. This is a hot market, just about anywhere, but it’s truly amazing in an area where the median sales price is $2.6 million dollars. To see just how remarkable this market is let’s go back 22 years and look at how we got here.
Until last year our highest number of sales in backcountry was 90 sales in 2000. For much of what people thing of as the heyday of backcountry, sales actually fell from 90 sales in 2000 to 62 sales in the peak year of 2007. That year we sold $306 million worth of houses in backcountry with an average sales price of $4.93 million. If you look at graph of the period, you see a big rise in sales volume while the number of sales is actually dropping from 2004 to 2007. That’s a pretty good definition of a bubble.
In 2008, the bubble started to burst with the number of sales dropping from 62 in 2007 to 34 in 2008 and sales hit their nadir in 2009 with only 27 sales. Sales volume dropped from $306 million to $163 million in 2009. We actually had a pretty good recovery going from 2010 to 2015 when sales grew from 45 to 61 houses.
At the same time, our sales volume and median sales price bounced around. We reached our post-recession low price point in 2012 as our backcountry median sales price dropped to $2,012,000 only to all most match that number three years later in 2015 with a median of $2,043,000.
We didn’t start to see a real recovery until the 3rd quarter of 2019. At that point, prices in backcountry started to look pretty good compared to what you could get in say Riverside. In 2019, backcountry sales were up 31% in while they were down 11% for the town overall and Riverside saw a drop of 23% as the $10,000 limitation on local tax deductions finally hit Greenwich hard. (Not to worry Riversideans, you can feel pretty good about this year’s sales.)
In 2019 our days on market dropped from its post-recession high of 475 DOM in 2017 to only 220 days on market in 2019. In 2020, after a slow first half of the year DOM dropped steeply to 145 days on market. For the first quarter of 2021 we are looking at about the same DOM with 143 days on the market.
It’s easy to over analyze this market. There is a lot of Brownian motion in the numbers as the law of small numbers means that one sale like Tommy Hilfiger’s house selling for $45 million throws off the averages. Take out that sale and the backcountry average sales price drops from $4.94 million to $3.03 million, which is still a pretty good average.
What is clearly remarkable is the number of sales we had in backcountry last year. Our 102 sales last year is 13% better than our previous high of 90 sales all the way back in 2000. If you really want to make a “gee-whiz” graph, you can annualize our first quarter sales on a weighted basis. Most years the first quarter represents only 18.2% of our sales for the year, so, if you take our 22 sales so far this year and divide by 18.2% you get an expected 121 sale this year. This would be an increase of 19% in sales on top of our 73% increase in backcountry sales of in 2020 over 2019.
Will we get to 121 sales this year? I don’t think so, our inventory is much tighter than it was last year, and we’ve got a good chance of sales being supply constrained. We are however continuing to see some shadow inventory in backcountry that was mostly used up in 2020 in the sub-Merritt Parkway areas of the town. Our inventory is down 34% this year, while its down 45% for the town overall.
Additionally, backcountry has always being synonymous with larger houses, but when you look at the numbers that what we are seeing. Our median house size peaked in 2009 at 8,300 s.f. For the last three years, our median house size has averaged around 5,600 s.f. So far in 2021 our median size is actually down to 5,400 s.f. Our median house size for the town over all is 4,200 s.f. or 1,200 s.f. smaller than the median in backcountry.
This lower median does indicate one issue in backcountry, which is that sales are distinctly slower when you hit $5 million. Over that price we have 3 sales and 7 contracts compared to 29 listings in inventory. Not to worry too much as the majority of high-end sales have shifted to the 4th quarter.
This has not stopped some folks from rolling some really big dice in backcountry. Of those 29 listings in backcountry, 3 of them are new construction with prices ranging from $23 million to $40 million.
Aquarion’s 2 4-acre tracts surrounded by a 72-acre park
In addition, Aquarion is selling two 4-acre tracts at 45 and 49 Cherry Valley for $1.45 million and $1.395 million respectively. These lots were retained by Aquarion, when the town and the Land Trust bought72 acres from Aquarion to create new Convers Brook Park on Lake Avenue just north of the Merritt Parkway.
It’s very likely to be a good year for backcountry; inventory will determine just how good.
In the first quarter, we sold 195 houses totaling $581 million dollars. This compares to the first quarter of 2020 when we sold 101 houses totaling $217 million. So, sales are up 93% and dollar volume is up 167%. The increased sales volume is driven by a major shift to higher-priced houses. As discussed last week, the work and schooling from home changes in lifestyles has meant that lots of the homes that people live in now are too small for the new 24/7, multiple offices and multiple schoolwork areas lifestyle.
We are seeing not only people moving from NYC to Greenwich for more space and much less crime, but lots of Greenwich folks right-sizing. For most families that means moving to larger homes with more rooms, more land and more amenities. As always though we have many folks, that have retired and are empty nesters, moving to central Greenwich to condos, co-ops and apartments. These senior buyers are coming from both Greenwich and Westchester County. The problem is that we don’t have enough people leaving these downtown units, leading to the pipeline clogging up.
The demand is there, but the supply until this week was flat. Finally, this week we saw inventory actually go up by 9% from 285 last week to 311 listing this week. The only problem is that we should be around 550 listings, not 311 listings. Part of this increase in inventory, may be the result of increased prices that we have seen, which will be discussed at the end of the article.
But let’s look at how the Greenwich neighborhoods are doing ….
Our sales numbers in the first quarter for several neighborhoods are just weird. Normally, we see a set of descending stair steps, as we have more inventory than we have sales for the for first three months and more sales than we have contracts. Byram, Pemberwick, Glenville and South of the Post Road, think downtown, Chickahominy and Belle Haven, illustrate this typical first quarter pattern.
Our weird neighborhoods are Cos Cob, Old Greenwich, and particularly weird is the pattern in Riverside. We actually have more sales in Riverside the first three months of the year than we have inventory, and we have more contracts than we have sales. The result is that we only have 2.3 months of supply in Riverside and if you add in contracts it goes from ridiculous to unthinkable at least if you are buyer.
If you are buyer looking in Riverside, because of the excellent Riverside School (nice job Mr. Weiss and teachers) and you are looking between $2.0 and 2.5 million, you have choice of four listings and one of those came on yesterday. For all of Riverside you only have 34 houses on the market. Now that sounds bad, but at the end of March you only had 19 listings for the whole neighborhood.
At the other end, is backcountry where we had 65 listings at the end of March with 21 sales in the first quarter and 20 contracts.
Backcountry has been slower this year than the rest of the town, but one place where it blows away every other neighborhood is for the highest sale so far this year. If you look at the chart, the maximum sale in backcountry goes to the top of the chart and then it keeps going one and half more times to $45,000,000. Our next highest sale is $13.3 million in mid-country.
We have Tommy Hilfiger to thank for taking a great backcountry property and making it even better. He bought it at $31.3 million in 2010 and made a lot of improvements. Over the years, he has done that to several property. I used to regularly see him walking on Buckfield when I had a listing at 37 Buckfield. One of my regrets is I never thanked him for what he did for high-end sales in Greenwich, but then one of the things you get in Greenwich is privacy.
The other things to note is how some areas have a relatively small gap between the lowest priced sale and the highest, while other areas have big gaps. For those areas with big gaps your averages are going to jump around every time there is a high-end sale, so take changes in averages in these neighborhoods with a grain of salt.
A little more than halfway up the months of supply chart is 6 months of supply, the traditional dividing line between a buyers and a sellers’ market. Only backcountry goes over that line into a buyer’s market. One of the reasons for that may be that we still have some shadow inventory left in backcountry, whereas in most of the rest of the town, those folks who wanted to move and had waited years, listed their house and got it sold last year.
