Greenwich Home Sales, Interest Rates, TRID and the CFPB

TRID RegulationsHigher End Sales and Contracts Looking Up

So far this year, the 2017 Greenwich real estate market has been very interesting, particularly at the high end. We have an even dozen properties that have either closed or are under contract for over $5 million. Much of this hasn’t been reported, because only two of those properties have actually closed. Of the 10 other properties waiting to close; one of the houses under contract is listed for $17.5 million, and two listings are between $8 and $10 million. This is after a year where we only had 28 properties sell between $5 and $10 million for all of 2016.

Year-to-date, we have 48 sales of single-family homes, plus another 78 contracts waiting to close. Sales from $1 to $2 million have been the strong point in this market. On the inventory side, properties have been going off the market just about as fast as they have been coming on so our inventory continues to be low with only 448 house listings.

Will Higher Interest Rates Hurt Sales – Not in the Short Term

Despite the snow this week, it’s been a mild winter and buyers have been more active than in the harsh winter years. In addition to the mild winter, increased buyer activity is attributable to expectations by buyers of rising interest rates. Interest rates perked up earlier, but only a little and they seem to have settled around 4% or a little under. (Interestingly enough, the non-conforming, so-called jumbo loans/larger loans, have lower interest rates than the conforming and often government-insured loans.)

Now micro-economics say rising interest rates will result in lower real estate sales, however, the National Association of Realtors, did a study of interest rate increases and house sales. What they found was that usually when interest rates increase it’s because the economy itself is expanding and people have higher incomes and feel wealthier. The result is that the expanding economy tends to increase sales and interest rates are more an indicator of this. So, higher interest rates, provided they are accompanied by an expanding economy, don’t necessarily correlate to lower home sales.

What we have seen in each of the last few years are pundits at year-end predicting higher interest rates in the coming year. This has resulted in a jump in January contracts followed by a drop in February as interest rates don’t continue their rise and people dial back their expectations of increasing interest rates. With the Trump administration, this may well change. We have had a long period of expansion and are due for a correction, however, the expansion has been a fairly lackluster one, but slow growth and certainty are better than no or negative growth.

TRID is Hindering House Sales

While higher interest rates may or may not mean lower house sales depending on the economy, one thing that clearly has hindered the housing market are the Dodd Frank and TRID mortgage regulations and the thousands of pages of regulation that have been created. Along with all of the regulations came thousands of compliance officers that had to be hired to interpret and enforce these new regulations from the Consumer Financial Protection Bureau. To see just how bad it is, just take the name of the massive new TRID regulations. TRID is an acronym that contains two other acronyms; TILA-RESPA Integrated Disclosure rule. Now TILA stands for Truth in Lending Act and RESPA stands for Real Estate Settlement Procedures Act so just the title should be the Truth in Lending Act – Real Estate Settlement Procedures Act Integrated Disclosure Rule and the regs themselves are worse.

These regulations lead to silly real world results that actually hurt buyers. Buyers with “preapproved” mortgages can be denied by the bank at the last minute. Compliance issues can prevent funding, for a buyer that doesn’t fit neatly within the requirements of a particular type of mortgage and its regulations. Most Greenwich buyers’ finances don’t fit neatly within the regs. They have unusual and often complex financial situations. As a result, some really outstanding loan officers have to jump through hoops to get the buyer a mortgage. Too often it turns out there is a brick wall on the other side of the last hoop.

Another example of how this increased complexity has made closings take longer and be more difficult, is that the standard Greenwich purchase agreement now provides for a ten-day extension for failing to close on time rather than a three-day period for delayed closing that had been in place for decades. This is directly related to the complexity of the new regulations and the uncertainty that the regulations have generated.

Mortgage Regulations Need to Be Redone

The result is more problems for buyers in getting loans, more expenses for banks that are passed through to consumers, fewer community banks that can afford the compliance costs and fewer people qualifying loans. Now I’m not against regulations, but the system that we have now is not working and it is holding back the economy and the housing market. It is badly in need in rationalizing.

 

January Sales in Greenwich Up – Very Competitive Price Ranges

January 2017 was an excellent month for sales in Greenwich. The really promising thing about it is that sales from $1 million all the way up to $5 million were up significantly over January 2016.

Last month we had 42 single-family home sales in Greenwich and 33 of those 42 homes were between 1 million and $4 million. The segment from $1-1.5 million was particularly outstanding with 12 sales, up from only two sales in January 2016. The even better news for that price range is that we have 16 contracts that have been signed waiting to close.

02/01/2017 Inventory Contracts Last Mo. Solds Month Solds+ Contracts  YTD Solds  YTD+ Contracts Mos Supply Mos w/ Contracts Last Mo. Annlzd
< $600K 7 0 1 1 1 1 7.0 17.5 7.0
$600-$800K 20 3 0 3 0 3 16.7
$800K-$1M 12 4 4 8 4 8 3.0 3.8 3.0
$1-$1.5M 31 16 12 28 12 28 2.6 2.8 2.6
$1.5-$2M 49 6 8 14 8 14 6.1 8.8 6.1
$2-$3M 75 18 7 25 7 25 10.7 7.5 10.7
$3-$4M 67 8 6 14 6 14 11.2 12.0 11.2
$4-$5M 44 6 2 8 2 8 22.0 13.8 22.0
$5-6.5M 54 3 1 4 1 4 54.0 33.8 54.0
$6.5-$10M 53 5 0 5 0 5 26.5
> $10M 35 0 1 1 1 1 35.0 87.5 35.0
TOTAL 447 69 42 111 42 111 10.6 10.1 10.6

When you look at contracts in all price ranges, the other area that jumps out at you is the $2-3 million price range where we have 18 contracts that have been signed. This is 11 more contracts than we had in January of last year. Sales in the $2-3 million price range will continue to be busy in February 2017, which has traditionally been our month with the lowest sales for the year.

Greenwich Real Estate Months of Supply by Sales and Contracts - January 2017

Greenwich Real Estate Months of Supply by Sales and Contracts – January 2017

Our January sales showed strong sales from $2 million all the way up to $5 million. We had had 15 sales in this price range this January compared to only 6 last January. We may actually be seeing a little evidence of a Trump Bump here as this is the second consecutive month with better high end sales and contracts.

January 2017 Greenwich Real Estate Inventory, Sales YTD, January Sales and Contracts

January 2017 Greenwich Real Estate Inventory, Sales YTD, January Sales and Contracts

 

Our total inventory is down to 447 houses which is 13 lower than last year at this time, while total sales are up 16. In fact, every aggregate category; whether inventory, contracts, sales, or months of supply are moving in a pro-seller direction.

Curiously, the one exception is the market under $800,000. In that price range our inventory is up 8 houses from last year while total sales and contracts are down 11 from last year. While these numbers aren’t large, they have a big impact in a market with only 27 houses in inventory. This price segment always has low inventory so this is probably only a temporary anomaly.

January 2017 Greenwich Sales and Contracts

January 2017 Greenwich Sales and Contracts

The other big change can be seen when you look at where in town the sales are happening. We are seeing relatively good sales and contracts in the back country and also in the eastern half of mid-country. When you look at the map of sales the dots are more dispersed in the 4-acre and 2-acre zone, but then so are the houses. To get a fair comparison you should double the number of dots in mid-country and quadruple the number of dots in backcountry compared to the one acre zone. Mentally doing that shows how good a month January has been for what had been our two slowest areas.

As you might expect with lower sales under $1 million dollar Byram and Pemberwick, for once don’t show a lot of sales, however Glenville with higher price points is doing fine. Central Greenwich, Cos Cob, Riverside and Old Greenwich also continue to do well.

At the other end of the market, the ultra-high end is looking good. The house with an additional lot at 60/62 Oneida in the Indian Harbor Association sold for $19.25 million. At the opposite end of town, a Conyer’s Farm property that was on for $17.5 million just went to contract.

From $5 – 10M we have 8 houses under contract, which bodes well for first quarter sales in what has been our most challenging price range.

jan2017-4pie-020117

Overall, the Dow Jones Industrials topping 20,000 has really put in a spark in the market. The shenanigans in Washington have been ignored so far while the prospect of heightened interest rates has encouraged sales in our mid-market. If these trends continue 2017 could be a very good year.

 

How Not to Sell a House in Greenwich

Presently, we have 9 houses that have been listed on the GMLS for more 1,000 days and almost a fifth of our 438 listing have been on the market for more than a year; so what keeps houses from selling.

INITIAL PRICING: The biggest reason by far is over-pricing the house when first listed. The first two weeks of a listing is critical and if online buyers think the house is overpriced they won’t even go see the house. Even if their agent recommends seeing the house if what they see online doesn’t match up with their idea of its value they will turn down the showing.