For our larger neighborhoods, Riverside is leading the pack with 2.3 months of supply. Now this is really amazing when you consider that the average sales price in Riverside is $2.39 million dollars. For most Connecticut town, that average price would be the high sale for the year and for many towns, the high sale for the decade.
Townwide we have 4.4 months of supply and most neighborhoods are between 3 and 5 months of supply. If you are coming to buy in Greenwich, you need to come with an underwritten pre-approved mortgage or have cash.
As you might expect with sales prices in the first quarter for single-family houses going from $520,000 to $45,000,000, we have widely varying prices per square foot. At the moment, South of the Post Road has the highest sales price/sf at $728/sf followed by Old Greenwich and backcountry. Normally backcountry wins this category, but this year we need more high-end, high $/sf sales. Backcountry is actually much better than we have seen it in many years, just not as good other sections are doing.
Part of that is the one area where are seeing enough supply is our over $10 million market. Luckily, Governor Cuomo, has really taken an interest in supporting Greenwich’s high-end real estate. With the help of the NY Legislature, NY state will now have the highest state taxes in the nation even exceeding California. For high earners in NYC, combined city and state taxes can be almost 16% compared to 6.99% in Connecticut.
I expect you’ll see some rather impressive high-end sales later in the year. In fact, post-recession most of our high-end sales have happened in the 4th quarter, so trust in Cuomo and be patient.
One of the best indicators of sales appreciation in Greenwich is the ratio of the sales price to the tax assessor’s assessment. Our chart for the first quarter of 2021 is remarkable in that every neighborhood, but Banksville has a SP/Assmt ratio that is up from the last revaluation in 2015. (I also wouldn’t worry about Banksville, that price drop is based on only three sales in the first quarter.)
What’s really remarkable is that for all the press that Old Greenwich has gotten for price appreciation, the best neighborhoods to put your money in back in 2015 was Byram where sales prices are up 45% from the revaluation that was effective 10/1/2015. This all the more remarkable, because Covid has hurt Byram and Pemberwick in particular due to their higher density in the last year.
The other nice thing to see is backcountry and midcountry with SP/Assessment rations in positive territory. This is actually good news for front country, since we are going to have another tax revaluation this year. With prices coming up in northern Greenwich, the shift of the tax burden to front country will not be as great as it would have been had the numbers in 2019 been included.
Overall, the SP/Assmt ratio is up 15% in the last 5 years. If your assessment percentage increase goes up more than the townwide average, you can expect your taxes will being going up. If you live in a neighborhood that has appreciated, but less than the townwide average your taxes are likely to go down in 2022 when the new assessments will be used to calculate taxes.
Overall, things are looking up for Greenwich real estate. The one major fly in the ointment is half a dozen bill in Hartford including a proposal for state-wide mansion tax.
Work from Home (WFH) Drives 427% Increase in High-end Sales
In the first quarter of 2021, Greenwich home sales were up 93% to 195 sales compared to 101 sales in the first quarter of 2020, and it’s going to get better. Our contracts are up 115%, so you can expect that April 2021 will be much better than last April. The first quarter would actually have been even better than that if we only had had more inventory.
At the high-end, transactions (sales and contracts) over $4 million are up 427% from 11 houses last year to 58 house this year. Homeowners at the high-end are adapting quickly to the Covid-driven once in a century change in work patterns and lifestyles. Changes that were already underway in the work/life balance that would have happened over the next 10 years happened in one year.
March 2021 Inventory, Contracts, Sales and Months of Supply
WFH is driving home buyers at all price levels to upsize their houses and if the buyers can do an all-cash deal this transition happens a lot faster. This trend will likely continue for years as millions of homeowners rightsize their living needs. We are seeing Covid driven buyers who are moving from the high-density, and unfortunately high crime rates in NYC, to the suburbs, but also lots of buyers in town that just need more space as everyone is home most of the time. Buyers want more space, more land, more rooms and more amenities.
Change in Inventory, Contracts and Sales from 1st quarter 2020 to 1st quarter 2021
INVENTORY IS WAY DOWN
I used to lead with sales, now it’s inventory, since that is determining sales. We had 508 single family home listings as the end of March last year. This year inventory is down 45% to only 282 listings. While we added 23 new listings last week, we also had 46 listings go off the market for a net shrinkage of 23 listings. We lost twice as many listings going off the market as we saw come on the market. We normally would be adding dozens of net listings every week at this time of the year.
Last year, we started the year with 432 house listings and by March 31st we were up to 508 listings or an increase of 17.5% in the first quarter of 2020. This year we started at 293 listings and by the end of March we were down to 285 listings a drop of 2.7%. If there is any good news in this, it’s that the drop isn’t greater. Our inventory has been essentially flat since the beginning of the year. What this means is that our new listings, for the moment, are essentially matching our demand.
A TOUGH TIME TO BE A BUYER, BUT MAYBE NOT QUITE AS BAD AS YOU THINK
The low inventory makes for a very challenging time to be a buyer. When you are ready to buy, there is a good chance that what you want won’t be there, so you have to wait for new listings to come one. So far this year, we’ve had 302 listings come on the market, which is actually up 4.1% from last year. So, all the harping by agents that we need more listings have gotten us 9 more listings. The result is a very tight market with only 4.3 months of supply down from 15.1 months of supply last year.
As a buyer in this market, you wait and check the new listings multiple times a day and finally something comes along, that while not perfect looks pretty good. You call your agent and start driving hoping that he or she can set up an appointment to see this rare, though slightly flawed, gem. Your agent amazingly is able to set up an appointment in only 2 hours. You meet your agent and find out they are running behind and it’s going to be another hour before you can get in. You get in line with the other buyers’ cars and wait your turn.
You have 10, maybe 15, minutes to walk through the house and to make a million dollar plus decision with your agent. It’s a tight market and who knows when something else this good will come along, so you decide to put in a bid. Your agent checks with the listing agent, who informs her that yours was the 10th showing and they already have 3 offers. You decide to up your bid from full list to 108% of list. (The kids cannot stay in that apartment another year.) You scribble out your offer on the offer form your agent brought. She hands it to the listing agent who glances at it while showing out the people behind you and showing in the next people. The listing agent tells your agent that at 108% of list you are in second place and he has 15 more showings, two more than when you arrived.
THE ODDS OF GETTING INTO A BIDDING BATTLE
The whole experiencing is exciting and dreadful all at the same time; and it’s mostly not true. Even though our inventory is down 45%, and we do have bidding wars, only 22 of our 195 sales so far this year have gone for over list price. We have had another 38 listings go for the full list price. This means 60 listings or 31% have gone for full list price or better. Of the 22 listings that went for over listing price only 4 went for more than 5% over list price. For those with particularly nervous spouses, it’s actually a little bit better than that.
If you look at the original list price, then we are down from 60 sales at list price or above to only 53 at original list or above which is 27% of our sales. The odds are almost 3 out of 4 that you aren’t going to get in a bidding war on a new listing. You are even less likely to get in a bidding war if you are looking over $4 million. We have had only three houses go for over original list price above $4 million. In all three cases, these houses had been on for months. One had even been on for 1,356 days.
Also, to provide more reassurance to those who see the glass as half empty and draining fast, 11 of the 34 sales that went for what appears to be full list price actually were for “reporting purposes only”. These sales were private sales that are posted on the GMLS so we can point out to our fellow agents that we did it. They are also very helpful to me, and everyone else that follows the market closely, to know what things are selling for in these private transactions.
After all that, how many of our 195 sales this year went for (a) over list price, (b) without a price reduction and (c) were in contract in less than 21 days? (hey, some of these negotiations, inspections and due diligence really drag out.) The answer is 6, only 6 of our sales were super-hot and even for these hot houses the median amount over original list price was only 4% over list price. So, don’t panic.