So why do owners over-price their houses? First, it’s just human nature; no one wants to leave money on the table if a buyer would have paid more, so why not take a flyer at a higher initial price. This hope and a dream approach can set off a cascading list of issues that can easily leave the house on the market for a year or more and result in price well below what you might have gotten.

Second, owner’s value the unique features in their houses that were added as labors of love and money. The problem is that most buyers will only pay a little more, if any for these features. Paradoxically, the lowest list price often leads to the highest and fastest sales price, by generating the most traffic to the house.

Things like quality of construction, beautiful gardens, and homeowner care and maintenance often don’t play into a buyer’s decision as whether to see a house or not. With the rise of the Internet, items that can be rendered as numbers have reduced the unquantifiable elements. Buyers look at square footage, price per square foot, acres, days on market and other features that they can sort on their spreadsheets as signs of value.

PRICE REDUCTIONS: Every time, an owner changes the price it shows up on the Internet and each price change or lack of them have an unwritten tag line in buyers’ mind:

  • Price unchanged for 100 days – The seller won’t negotiate a “fair price” and may not want to sell at all, probably a waste of time to go see
  • A small price reduction – Seller will negotiate, but their bottom line is close to their present list price so that needs to be close to the buyer’s perceived value
  • A series of small price reductions – Must be something wrong with the house if no one has bought it after all those price reductions and the buyer is probably desperate and will take a lowball bid.

If the buyer traffic is not there initially, or if you had good traffic, but no offers have been made it’s time to take a major price reduction. You also don’t want to do this more than twice so the bigger the better. Once again paradoxically the bigger the price cut the better your sales price will be. What you don’t want to get caught in is the death spiral of a dozen cuts, if you do you may end up having to reduce the price below “fair market value” to get people to come see your house.

POOR PRESENTATION: I was talking to another experienced agent about how much clutter and poor presentation could cost a seller and we both came to the same figure. We posited two identical older homes, but one was neat and tidy and the other cluttered and dirty. If the neat house went for $750,000 we both estimated, it would be minus $50,000 if the other house was a mess. If you add dishes in the sink and mildew in the shower, you could take off another $25,000. Appearance counts.

So, the things you can do that will improve the value of your house starting at street side:

Curb appeal – A lot of people decide whether they like a property as soon as they see it, so trim the trees and bushes, remove fallen branches, fix the driveway, paint the mailbox and add big house numbers so the house is easy to find. Make sure the path from the driveway to the front door is a nice as you can make it; buy a new doormat with a welcoming message, paint the front door and replace any corroded door knobs and knockers.

First steps – Assuming they still like the house from the exterior the next most important is the first two steps inside. Make the inside air temperature the opposite of the outside; warm in the winter and cool in the summer. Make sure there are no unpleasant smells such as cat pee or cigars (we smell one of these every week.) The entry should have the warm inviting feel of a home not a hotel lobby.

Inside – Get rid of “bad memory points,” the things that people remember a week later about the house. I’ve seen dead squirrels in the attic, dead bugs under the sink, and used diapers left out. Even things that aren’t offensive should be fixed, like door that stick, dust on shelves and a used drinking glass in the sink should be removed.

NEGOTIATION: If you want to really insult a Greenwich seller make a lowball offer, however, if you are the seller put that irritation aside and consider the situation. Last year our median sales price to list price was 92% so if the parties were to meet in the middle the buyer would start with an offer of 84% of list price or an $840,000 offer on a $1,000,000 listing. A lot of sellers wouldn’t even counter this “insulting” offer and a lot buyers would be too embarrassed or prideful to raise their own opening offer so the negotiation is over, before it began.

My philosophy is to counter every offer. The buyer maybe an ignorant, irritating, cheapskate without any money, but you’ll never know unless you counter-offer (along with a strong, and often unneeded, admonition from seller’s agent to buyer’s agent to get serious in buyer’s counteroffer.)

The other major negotiation killer is the line in the sand. Very often the buyer and seller will be less than 1% apart, but they both draw a line in the sand and won’t make a better counter. (Seller: If it’s that small a difference the buyer shouldn’t have problem coming up 1%.”) If that happens try to add more negotiating options; a better closing date, larger down payment, or offer to include the yard furniture, or the Mercedes.

And, whatever you do, try not to tick-off the buyer. It never makes the process easier and greatly increases the chance that both parties will walk. At the same time try not to be ticked-off yourself. Yes some buyers are rude, but it’s a transaction not dating. Too often, what is perceived as rude is really a cultural, regional or national difference in style, so stay cool and a few showings, can lead to a good price and quick close.

by Mark Pruner, Douglas Elliman, 203-969-7900, mark@greenwichstreets.com

 

 

2016 Greenwich Real Estate – Most Active Neighborhoods

The 2016 winner for most popular neighborhood in Greenwich is North Mianus. Last year we had 11 houses sold there and we only have four listing presently which gives us 4.4 months of supply. It’s a small neighborhood but it meets so many of the things that people were looking for in 2016 and will be looking for in 2017. It’s a real coTmmunity with smaller properties, close to town, good schools, and for Greenwich, reasonably priced houses.

The runner-up is Cos Cob, and arguably the winner for larger size communities in Greenwich. Cos Cob last year had 73 properties sold and we have another six contracts waiting to close as of the end of the year. While Cos Cob is only 6% of our listings, it was almost 13% of our sales in 2016. So with only 28 listings, we have 4.6 months of supply and a hot market. When you add up all the sales, contracts and active listings we have 107 properties that were in play in Cos Cob in 2016.

Area Total Activity* Number of Listings Number of Solds Percent of Activity Percent of Listing Percent of Sales Mos of Supply
North Mianus 19 4 11 1.7% 0.9% 1.9% 4.4
Cos Cob 107 28 73 9.7% 6.2% 12.7% 4.6
Pemberwick 17 5 11 1.5% 1.1% 1.9% 5.5
Old Greenwich 150 45 96 13.6% 10.0% 16.8% 5.6
South of Post Road 109 32 63 9.9% 7.1% 11.0% 6.1
Glenville 44 13 25 4.0% 2.9% 4.4% 6.2
Riverside 147 54 86 13.4% 12.0% 15.0% 7.5
Byram 22 10 11 2.0% 2.2% 1.9% 10.9
South Parkway 337 167 148 30.6% 37.1% 25.8% 13.5
North Parkway 145 88 49 13.2% 19.6% 8.6% 21.6
Banksville  4 4 0.4% 0.9% 0.0%
Total Active 450
Total Contracts 78
Total Sold 573
Grand Total 1101 446 573 100.0% 100.0% 100.0% 9.4

(*Total Activity is All 2016 Sales, Contracts as of year end and year end listings)

Pemberwick and Old Greenwich are neck and neck with less than six months of supply, presently on the market. Glenville also does well with lots of demand for a limited number of houses. Riverside, which has been our leader before, has fallen to 7 1/2 months supply with 54 listings and 86 houses sold in 2016 as prices have risen significantly lowering demand. However, Byram which has our least expensive housing also lags behind Riverside with 11 months of supply. For the same price you can get a much larger house in Westchester, you just have to pay the higher taxes.

Illustrating the trend of people wanting to live closer to town, South of the Parkway has 13 months of supply and north of the parkway has 22 months of supply. Now South of the Parkway covers a huge area of Greenwich, from the parkway to the Post Road. For analytical purposes this area which has 37% of our listings makes little sense as it encompasses a wide variety of neighborhoods, lots sizes and price points. It would make a lot more sense to break up this huge area into the 1 acre and 2 acre zones and add a central dividing line, but we work with what we have.

ye2016-areaanalysis-mp-011417

You need to take all of these numbers with a large grain of salt. For example, Old Greenwich has houses from under $800,000 to over $8,000,000, on small 1/6th of an acre lots to multiple acre lots on Long Island Sound. These markets are very different but the MLS groups them altogether for statistical purposes and this might not be a bad thing. The houses maybe be different, but the kids play on the same Little League teams, they go to the same middle school and eat the same Lion’s Club pankcakes. Breaking up areas by price may make sense for Realtors and even buyers, but it’s still one community and people are drawn to it regardless of what their budget is.

 

2016 Year End Greenwich Real Estate Report

Good Sales & Good Contracts at Year-end

December 2016 was a good month for sales and contracts in Greenwich. Part of this increase in sales was the shifting of closings away from the uncertainty of November’s presidential election. Another part of the increase in sales is also attributable to motivated buyers trying to avoid further increases in their mortgage payments from expected increases in mortgage rates.

sales-sfh-2014-dect2016prelim-101316

We had 50 sales of single family homes in December 2016 up 2 from December 2015 and also up 2 from our 10-year average. Month over month the increase was even more dramatic when the 50 sales in December are compared to the paltry 29 closings in November. A third factor in December’s sales increase was the number of contracts signed in November a few of which closed in December further boosting sales.