OUR INVENTORY IN THREE SEGMENTS
When you look at our inventory overall:
33% of our listings have been on for less than 30 days (86 houses)
37% have been on for 30 – 180 days (105 houses)
30% have been on for more than 180 days (86 houses)
So two-thirds of our listings have been on for a while. You can probably wait till the weekend to see many of these houses, but make a phone call first as I frequently find, that properties listed as active have accepted offers. This is not a time for a slow and measured pace, move quickly, but most of the time you have time, if the listing has been on for a couple of weeks.
Now, don’t get me wrong. It’s a tight market our months of supply are ridiculously low. If someone lists a nice house in a desirable neighborhood at a good price it will get a lot of showings and probably also multiple offers, but the statistics so far say that happens less than half the time. Also, what the above analysis can’t see are houses that are priced fairly and have a bidding war, but none of the bidders go over list.
These bidding wars can also happen at any time and it’s not unusual to have a house sit on the market for several months and then have a bidding war when the price is reduced. So being prepared, particularly if you don’t like what is on the market is crucial. My article on how to be the winning bidder in a hot market is one of my most popular articles.
What I am saying is we have a hot market, it’s just not the market that you often read about in the press, not everything is going for over list with multiple offers. For sellers, this means that if you significantly over price your house, it’s going to sit on the market even in the hot market. Our buyers today are very knowledgeable about price and know when something is too high.
WHAT ABOUT CONTRACTS?
Contracts also show that a little anxiety is due. We have 195 sales, but we have more contracts waiting to close and we won’t know until they close just how competitive the market is right now. Last year at this time we only had 94 contracts. Our contracts have more than doubled and of those 202 contracts, 51 or 25% were on the market for less than 21 days and 34 were only on the market for 14 days or less. For all practical purposes listings that went to contract that quick were only on the market for days. Over list price sales are going up when we finally seen these price close.
ECONOMICS 101 FINALLY AND INCREASING PRICES
Is the hotter market and these bidding wars driving up prices? Definitely and also, it’s about time. We actually didn’t see much price appreciation in 2020. Yes, our average and median sales prices went up for single family homes, but that was mainly because of a big increase in sales of high-end homes, pulling these averages up.
If you look at the price/sf in 2020, it went up from $501 at the end of the first quarter to only $525 by the end of the year. This was an increase of only of 4.7% in possibly the hottest Greenwich real estate market every. We’ve had many years where the appreciation was in double digits. Lots of shadow inventory coming on market in the second half of 2020 kept the amount of appreciation down last year.
This year it looks like there is not much more shadow inventory left to go through. High demand with low inventory means prices increase. Our median price/sf is up 9% from the first quarter of last year and is up 4% from the end of 2020. Does this mean we are going to see 16% appreciation this year (4% x 4 quarters)? Last month I would have said that’s too high, but it’s not looking so crazy now.
MAY YOU LIVE IN INTERESTING TIMES
We are seeing a once in a century lifestyle change. Not since the invention of the car, the telephone and the radio are we seeing so many changes in the home. The work from home movement is not going away, even when Covid does. WFH means that people need bigger houses; at the moment they need much bigger homes because of remote learning and remote work. People also want more amenities and more property as well as more rooms.
This plays right into Greenwich’s forte. Our 4-acre zoning I believe is the largest in the state. We have more houses with more rooms. We have a great hospital and excellent schools all factors that bode well for us. I do think we will evolve from WFH to WOFH where the “O” stands for either “occasionally” or “often”. Even after Covid is gone, people will still want a home office.
The concept of the home office is also evolving. It’s no longer just a desk and some bookshelves. It now comes with a whole set of accoutrements. You have copiers, scanners, supply closets, and printers. The old 3-in-1 device is just too limited. People who can afford it are not going to scan a 20-page document one page at a time.
THE EVOLUTION OF THE MASTER OFFICE SUITE
We are also going to see Zoom rooms for video conferencing. You should not negotiate $100 million deals with barking dogs and crying babies in the background. I think we’ll also see more assistants work in the home office and not just remotely. The next step is a master office suite and also guest offices. I can even see the Biden administration giving carbon credits to businesses for people not to commute. (At the same time, former presidents with lots of commercial office space being freed up will need excellent deal making skills.)
The Covid era is not like Hurricane Sandy or 9/11. The world pretty much went back to a gradual evolution, after a year or so had passed. Covid could have been like that, but ubiquitous connectivity, smart phones and a whole series of technologies that were just maturing allowed us to quickly morph to new ways of living and working. At the same time, people really want to get back together to facilitate teamwork, I just don’t see them doing that 10 hours a day, 5 days a week as many workplaces had become.
While the future is rapidly evolving around us, let’s wear masks. Covid is at another inflection point, which really needs to be a downward inflection this time. Having a low Covid rate is a real competitive advantage.
Mark Pruner is a Realtor in Greenwich, CT with Berkshire Hathaway. He can be reached at firstname.lastname@example.org or 203-969-7900.
How to Actually Create Affordable Housing in Greenwich
I’ve been looking into the very controversial SB 1024 and believe that it will destroy more affordable housing than it creates, while causing lots of damage to towns and cities across the state. The one group that will be greatly aided by the bill if enacted are developers of mid to large size developments.
We have lots of good local developers who work in a difficult environment
Developers get a bad rap. They are entrepreneurs with a vision who put their own money at risk to build something better. The system they work under, particularly now, is difficult and risky. Yes, they usually make a profit, but I don’t think there is anything wrong with that. The good thing is that our local developers generally want to build something good for the community. Multiple times in meetings, I’ve heard developers say, “I can build that, and I’ll make money, but it’s not what I want to be known for. Building cheap and lowering values is a negative sum game for them.
The system these developers work with is too expensive, takes too long, is too balkanized, too adversarial and is way too uncertain. All of these factors drive up costs, and lots of these costs don’t give value to buyers. Amazingly, SB 1024 makes things much easier and will result in something much worse. It’s proponents actually think that this bill will only make small incremental changes and can’t seem to see what the big deal is. They make the false assumption that if we build more units, more supply will drive prices down and lower prices will lead to greater diversity in towns and cities.
The problem with this approach is that the New York City metropolitan statistical area is 20.2 million people according to the census bureau. So, Greenwich’s 62,000 people represent 0.3% of that population and an even smaller part of the residential units in the NYC MSA. We have essentially insatiable demand for houses. Adding a few hundreds or even thousands of unit in a desirable area in this sea of 20 million potential buyers is not going to satisfy this demand.
21st Century blockbusting
What this bill does is give major financial incentives to developers, and particularly out-of-town developers, that can build big, cheap and fast, to build quick and move onto another town where they aren’t known.
These developers are not going to build affordable units and SB 1024 doesn’t require that they do so. It should really be called the OverDevelopCT bill. These developers are going to build as big as they can, with as many units as they can. The result is likely to be a brief glut of high-end apartments, that instead of renting for $12,000 – $15,000 per month will rent for $9,000 – 12,000 per month, not most peoples idea of affordable apartments.
The one way that the proponents could accomplish their goal would be through the uglification of Greenwich, which I call legal block busting. In this 21st version of blockbusting, the developer goes in and tells all the folks on the block that he’s about to build this big, apartment building, or two or three of them, right next door to them on their block. He points out that once these are completed, the streets are going to be blocked with cars, since under SB 1024 there is little or no onsite parking required under the bill.
While he says that’s the bad news, the good news is if you sell now, I, the developer, can pay you a premium, since I now can build multiple units on your lot in what was a one-family zone. Unfortunately, if you don’t sell to me now, the 50% limit on this type of development is going to kick-in and you’ll be stuck on a congested street, surrounded by over-sized apartment buildings with no ability for you to do the same. Your house is going be worth less, as no one will want to build a nice house in this soon to be congested, neighborhood, so sell now and make more money.
Loss of affordable and historic homes
The other issue is that many of these houses and duplexes that are going to be torn down are presently some of our more affordable units. The effect of this bill would therefore be to decrease the number of affordable units, while creating a glut of high-end units. We are likely to many older, and often historic homes, torn down and see a fall in value of the ones that aren’t torn down. Bottomline, more high-end rentals, fewer moderately priced houses and duplexes, historic homes torn down for new multi-family rentals and more traffic congestion in already congested areas.
Some proponents are calling such visions alarmist, but the economic incentives are in the bill and I don’t see any limitations other than a preliminary injunction from the superior court to temporarily stop this kind of development. The bill gives developers approval as a matter of right and requires development of at least 15 units per acre. I don’t see any legal impediment to dozens of these projects starting up this year.
For alarmist, how about sewer lines and our one sewer plant over-flowing as the bill proposes lower standards for sewer volumes. That I do believe is alarmist, and I don’t think it is likely to happen. In discussions with people in town, we come up with several worse options that this bill would allow, but I really don’t want to publicly disclose these ideas that would cause Greenwich even more problems.
Some reasons we need affordable housing
David Ogilvy, several years ago, when we were on working on a deal together, told me the most important thing is to try to always do what’s best for the town. In the long run everyone is better off. I am a strong believer in more affordable housing. I moved here in 1967 and the town is not what it was then. We are seeing more and more high-end units replacing our more modest homes. Our volunteer fire companies are having trouble finding enough people. The over-scheduling of adults and kids and the lack of really free time for everyone have led to different town.
We are seeing a less diverse range of means, but not along racial and ethnic lines. Check out the United Ways’ just published online 2021 Greenwich Needs Assessment (https://greenwichunitedway.org/needs-assessment). It’s an excellent summary of the issues that are really facing Greenwich. It points out that our minority population is actually up a little.
While we have some very wealthy residents, the United Way has also pointed out that 7% of our residents live below the poverty line and an amazing 22% fall into a group called Asset Limited, Income Constrained, Employed. These are folks who earn more than Federal Poverty Level, but don’t have significant savings and just barely meet their basic needs. They have little money for any emergencies and are unable to handle even a short period of unemployment. In Greenwich, this group is 22% not that far below the state-wide percentage of 27%.
We do have housing for these folks, it’s not always good housing, but people upstate would be surprised that 29% of the residents in “super-rich” Greenwich are struggling to meet even a basic living standard. Many of these folks are the ones that make this town work in town government, local businesses, our charities, religious institutions and volunteering. They are an important part of the town and we need to have affordable housing available for them. They add to the rich fabric of Greenwich.
What is the law now as to affordable housing?
The main statute presently promoting affordable housing in Connecticut is Connecticut General Statute 8-30g. This is the statute that allows developers to appeal denials of affordable developments by local planning and zoning committees, if the town doesn’t have at least 10% affordable housing as defined in the statute. In court, the town can not argue that the development exceeds zoning limitations. The court has to permit the development unless the town can show that the proposed development would endanger, public health, safety, or other matters such as the environment.
The law presently has two problems. First for a development to be considered an affordable development:
(1) 15% of the units must be deed restricted to households earning 60% or less of the area median income (AMI) or state median income (SMI), whichever is less, and
(2) 15% of the units must be deed restricted to households earning 80% or less of the AMI or SMI, whichever is less.
To meet the 80% state median income the renter can’t make more than $42,000 per year and at 80% the lower state-wide income limitation is $56,000. By using 60% and 80% of the state median many projects that would otherwise work in Greenwich don’t generate enough income to be viable commercial developments. These state-wide median based incomes exclude our first-year teachers, firefighters and police officers, since their starting salaries are little above the 80% statewide average.
We should be able to use the local area income, which would allow for much higher rents and make more projects viable. For folks that are resistant to affordable housing, the statewide income standard means that 8-30g has resulted in minimal affordable housing in Greenwich. It’s a feature, not a bug in the law for these folks.
The other problem is that in calculating whether a town has met the affordable housing 10% minimum much of the affordable housing in a town is not counted. The statute only counts (1) government-assisted housing and (2) low-income houses, mobile homes and accessory apartments that are deed restricted as affordable for 40 years.
At the present time 5.3% of our housing qualifies under this restrictive definition. This is 1,371 units out of a total of 25,631 housing units in town. Our Planning and Zoning Commission and Greenwich Communities (formerly called the Housing Authority) are to be congratulated for having this many units that meet the state requirement given the high cost of land in Greenwich.
How do we create more affordable housing?
The high cost of land in Greenwich is the biggest problem to creating more affordable units. The land around the train station and along the Post Road are particularly valuable for commercial businesses. To make units affordable you have to have either, more units per acres, lower land cost, or free land.
Our present affordable housing law, 8-30g, does not do a good job of creating affordable housing. It allows for greater density, but the developer gets 2.3 .regular units for every affordable unit. At the present time we are 1,200 affordable units short under the 10% statutory definition. This means that we would actually need 4,000 units in 8-30g compliant development to net 1.200 affordable units.
Count all affordable housing
To my mind, two things should be done to improve the situation. First, count the affordable housing that every town actually has. I would count all units that meets the 80% local standard should be toward the required percentage. For units that can meet the 50% standard, they should be counted as 1.5 units. This will distinguish towns like Greenwich that a diversity of affordable housing from towns with regulations that prohibit types of housing that would be affordable. This will incentivize town and developers to create more privately funding affordable housing.
All market rate units, whether receiving government assistance or not, should be counted, since some of our rentals in-town actually meet these limits. Also, our accessory apartments, which P&Z just made easier to do, could be built to meet these standards. Property owners that are willing to rent out their properties at these lower limits should get a property tax break.
These affordable units should not need to be deed restricted. The owner should annually certify what the rent is and that it is rented. SB 1024 doesn’t require that the units be rented, so your neighbor can build an apartment in their back yard and deed restrict it, so it’s counted under 8-30g, and use it as guest house. That’s not helping people who are looking for affordable house.
Second, the town should build, or take over, rental housing that is 100% affordable. Why build 2.3 market units just to get one affordable unit. While it would be highly controversial, these units could be built on state or town land saving the cost of the land. A few large developments tucked away to my mind would be a better alternative than lots of mid-sized buildings with one or two affordable units.
For a really controversial proposal, the town could purchase presently existing company housing from the hospital, private schools and other facilities giving these institutions an infusion of cash and us a big boost in affordable housing. (I don’t say it’s likely, but when your write a column or propose legislation you can include anything you want.)
Have the state donate land
We could also get the state to donate the air rights at the Greenwich railroad parking lot and some of the rights-of-way along I-95 for moderate cost housing for local workers that can’t afford the going rates, particularly when they are starting out.
A Housing Trust Fund
Planning & Zoning also has an excellent idea which is to create a not-for-profit Housing Trust Fund to be financed with private money, but available to help assist some public housing projects. Companies could get housing for employees; individuals could get tax deductions and the town could meet its requirement for 10% affordable housing set out in 8-30g.
To be clear there is no 10% goal in the SB 1024, so unless that fails to pass or can be amended to include such a provision, we could still end up with the nightmare of uncontrolled development. This bill has strong support in many cities and some town, which baffles me. Do the local elected officials and town commissions really want to give up control on what can be built in their municipalities.
As I mentioned in my last article this is no time to sit back, if you know someone in these other towns and cities that are supporting, this uncontrolled development, you might give them a call and ask if they know what is likely to happen in their cities and towns.