Contracts are also looking good. In 2015 at year end we had 70 contracts outstanding and this year we are up 8 contracts to 78 contracts even after the 50 sales in December. There is nothing like the likelihood of increased monthly payments to motivate buyers.

The 50 listings sold in December are not all of the story. The true picture will only be known once all of December’s private sales are tallied later this month. At the present time, we have 610 MLS and private sales in Greenwich, and with say 10 more private sales, we’ll be at 620 total sales down only 2% from 2015’s 631 home sales.

All of these December sales and contracts have depleted our inventory to only 450 house listings in Greenwich. While this is up 6% from December 2015 when we had 425 houses on the market, that’s still a tight inventory in a busy market.

As of 12/31/16 Inventory Contracts Dec. Solds Dec. Solds+ Contracts  YTD Solds  YTD+ Contracts Mos Supply Mos w/ Contracts Last Mo. Annlzd
< $600K 5 1 3 4 18 19 3.3 3.6 1.7
$600-$800K 16 3 1 4 48 51 4.0 4.2 16.0
$800K-$1M 13 6 5 11 51 57 3.1 3.1 2.6
$1-$1.5M 35 21 14 35 120 141 3.5 3.4 2.5
$1.5-$2M 50 11 10 21 116 127 5.2 5.3 5.0
$2-$3M 80 17 8 25 104 121 9.2 8.9 10.0
$3-$4M 67 7 5 12 55 62 14.6 14.6 13.4
$4-$5M 40 8 3 11 28 36 17.1 15.0 13.3
$5-6.5M 51 2 0 2 17 19 36.0 36.2
$6.5-$10M 55 0 0 0 11 11 60.0 67.5
> $10M 38 2 1 3 5 7 91.2 73.3 38.0
TOTAL 450 78 50 128 573 651 9.4 9.3 9.0

 

Market by Price Range

Below $1 million we are supplied constrained, particularly on the east side of town. Under $1 million we only have 24 listings. If we had more inventory, we would have more sales. We also have seen lower sales under $600,000 as most of the houses that were under $600K have now appreciated above that price further shrinking inventory. Despite all this we had 117 single family home sales in Greenwich under a million dollars.

$1 – 3M: The price range from $1 – 2 million was busiest part of the Greenwich market in 2015 with 236 sales and another 32 contracts waiting to close. This price range is popular with both young families moving from NYC and downsizers moving from Westchester County our two-major group of buyers. The market from $2 – 3 million had a slow start, but picked up steam as the year went on. We ended up with 104 sales and another 14 contracts in the $2 – 3 million price range.

$3 – 5M:  This price range seems to be the new sweet spot for high end buyers, particularly as the year went on. Both contracts and December sales were up in this price range by 13. For the year, we had 83 sales and have 15 contracts between $3 and $5 million waiting to close. The year started slow however and the 83 sales is down 14 sales from 2015 when we had a total of 97 sales.

2016 Greenwich House Sales

$5 – 10M: The market that has changed the most since 2015 is the $5 – 10 million market, where we only had 28 sales in 2016 compared to 48 sales in 2015. Sales won’t be getting much better in January as we only have 2 contracts in a price range that spans five million dollars. The low sales is not due to lack of inventory as we have 106 beautiful houses on the market now in this price range. We also have a bunch more houses in hibernation resetting their days on market and waiting for warmer weather to go back on the market.

The good news is that 10 of these 28 listings went to contract in less than 40 days. Of these 10, four of them were on the Sound and there were two in mid-country and two in backcountry. Also, four of the houses were built between 1918 and 1961, but all four of these houses had been renovated in this century. So, if you have what the buyer wants you can get a relatively quick sale even in this price range.

Over $10 million things are looking up in the fourth quarter. We have had the same number of sales this year as last year with 5 mansions sold and 2 contracts pending. If you annualize December’s sales over $10 million dollars we are down to 38 months of supply from 98 months of supply for the whole year. This is a dramatic drop, but it is really just fun with numbers as annualizing the one sale we had in December results in more sales than for whole year.