I support affordable housing in Greenwich and have done so for decades. Back in the ‘80’s, I drafted the original affordable accessory apartment ordinance and helped usher it through the Greenwich Planning & Zoning Commission. In the 90’s, I was Chair of the Selectmen’s Affordable Housing Commission for several years trying to coordinate multiple town agencies to make Greenwich welcoming to a diversity of people and economic means. I want to preserve the character of Greenwich and enhance its already diverse population. We are about to see a bill that will do just the opposite, while greatly changing Greenwich.
SB 1024 is a blockbuster bill just introduced in the Connecticut legislature that will do a lot of damage to the quality of life in Greenwich, particularly central Greenwich and will produce only a little affordable housing. We also have another bill that wants to create a statewide property tax, which in combination with SB 1024 would be create synergistic badness for Greenwich.
What SB 1024 will do if passed, and it has a very good chance of passing, is to bring in developers from outside this area to build lots of multi-family housing to rent mostly at market prices. The proponents of this bill, “Desegregate Connecticut”, are of the opinion that if you build lots of new housing that housing prices will fall, and this will desegregate Connecticut. I think that is extremely unlikely given that we live in a metro area of 14 million plus, lots of who would love to live in Greenwich, a town of only 62,000. What you are more likely to get are lots of new downtown and Post Road units renting at premium, not affordable prices.
There are several underlying ideas that have been incorporated into the bill, but I can’t tell you how they would work even after multiple readings of the bill. Over the years, I’ve worked on a lot of legislation; as an attorney, testifying twice in front of the Connecticut legislature, as a lobbyist in Washington and speaking at a lot of public hearings here in town on P&Z and other regulations. I thought I was losing it in my old age, because I couldn’t figure out the details of how SB 1024 would work here in Greenwich. Luckily for me, and unfortunately for Connecticut, everyone I’ve discussed the bill has said the same thing too; they don’t know how it would work.
Let’s take a look I what I think the bill says.
WHERE COULD YOU BUILD
The bill proposes high-density development around the primary transit station for each municipality. For Greenwich, this means our train stations and it probably means the Greenwich train station. Unfortunately, the definition of “municipality” is somewhat convoluted so in a worse case situation it could be all four train stations. The bill proposes allowing the building of high-density complexes within a half-mile of the transit station. The odds are that this is all of downtown Greenwich, including parts of Mead Point. This transit area will be looking at an intensity of development that we have never seen before and under this bill the town can’t stop or even slow down this development.
The bill however goes on to say that the half-mile radius can be expanded to 1 mile if there is “a public right of way that directly connects to such transit station with adequate sidewalks, crosswalks and other similar pedestrian facilities”. Central Greenwich is a great place to walk, and a 1-mile radius would extend from Greenwich Hospital to most of Belle Haven and Field Point Circle.
In addition to central Greenwich, you also have two other areas for increased density projects; one is the “Main street corridor” and the other is any lot in our single-family zones. The “main street corridor”may only be the Post Road for three-quarters of a mile around the top of Greenwich Avenue or it may mean the entire Post Road from NY to Stamford. I’m guessing it’s the entire length of the Post Road, but I’m not sure. (It might also mean some of King Street also.) This main street corridor would extend along the Post Road and for a quarter mile on each side.
WHAT COULD YOU BUILD?
If it is central Greenwich and the Post Road corridor, the question is what could you build. This is the really interesting part; you can build higher density in the transit district and the main street corridor at a “minimum of density of 15 units per acre”. To me that means that on our R-20, 0.46 acre lots, you would have to build at least 7 units.
What I can’t figure out is how big that 7-unit building can be. It might be limited to the present FAR of 4,500 s.f. in the R-20 zone, that would be 7 units of 643 sf. It might be limited to half of the lot size or 10,000 square feet per floor up to 37.5 feet the height limitation in the R-20 or it might have no limit. Also, the economics would strongly encourage developers do assemblages of properties, and to buy oversized lots so that they could put up much larger buildings.
In the transit district you may not have to any on-site parking. The presumption is that everyone will take public transit. In the main street corridor developer would only need a max of 2 parking spots per unit. So, a four-bedroom unit with 6 people would still only need 2 parking spots. Imagine what trying to drive on Milbank or E. Elm will be like in 2022.
In the single-family zones each property could build an accessory apartment. This means a guesthouse of up to 1,000 s.f. with a full kitchen. This apartment can be either be in the house, with no need for a separate entrance, or it can be in a separate building. Contractors will have field day building elegant pool houses with full kitchens. Parents will be able to send their kids to play in the backyard and not come back until tomorrow, oh and make your own breakfast too.
The bill has no requirement that these actually be rented, they just have to be deed restricted for 10 year. Presently in Greenwich, if you build an affordable accessory apartment you had to certify each year that it was still be rented at an affordable rate. The bill will abolish both our affordable accessory and elderly accessory apartment regulations.
The bill also eliminates three key zoning provisions that presently zoning board members can use to turn down projects. Today projects have “to provide adequate light and air; to prevent the overcrowding of land; [have] to avoid undue concentration of population”. No longer will overcrowding be a factor to be considered or can you complain that the proposed big apartment building will block the sun or air circulation. Under this bill density as they call it in the new bill or overcrowding as it called in the present law is actually being encouraged in what are already our most densely populated areas.
“AS OF RIGHT” IS WRONG
Probably the most dangerous concept in the whole bill is that all of the above can be done “as of right”. This is the so-called “permit zoning.” If this bill is seen as having a good chance of passing then developers will option lots of land in central Greenwich and along the Post Road. Once the bill is signed they close on the land and wait for it go effective on October 1, 2021. In the meantime they pull out there previous plans done in Norwalk, Hartford, Yonkers and New York City where this type of high-density development is more common and tweak the plans for that site. (This is what will give out of town developers and advantage. On Friday, October 1, 2021 we could see as many as a dozen or more of these permit applications filed with the Building Department. Provided, they comply with the Building Code the Town would have to approve them by December 9th and construction could start the next day. Unlike the present 8-30g affordable house process, it appears that public health and safety, nor environmental issues can be considered. Sewer capacity may also not be an issue. (Lack of sewer line capacity was a primary factor in denying approval for the 355 unit proposal on the Post Road Ironworks site.)
The only limit to how many units can be built is that the town can limit these new high-density development to 50% of the downtown lots. It’s not clear whether that means the town can designate which half of the area can be developed or that they have to wait until there is a high density development on every other lot, before these units can be stopped.
“As of right” means no P&Z review, no public hearings, but still likely lots of lawsuits. Whether the town can get a preliminary injunction to halt the construction of dozens of projects is not at all clear. It’s also not at all clear as how many developers would go ahead in such a circumstance.
As I said I’m an advocate of affordable housing. I think accessory apartments are a good way for widows to stay in their houses and for young couples to buy their first house and for kids who grew up here to find an affordable place to live. The town could have done a better job of telling people about our elderly accessory and affordably accessory apartments, but the town needs some control of these units which the proposed permit zoning does not permit.
We also don’t need a statewide property tax. As with all taxes it will start off low, but just as the income tax did, it will grow. Every time legislators need to plug a budget deficit hole, they can change one number, the state-wide mill rate, and poof the deficit is gone. Then we’ll get more tiers and the politically connected will get exemptions. It’s a really dangerous tax.
SO, WHAT CAN BE DONE
The proponents of this bill have been organizing for years and are trying to apply a machete to every town’s regulations, when towns are very diverse. DesegregateCT.org lists 70 organizations that support them. You can start by contacting your state senator and representatives. Luckily, we have legislators in both the Republican and Democratic caucuses. Given the anti-Trump backlash, that swept in more liberal legislators, stopping this bill will be hard, so the best we may be able to do amend it, and let’s really hope it can be clarified, so at least we know what the rules are.
The legislators have already sat through a day of testimony, and I mean a day that started on one day and ended in the morning the following day, but I and other people couldn’t testify. There should be more hearings and they should be done regionally.
You can also check out organization that you may be members of who are supporting DesegregateCT and let them know that you don’t support SB1024 as proposed. We, and they, can support desegregating housing. The Connecticut Conference of Municipalities of which Greenwich is a member is a supporter of DesegregateCT. CATIC who writes title insurance policies through their attorney clients supports DesegregateCT through their foundation. Other members are the Sierra Club, Connecticut Homebuilders, AIA Connecticut (architects), APA CT (town planners) and ironically, Connecticut Preservation Action.
As to the state property tax; kill it. The state is getting billions of dollars from Washington as part of pandemic relief. Now is not the time for more taxes.
I like to say stay tuned for upcoming developments, but this time I’m urging you to get up and do something, now, before uncontrolled upcoming developments overwhelms us.
Inventory is way down in Greenwich. In fact, it’s at all-time, record lows. Our previous record low for inventory was 299 single family homes a couple or years ago on January 1st, just after all the year-end expirations hit. At the end of February, we only had 277 listings and this was actually down from January 1st which is traditionally the low point of the year for inventory. Our inventory traditional grows slowly in January, and the first part of February, and then starts to accelerate by the third week of February as the “spring” market starts (which I guess is better than calling it the late winter market, which is what it really was this year).
As of March 10,2021 we have 281 listings, so we might be starting to see more spring inventory come on faster than it is going off, but as with most things Greenwich real estate it zig-zags week to week. Our transactions, contracts plus sales, started out strong and have continued strong. We are up 94% on transactions through the end of February. This can’t keep on much longer, because we are running out of inventory.
As of the end of February, inventory had dropped 46%, which is 236 fewer listings that last year at this time. We came into the new year with very low inventory, and it got worse. New listings are coming on slower this year than last year. In 2020 through March 10th we had added 236 listings, this year we have only added 191 listings or a drop of 45 listings. We are down 19% in new inventory this year and it’s even worser than that.
Last year we a lot of shadow inventory, whose owners had been waiting for years to put their house on the market and finally did so in 2020.
Our inventory dropped in 2020, but then it held steady, so new inventory was coming on as fast as sales and contracts could take it off albeit with below average total inventory. The result was sales were up 63% last year and most of this increase was in the last five months of the year. From August to December sales were often double what they normally are. Then came 2021 and our sales have continued to be almost twice what they were in the pre-Covid months of January and February 2020.
At the same time, inventory has dropped in a zig-zag pattern in 2021 so far. It looks like we still have some shadow inventory left from $5 – 10 million where our 2021 listings are actually up by 20 listings. This has kept up our months of supply for that price range from dropping even more, but the question is for how much longer. If you exclude the $5 – 10 million price range, we are actually down 65 new listings from 2020. Under $1 million we have had only 18 new listings down 54% from last year.
What’s also remarkable is of the 191 new listings that we have had come on this year, 67 already have contracts and 18 have already closed. Now, of those 18 listings, 12 actually had zero days on market. What that means is that these were private transactions, that are being reported so other agents can see the selling price and so that the listing and selling agents can take public credit for the transaction.
What’s keeping listings off the market
With the market as hot as it, many listings are not making to a public listing. Agents announce at their office meetings that they have a listing coming on and another agent says, “I think I have someone for that.” The GMLS implemented the NAR required rules last year which prevents agent from marketing these so called pocket listings outside of their firm. If you look at the contract, the listing is with the homeowner and the brokerage firm, so the brokerage is really marketing the listing to itself.
Interestingly, many homeowners who might have listed their house last year during the dip in Covid cases are reluctant to list their houses now, since if they just wait a couple of months, most of the people who come through their house are likely to be vaccinated. What’s a few weeks delay in a rising market.
Another factor is that we have practically no new construction. What we think of as new construction is really replacement construction. I sold three land listings last year, one truly was raw land, but one was to replace a house that had burned down and one was an oversized lot with a house to be torn down plus a subdivided lot. So, four lots sold that will only add two houses to our housing stock.
The other thing we have talked about is the apparent disappearance of our shadow inventory under $4 million last year. From $4 – 5 million we are up 1 more listing in 2021 than in 2020 we do have a gain of 19 more listings this year over $5 million. What I failed to mention earlier is that we entered 2021 with well below average high-end listings. So we are actually down 10 total listings over $5 million even with 19 more new listings this year. The only real increase in inventory over last year is from $6.5 – 10 million where we one more listing.
If you look at the percentage change chart comparing month end February 2020 to the end of February 2021 one of the other things you’ll notice is a lot of cells with Excel error messages. The error messages mean there were no sales in that category last year. (BTW: I hate whoever at Microsoft came up with “#DIV/0!” for this error. It’s ugly and a pain to deal with.) If you scan the percent change chart all these error messages are above $6.5 million and below $600,000. The former is due to no sales at the beginning of 2020 at the high end and later is due to no inventory under $600,000 this year.
Another blogger here in town accused me of being a Pollyana, which I look at another way of saying I’m optimistic. The optimist says the snow is gone and is being replaced by snowdrops. Lots of folks have been vaccinated and lots more are every day. Rising price will encourage more people to put their houses on the market and homeowners will push for public sales to get multiple offers rather than the private sales. All this will result in us getting back to 600 listings by the end of March. (I think that may be a little too optimistic, I’d be happy to get to 400 listings.)
Stay tuned our market continues to be interesting.
February 2021: Greenwich Real Estate Transactions Double
Inventory Cut in Half
The number you want to remember for Greenwich real estate in February 2021 is “2”. Our sales and contracts are 2x what they were last year in the second month of the year. Our February sales were more than double last year, and contracts were nearly double. Our inventory is down to barely 1/2 of what it was last year. Our median price for 2021 sales so far is $2.2 million, which is up almost 20% from February last year. We have too little inventory for sales to continue at this pace.
Once again, the Greenwich real estate story has been turned on its head. Sales are important, and they are up this year. To be precise sales for the first two months of the year are up 68 sales from 2020 to 129 sales this year or an increase of 90%. Our contracts are up from 75 in 2020 to 148 contracts in 2021 or 97%. While this is a stunning change, it is not what’s going to define our market in 2021; that is our inventory numbers.
Our inventory is at record lows. As of the end of February we only had 277 single family home listings in Greenwich. This compares to 513 listings at the beginning of March 2020. We started the year at 287 listings also a record low and briefly struggled up to 300 listings, but since then we have actually been drifting down in the net number of listings. Right now, we should be adding dozens of listings each week as our spring inventory comes on the market and sales are usually at their low point for the year.
When you look at certain price categories you can see just how tough it is for buyers out there. From $800,000 to $1,000,000 we have 7 listings; last year at this time we had 25 listings. We actually have almost as many contracts as we have listings in this price range. The result is that our months of supply in this price category went from 16.7 months of supply last year to 2.8 months of supply this year or a drop of 83%.
Under $600,000 our months of supply is zero, as in we don’t have any houses, when at least last year we had 4 listings. This really speaks to how unique our market is. According to the NAR, the median house sales price for the entire US in January was $303,900. Half of the houses in the U.S. sold for less than $304K and that median sales price was actually up 14% from last year. In Fairfield County as a whole, the median sales price was $550,000, which was up 22% from January 2020 according to the Smart MLS. Right now, the lowest price house on the GMLS is $625,000 more than twice the national median and $75,000 higher than the Fairfield County median sales price. We live in a very unique market.
It’s not just the lower end of our market that is seeing these remarkable year over year changes. All the way up to $5 million we are seeing 6 months or less of supply. When you throw in our 97% increase in contracts, then we are seeing about 6 months of supply all the way up to $10 million.