 

Dec ’16 vs Dec ‘15 Inventory Contracts Mo. Solds Mo. Solds+ Contracts  YTD Solds  YTD+ Contracts Mos Supply Mos w/ Contracts Mo. Annlzd
< $600K 2 -1 1 0 -7 -8 1.9 2.1 0.2
$600-$800K 1 -4 -3 -7 11 7 -0.9 -0.4 12.3
$800K-$1M 1 -2 0 -2 4 2 0.0 0.1 0.2
$1-$1.5M -3 10 4 14 -1 9 -0.3 -0.5 -1.3
$1.5-$2M 9 -2 -1 -3 5 3 0.7 0.9 1.3
$2-$3M 2 6 -2 4 -5 1 0.6 0.2 2.2
$3-$4M 2 2 3 5 -11 -9 2.8 2.2 -19.1
$4-$5M -2 6 2 8 -3 3 0.9 -2.2 -28.7
$5-10M 17 -7 -3 -10 -20 -27 22.5 29.4
> $10M -4 0 1 1 0 0 -9.6 -7.7
TOTAL 25 8 1 9 -28 -20 0.9 0.8 0.3

 

2016 vs 2015:

Ups & Downs: When you look at what’s up and what’s down compared to the prior year, inventory is up 25 listings, while sales for the whole year are down 28 sales (with a few private sales yet to be reported). On the good news side, from $600,000 to $2,000,000 sales are up by 19 houses. From $1M to $5M the contract news was also good as we had 22 more contracts than we saw in December 2015.

On the needs improvements side, the $5 – 10M price range has sales down 20 houses from 2015 and contracts down by 7 houses from last year. Over $10M sales also need a lot of more improvement as we have 91 months of supply. Now a few sales will cut that down by several years, but it’s not clear when this segment will turn around.

Sales Volume: When you look at the overall market, our 573 GMLS sales in 2016 is a total sales volume of $1,261,572,386 a number that in any other town our size would enviable, but it is down $186 million from 2015.

Average & Median Prices: Our median price was $1,700,000 down $146,000 from 2015. Our average price went down from $2,426,320 in 2015 to $2,201,697.

The Sales Mix is Lowering the Averages: So we had a 13% drop in sales volume and a 9% drop in both the median and the average prices. All of this reduction is due to a fall in the number of sales between $2 million and $10 million where we are down 39 sales and more than half of that drop is in the $5 – 10 million dollar range. Below $2 million the market is very competitive and so is the pricing. Now the uninformed will say that individual house prices are down 9% in Greenwich, but that is not the case, what is down 9% is the average of all houses.

When there are fewer sales at the high-end, averages will drop. In fact, every house in Greenwich could have gone up in value, but if there are fewer sales at the high-end the average sales price will still drop. (While that’s mathematically true, where the number of sales drop, prices tend to also drop.) The point is that your house is most likely not down 9% in FMV in fact the odds are that it is up in value in 2016 compared to 2015.

 

 dec2016-4pie-010417 The pie charts show this tale of two cities. ·

  • Half of our inventory is over $3.5M, while less than a quarter of our sales are over that price.
  • At the other end 8% of our inventory is under $1M, while 20% of our sales are under $1M
  • The large bulk of our sales, 59%, are between $1M and $3M. These sales come from only 37% of inventory.
  • The $1 – 3M segment was even more popular in December with 64% of our sales.

Months of Supply: When you look at months of supply our market under $1.5M is very competitive with 4 months or less of supply. We also saw decent sales from $3 – 5M particularly in the fourth quarter.  We had 8 houses sold between $3 and $5 million just in December. We also have 15 contracts between $3 and $5 million waiting to close so that price segment will be looking up in January and probably February also.

dec2016-mos-010417

2017?

So, what will 2017 bring? The answer is that more so than in any other post-recession, you can’t say. For every potential plus there seems to be a potential minus:

  • The stock market is reaching record highs, but we have not seen a major correction in the market in years.
  • Interest rates are still very low historically speaking and a slight bump up in interest rates has seemed to spur sales, but a major rise in interest rates could hurt sales
  • The Trump presidency promises to be, possibly the most unique in American history. Business is anticipating a very pro-business policy from a president that has never served as an elected official
  • Citizens of countries that have been major purchasers of Greenwich houses are seeing problems in their home countries from Brazil to Russia to China to Great Britain
  • National unemployment is relatively and is pushing wages higher, but that has little impact on the Greenwich real estate market

Now if I had to guess I’d say we are looking at a good year in Greenwich real estate with a more positive attitude and people who have been saving for years and have surprising amounts of liquid assets for substantial down payments driving a good market. Even if the year play outs this way, I’m can be pretty sure this will be one of the most interesting years in a long time.