Above $10 million we have 23 listings down 21% from last year’s 29 listings. We are looking at 15.3 months of supply at the ultra-high end due to our 3 sales (and we have two more ultra-high-end contracts). I can’t compare these sales to last year’s sales as last year we had no sales over $6.5 million last year through February. In fact, in 2020 our first sale over $6.5 million didn’t happen until May 11, 2020 despite having over 80 listings.
Inventory our 2021 sales determinate
Inventory, at all price ranges, is going to define what kind of market we have this year. If we get back to anything like normal inventory levels, we are likely to have a very good year. We have two big Covid related factors that are driving our market. Clearly, we are seeing many New York City families and other individuals looking for more space in their homes and no shared hallways, stairs, or elevators. They want to be able sit in their backyard and not have to wear a mask. The pre-pandemic perks that kept people raising children in a 1,200 s.f., NYC apartment are all shut down or have limited access. Museums, concert halls, lectures, exhibitions, and restaurants aren’t available or are restricted, making those apartments feel smaller every day. NYC is just not as cool as it was before.
The other factor that doesn’t get nearly the attention that it deserves, is the number of Greenwich families that decided to upsize in 2020. I had six sales last year where the buyers were doing just this. I was elected to the Board of Assessment Appeals and we are hearing assessment appeals this week. Three quarters of the appeals that I heard were from Greenwich residents who had bought another house here in Greenwich.
It could be that our out-of-town buyers didn’t know about the appeals process, but I will say that every buyer I had last year asked about taxes and assessments. It could also be that our local residents know how to find particularly good deals even in a pandemic. Regardless, lots of our Greenwich residents have been upsizing and our older homeowners continue to downsize here in Greenwich at similar historical rates. Some are going to Florida and other southern climes, but they have already done. The impression is that in the Covid era, that’s increased, but there is no good way to quantify people’s reasons for moving.
One thing that is clear is that we had lots of local homeowners that were willing to list their houses last year. Our sales were up 334 houses in 2020 over 2019 for total sales of 861 houses. Much of this additional inventory were from the so called “shadow” inventory of people that had been waiting years to sell. The question is how much shadow inventory is left, based on the first two months, the answer maybe not much. Then again sellers may be waiting for the crocuses and the climatic spring.
The Covid Housing Paradigm Shift
One of the main factors driving our intra-Greenwich buyers is that lots of Greenwichites need a different house. Today’s buyers want two, and even three offices. Kids also need virtual schooling area(s). Parent’s don’t want the school site to be in a remote bedroom on the third floor. At the same time, we are seeing some movement away from the very open floor plan. When the whole family is home, the whole day, for the whole week, having some private get-away space becomes a necessity.
The next couple of years will show whether these shifts in peoples housing needs becomes the new normal or if this is only a phase that will pass when Covid passes away. Given that the present predictions are that Covid may hang around much like the flu, albeit at much lower number of infections, the most likely result is that we will see a little of both. Some renters will return to NYC permanently and some pandemic renters have decided to take up full time residency here.
What isn’t going away are summer rentals. Many Greenwich homeowners who rented their houses last summer found it was a nice way to make a good amount of money in short time. It looks like most of the tenants liked their summer rentals as there are presently zero summer rentals available, though inquiries show that the many landlords are re-renting their houses again this summer.
A good time to list
I hear that some people are waiting for warm weather to list their house. With all the snow we’ve had it doesn’t look very springy, but it’s not the calendar or the weather that determines when the best time to list a house is but supply and demand. We don’t have much of the former and so have lots of the latter so now is a good time to list a house.
Stay tuned from a real estate viewpoint, 2021 has the potential to be even more nail biting than was 2020.
Greenwich had an amazing year last year in sales, and 2021 has been even better. Our median price went from $1,866,666 for all on 2019 to $2,080,000 at the end of 2020 or an increase of 11.4%. Our average price went from $2,376,978 in 2019 to $2,677,179 or an increase of 12.7%.
In 2021, this price increase has continued to grow. Our median price for single family homes through the middle of February is $2,342,000 or an increase of 25.5% over 2019 and a very surprising 12.6% median price increase in a month and half. This is more of a price increase than we saw in all of 2020.
So why is this happening and if we are getting 12.6% price increase in 48 days can we expect to get a 100.8% increase for the entire year? (OK that last part was just checking to see if you were actually looking at the numbers.) But why are we seeing 12.6% growth in our median price only 6 weeks of the new year. The reason is that our inventory is down and pretty much the lower you go in price the less we have to sell. For example, we still have yet to have a new listing under $600,000.
As of February 17th, we have already sold 115 houses as compared to 68 houses in 2020 for the first two months. In the first 17 days of February 2021, we have had 49 sales compared to 30 sales for all of February 2020. We started the year at an all time low of 287 single family homes, when we should have been in the 400s for listings. We saw a slight climb of inventory in mid-January, but then sales started to outpace inventory additions and inventory shrank.
Mo to Mo % Change
Average of Sold Price/SqFt
Average of SP/ASMT
Average of SP/OLP
As of now, our 280 house listings make for a new all time low. As of March 2nd, last year we had 513 listing, as the spring market started hit its stride last year. We won’t be getting close to 513 listings this year.
As a result, we are seeing upward pressure on prices. In December, January and February, we continued to see the sales price per square foot around $600/square foot. This is all the more remarkable when you realize that at the beginning of the pandemic, we actually slid to a low of $462/s.f. in April of 2020. This meant we saw a 31% increase in real prices from April to December.
If you take our 49 sales so far in February and annualize them (monthlyize them(?), There has to be a word for that) you come up with 80 sales for the present month if the second of February see sales at the same rate as the first two weeks. If we keep getting inventory, we just might make it, because demand has not slackened.
When you look at transactions, sales and contracts, we took a slight pause for two weeks at the beginning of the year and then transactions took off. Last week we had 22 sales and 36 new contracts making for 58 transactions compared to 13 transactions for the same week last year. No wonder inventory is going down.
Curiously, the roll out of vaccines may actually have slowed some people from listing their properties. Their thinking is why risk my family when in a month or two they are likely to be vaccinated. Another factor which hasn’t gotten much discussion, but is blatantly obvious, to anyone who has a window is that we are having a classic New England winter with frequent snowstorms. It’s not the most conducive to holding Realtor or public open houses.
The result is market that was tight in December, stayed tight in January and then got downright constrictive in February. The result is that our sales price to assessment is well over 1.42. Since our assessment ratio, the percentage of the assessor FMV that is actually taxed is 70%, anything about the reciprocal of 1.42 indicates that houses are selling above their October 1, 2015 assessed value. That date 10/1/15 is the last time that all of the property in Greenwich was reassessed.
Given that property values in backcountry and mid-country have fallen since then and are only started recovering starting in 2020, means a broad spectrum of properties are seeing price increases. December’s 91 saw a median sales price to assessment ratio of 1.656 or 16.6% higher than in October 2015. Our sales price to original list price is also up to very pro-seller amount of 95.1% and has been high for months.
Unless we see a flood of inventory or a major drop in demand, you can expect some significant price appreciation this year. Interest rates are still very low, the stock market is at record highs, we burned through lots of stale and shadow inventory, leaving a small relief valve of reserve inventory. It’s a good time to be a seller (if we only had more.)
and, Why Most Realtors Wish There Was a Zillow Alternative
Every day Zillow is putting Greenwich homeowners at a significant disadvantage, by falsely raising the monthly payments they claim are due on houses in Greenwich. This inaccurate amount appears in the header of every Zillow listing and stays on the page even when you scroll the data column. The estimated monthly payment is a key determinate as whether someone will buy, or even look at house in Greenwich. (I’d love to know if this is a nationwide issue.)
Zillow grossly inflates the taxes due on a house in Greenwich, thus increasing the monthly cost by thousands of dollars. The actual amount of the Greenwich property taxes appears in the Zillow listing, but Zillow don’t use the actual tax number in calculating the crucial monthly payment amount.
For example, 22 Byfield Lane in Greenwich pays $13,623 in annual property taxes to Greenwich. Zillow, however, estimates this property’s taxes at $42,665 or more than $29,042 higher than the actual taxes. This is 213% of the actual taxes and increases Zillow’s estimate of monthly expenses by $2,420. Cheryl MacCluskey, my co-columnist at the Greenwich Sentinel estimates that a buyer would have to have an additional $70,000 income to pay these fake taxes. The result is that many people think that they can’t afford to live in Greenwich and look elsewhere.
Even if they can afford that house in Greenwich, houses in other towns look more attractive. If you compare 22 Byfield Lane in Greenwich to 25 Common Mile Road in Easton they are both at about $2.5 million. Zillow says that you would have to able pay about $12,580 in monthly expenses to buy either home. Zillow is wrong on both accounts. The taxes they calculate for the Easton house are high by $9,733/year or $811/mo. In Greenwich, the taxes are high by the aforesaid $29,042/year or $2,420/mo.
This overestimating of taxes gets worse the lower the tax rate. For Greenwich with the lowest tax rate in Connecticut, the over estimation of monthly taxes is high by 100%, 200% and even more.
So why are Zillow tax calculations so bad?
You would think all Zillow needs to do to calculate the tax portion of a monthly payment is take the actual taxes paid for the house as entered by the listing agent on the Greenwich MLS listing and divide by 12 months. The correct tax number is on Zillow and that number is usually accurate.
That’s not how Zillow does it. They take the list price of the house and multiple it by 1.71% and divide by 12 months. They make not one, but three basic mistakes in calculating the monthly taxes. First, the mill rate in Greenwich is 11.59 for houses not in the sewer service area (think of it as 1.159%) not Zillow’s 1.71%. Second, the mill rate is not applied to today’s list price as Zillow does, but to the assessed value on October 1, 2015. Third, the assessed tax value is 70% of what the Assessor thinks the fair market value was on October 1, 2015. So, taxes on a $2,500,000 house whose value hasn’t changed since 10/1/15 are only $20,282.50 ($2.5M assessment x 1.159% mill rate x 70% assessment ratio) not the $42,750 that Zillow reports.
Why Realtors Don’t Like Working with Zillow
Long time Greenwich agent, Denise Rosato, pointed out this bad monthly payment issue to me at an open house recently. She had been trying to fix this problem for her client by contacting Zillow. As any agent who has had to work with Zillow knows it’s a nightmare trying to get Zillow to change anything. It can take days and weeks for them to even get back to you with anything, but an automated reply. Agents know that gong through regular Zillow channels for an individual agent is a lesson in frustration.
To add insult to injury, once you do get Zillow to change something, it’s very likely that when they refresh their database in a couple of days that it will revert back to old erroneous data and you have to start all over again. I’ve had to correct the same error as many as three times.
You can take “ownership” of a listing and make certain manual changes, but once you do that, you become a slave to Zillow. All updates for open houses, price changes, status updates and anything else will now have to be entered manually by the agent forever. Lots of wrong data stays on Zillow, because it’s just too much work to fix it.
Denise sent multiple emails she had sent to Zillow trying to correct the bad tax information. She eventually got back an email from a real person at the “Zillow Help Center” that Zillow uses a county-wide blended tax rate of 1.73% times the Zestimate. (They actually use 1.71% times the list price not the Zestimate as you can see when you click the down arrow next to Property Taxes in the Monthly Cost box on any listing.)
The result of all this is Greenwich loses buyers to other towns with higher tax rates, because the Zillow data is wrong. It is wrong everywhere in Fairfield County, it is just more wrong in Greenwich.
Other Zillow Issues with Real Estate Agents in Greenwich
Zillow has been on quite a run this week, but they have not treated agents very well. Even I was shocked at the visceral hate that many agents have Zillow. Were it not for Zillow Group’s market power, they would work with another company.
For example, Zillow has the notorious Zestimate which is their estimate of what your house will sell for in Greenwich. These estimates can be wrong by millions of dollars both high and low. Several years ago, a brave Zillow salesperson came to one of our weekly office meetings. Several agents complained about how far off the Zestimates could be, (they were even worse then). He finally said, “We know they are off, but they are a great way to start a conversation with a prospective client.” It wasn’t a great selling point for us to recommend Zillow. At least with Realtor.com you get a choice of multiple valuations.
Another major problem with the Zestimates is if you look at the history, they jump around by huge percentages often for no apparent reason. I listed a property for $4.3 million and the Zestimate went from $2.6M to $4.2 million literally overnight. (I don’t know why. Maybe they thought I knew something they didn’t.)
In some ways, I feel for sorry for Zillow and the Zestimate, as Greenwich doesn’t have hundreds of identical tract homes. Even when we do have two identical floorplans, one may have a third more square footage on the tax card, because one has a walkout basement and the other house’s basement is partially buried and not part of the square footage on the tax card.
The problem is that buyers rely on these numbers. They make decisions on what to go see and how much they should offer based on the Zestimates. House don’t sell, because of Zillow’s misinformation and the difficulty of correcting this information.
Besides the monthly estimates, all of which seem to be wrong, lots of other Zillow “data” have problems. A friend of mine listed a house this week and Zillow showed it had been on the market for 75 days, not a good way to get buyers to your house in a hot market. A third agent got challenged at open house, because the list price was so much lower than the Zestimate. The house was right next to i-95, while Zillow was pricing it off of waterfront houses that weren’t near I-95. A fourth agent had an issue where the dual listing on the SmartMLS was predominating over the Greenwich MLS listing and Zillow was showing that the seller was still taking backup offers when they were not.
Bottomline, Zillow is not built for a small market, with lots of housing types, of different ages, and vastly different values and they mistreat agents and can make homes more difficult to sell.
None of this really matters to Zillow
Zillow has now become a digital monopoly like Facebook, Amazon, Google, or Microsoft. Digital network effects have kicked in strongly. In 2021 homeowners and agents have work with the Zillow Group. The FTC made a major mistake, when they allowed Zillow to acquire Trulia, which Zillow is putting minimal market effort behind. At this point, Zillow is buy up competitors to consolidate their market power and their zooming stock price expand into affiliated areas.
Not only is Zillow looking to control the horizontal real estate information space, they are also moving quickly to control the vertical space. Zillow now has a statewide brokerage license out of East Berlin, CT (which is a somewhat ironic location) and is a licensed broker in every other state. They have finance and closing divisions. They own Dotloop, a leading digital documents company. They are buying tract homes at bargain prices in Atlanta, Las Vegas, Phoenix, Denver and other cities and reselling them with their own agents.
The Zillow Group now has about 2/3rds of all Internet searches and is growing rapidly. Their stock has gone from $25 to an intra-day high of $200 in 11 months as analysts see them squeezing out the competition and leveraging their market power. They have become the 16,000-pound killer whale.
They are so large and growing so fast that issues like really bad data don’t matter to them. Right now, if you want to get your data corrected on a timely basis you need to sign-up as a Zillow Premier Agent for which you will have to pay thousands of dollars. To be a premier Zillow agent, you don’t have to have ever sold a house just pay them lots of money under long term contracts just to get your face on their site. They also have grown so large that they now have to grow even faster on a dollar basis to keep up their compound percentage growth. They just started to charge for apartment listings and if that works agents can expect fees for house listings that are likely still to have bad data.
Lots of their money comes from payments by agents to Zillow, they really should treat us better.
Greenwich had amazing year in 2020 for real estate and it is continuing in 2021. It was a lot of late nights and early mornings for me, but it paid off with my first Chairman’s Circle Gold Award. If you want to see what I was up to just click the video below.
Thank you to my clients everyone that was a part of that amazing year.