 

Eight Ways to Not Buy a House in Greenwich

Low Balling the Opening Bid – Some people are sure that if they make enough lowball bids that eventually somebody will be desperate enough to actually accept their bid. The problem with lowball bids in  Greenwich is that majority of the time the the seller won’t even respond to the bid. This leaves the buyer with two bad choices; he can bid against himself and raise his bid or walk away from a house that had he made a more reasonable initial bid he would have had a good chance of buying. The median list price to sales price ratio in Greenwich is around 93% and has stayed fairly constant. Making a bid that is only 75% of list price is a waste of time. The one exception is high-end and particularly, the ultrahigh-end. In those rarefied airs the 93% ratio gets much lower.

Focusing on Foreclosures – Foreclosures are another popular way not to buy a house in Greenwich. Some people have to have the best bargain (read lowest price possible) and see a foreclosure as being the answer. The problem in Greenwich is that there are very few foreclosures that are actually foreclosed. Connecticut is one of the most homeowner-friendly states when it comes to foreclosing on a property. The process often takes two years even though multiple foreclosure auction notices are printed in the newspaper. In Greenwich they are usually canceled and most of the properties never actually go to foreclosure. Even if an auction actually happens, the buyer needs to realize that he or she is bidding against professionals who know all the ins and outs. You do meet an interesting group of people at foreclosures. If you are really looking to buy an investment property via foreclosure you’re going to have a lot more success where foreclosures happen more often, in the larger cities of Connecticut.

Lower-Priced, Brand New Houses – Another unsuccessful strategy is to focus only on brand-new houses. So far this year we have had 630 single-family home sales. Of those 630 houses, only 13 were built this year. Of those 13 new spec houses, only two were under $2 million. It’s very unlikely you’re going to find a new house for under $2M in Greenwich. If you do want new for less than $2M, then consider buying a teardown and building.  

Taking a Vacation – Another surprising way that buyers end up not buying a house in Greenwich is by taking a vacation in the middle of negotiation. You would think if someone was going to be spending a lot of money on a house and they’re in serious negotiations that that’s not the ideal time to take a vacation. Almost every year however I get involved in a situation where we end up emailing or faxing stuff to cruise ships, remote tropical islands or countries you have to google to find just where they are. Being out of town isn’t the deal killer that it was even five years ago but if you’re in a competitive bidding situation being unavailable during an entire afternoon scuba trip or expecting uninterrupted sleep in a time zone 12 hours ahead of Greenwich means there’s a good chance that you’ll lose out on the deal.

No Money Down – There is a book out there about how to buy real estate with no money down and even to get the bank or the homeowner to pay for the improvements. You don’t see buyer trying this very often in Greenwich and I have never seen it work. The one time you can do this is if you are veteran who qualifies for the VA’s 100% mortgage.

In Your Face Negotiating – You also occasionally see the buyer who comes from a whole different world of negotiation and tries to bring a rough-and-tumble style of negotiating to Greenwich. Unless the seller is also part of that world the odds are that the seller will just take a pass on negotiating. (I did once see two NYC building contractors screaming at each other on a conference call even to the point of threatening to have each other’s building permits for NYC projects cancelled. They ultimately decided not to do the deal, but did go out to dinner together with their wives, all of whom were friends.)

Insulting the Seller – Nine out of 10 times insulting the seller is the kiss of death. I have seen sellers take substantially less just so they can keep that “jerk” from getting the house. And, it doesn’t have to be a direct insult, showing up late at meetings, not doing what you say you are going to do, inappropriate jokes, even mispronouncing the owner’s name can hurt or kill a deal.

In Zillow We Trust – Another way that a buyer can kill a deal before it’s even started is by trusting some of the estimates that the big real estate websites such as Zillow generate. Zillow has the Zestimate. Greenwich has very few tract houses and a variety of housing styles, topography, ages, and floorplans. In addition, our square footage may or may not include the basement or attic space so this number can vary a great deal even if the houses have the same floorplan. Trying to estimate price in Greenwich via a computer model leads to some really bad price estimates. The problem is that some buyers believe these estimates and let them control their house hunting and bidding. Some buyers won’t go see a house where the Zestimate says the house is “overpriced” even though it is in their price range. Sometimes they don’t even tell their agent that’s why they rejected a house. Zestimates can also screw up bidding, as buyers refuse to bid over the Zestimate. It’s no way to buy a house.  

 How to Buy a House in Greenwich – In reality all of these things come down to doing your own research, being prepared, focusing on areas with good prospects and acting respectful to the seller. Also there are times to break these rules. Sometimes sellers just won’t budge and stepping back from negotiations can get them to step forward. Just make sure you have cell service where you are vacationing.

Is There a Trump Bump in Greenwich Real Estate Sales?

December is usually a fairly calm month in Greenwich real estate as sales increase somewhat from November which is traditionally a low point for sales. In December we see year-end deals for tax purposes and estate planning. Unless there is a major tax change we get a moderate bump and end the year with a decent sales month, but December 2016 is not a normal December.

We have a new president coming in and there is great uncertainty about what changes he will and can actually make. At the same time, we are seeing record highs in the stock market and the Fed (unlike the FBI) waited until after the election to make its major announcement of an imminent rate increase.

 

Post Election RE Activity
 (Greenwich MLS 12/7/16) Houses Condos Total
Contingent 20 9 29
Pending 19 6 25
Total Contracts 39 15 54
Solds 4 1 5
Grand Total 43 16 59

 

The result has been an increase in mortgage interest rates and an increase in buyer inquiries. For me and many other agents, December has not been the quiet month it usually is when we are normally more focused on getting ready for the holidays and the spring market next year.

For hard number examples look at the 59 post-election transactions we have had which consists of 54 new contracts and an additional 5 post-election contracts that have already closed. People are also pushing hard to get these contracts to closing.

Pre- vs. Post-Election Houses
11/1/2016 12/7/2016 Difference Post Election %
Inventory 591 499 -92 Down 16%
Contingent Contracts 39 32 -7 63%
Pending Contracts 31 54 23 35%
Total Contracts 70 86 16 45%
Sales YTD 497 537 40 Up 8%

Despite the increase in contingent contracts overall, we are actually down from 39 contingent house contracts on November 1 to 32 contingent contracts for single family homes. This is because we are up 23 pending house contracts as buyers who did the right thing, and got underwritten pre-approved mortgage applications, are moving to pending status in a couple of weeks rather than a couple of months.

Our most notable sale this week was 7 Cobb Island Dr. which sold for $15.25 million after being on the market for 495 days. The next highest sale however is at $5.3 million and the third highest is at 4.7 million. Only 9 of the 59 contracts were for over $3 million. This is indicative of what we have seen in the 2016 market in general.

The other thing that I think shows that interest rates increase may be driving the jump up in buyer activity more than a Trump glow/stock market wealth effect is that people who need a mortgage and are interest rate sensitive are the large majority of the buyers. We have 21 transactions that have happened post-election that are under $1 million and an additional 22 transactions that are between $1 and $2 million.

Greenwich Housing Contracts Post 2016 Election of Donald Trump as President-Elect - Green Actives and Contingent Contracts, Yellow Pending Contract, Blue Solds 11/30-12/7/16

Greenwich Housing Contracts Post 2016 Election of Donald Trump as President-Elect – Green Actives and Contingent Contracts, Yellow Pending Contracts, Blue Solds 11/30-12/7/16

You can also see the increased urgency from those people that are getting mortgages when you look at the distribution of contingent and pending contracts. We have slightly more contingent than pending contracts, 29 to 25, however five pending contracts did have a contingency so we’re really looking at a breakdown of 34 to 21.

Also just because a listing never had a contingency doesn’t mean financing isn’t involved. Some buyers who are confident they can get a mortgage and are in a bidding contest or who want to offer a seller a major sweetener will waive the contingency

Bottom line is that financed properties outweigh all cash deals by a significant margin and show how this bump up in interest rates is putting new urgency into buyers. We shouldn’t however discount the rise in the stock market and a general feeling that businesses will do better in 2017 that are playing a factor.

The increased contracting activity has resulted in a major drop in inventory. We are now under 500 listings when as recently as November 1 we had 591 listings. With only 499 listings and dropping we are down 16% in only 5 weeks. (In some price ranges and some neighborhood doing the unheard of and listing your house in December or early January might be a smart move.)

So is this a Trump Bump? Is the election of a more conservative and more pro-business president spurring people to get out and buy. It certainly seems to be spurring the stock market and that always helps sales but it tends to be on a longer term basis.

When you look at the difference in contingent contracts and pending contracts and the large percentage of purchases under $2 million the bump up in contracts seems to be more motivated by the fear of higher interest-rates then on a future improved economy. You could say it’s more of a Fed Led Bump up in sales, but Trump Bump rhymes better.

 

MARK PRUNER is a Realtor with Douglas Elliman in Greenwich and was their number individual agent in 2015 – 203.969.7900, mark.pruner@elliman.com.