Two articles came out this week that can give the wrong impression of what is happening in the Greenwich real estate market. The one that got the most attention was a Bloomberg article claiming that Greenwich is the worst US housing market in the U.S.
The reality is that the Greenwich market is actually doing fairly well this year. Our market under $2 million is a sellers’ market with good demand and with one exception tight inventory. The one exception is our market from $1 – 1.5 million where our inventory is up from 38 listings in August 2015 to 58 listings at the end of last month. This is an increase of 22 listings or more than 50%. Now this looks dramatic, but it’s not. Last year we had an extraordinarily tight market in this price range and needed more inventory. This year we got it and sales and contracts jumped up 16 houses from last August.
From $2 – 3 million we have a fairly balanced market in Greenwich with under a year of supply. When you annualize this year’s August sales months of supply dropped from 14 months last year to 8.4 months this. In fact, August was a good market for sales all the way up to $5 million. Also we had four high-end sales in the past week from $4.6M to $8.9M.
So where did this impression come from that the Greenwich market is so bad? The problem is, and it’s not a problem just limited to Greenwich, is that high end sales have been soft nationwide. Jonathan Miller of Miller Samuel Inc. told me that all 18 of the real estate markets that he reports on are soft at the high-end.
|Aug. 15 vs 16||Inventory||Contracts||Mo. Solds||Tot. Solds+ Contracts||YTD Solds||YTD+ Contracts||Mos Supply||Mos w/ Contracts||Mo. Annlzd|
Some people would have you believe that the slightly higher state income tax for 2016 in Connecticut is driving the wealthy out of the state. There’s no denying that there is discussion about this among people I know, but that doesn’t account for the slower sales in New York City, Los Angeles, Miami, the Hamptons, Aspen and other places.
The one thing that hurts all of these markets is a strong dollar making US real estate more expensive for foreign investors. As these investors pull back some of the froth goes off the market. (On the flip side, foreign investors who invested earlier are seeing some nice appreciation in their purchases when calculated in their local currency.)
Another issue at the high-end are changes in Wall Street compensation. Traditionally in Greenwich, high-end houses went to contract in February and March and closed in March and April. The closings were often very quick since the deals were all cash and paid out of the buyers’ cash bonuses. These bonuses are now often paid out over multiple years and in stock rather than cash. The result has been that more high-end purchases are being made in the last four months of the year. Each of the last two years we have seen some dire predictions only to see a nice pop-up in sales in the later part of year.
You can see a little of this when you look at the $4 – 5 million market. In August in that price range, we have four properties under contract and three sold out of a total of 21 sales YTD. So a third of the transaction so far are recent.
Having said this there’s no denying that the market over $4 million in Greenwich is highly competitive for sellers. As the amount of Wall Street bonuses are lower and, for the moment, the interest from foreign buyers is down, dealing with disgruntled sellers is an important part of the high-end agents’ job.
To sell a high-end house in this market in Greenwich it needs to be in a good location and most of these houses are. It also needs to be in very good shape and many of these houses are. Unfortunately, many of the magnificent styles of prior year have styles and layouts that do not fit todays buyers’ lifestyles.
The second article in the Greenwich Time was entitled “Greenwich real estate among the priciest in the nation.” This info came from Coldwell Banker’s annual house report and states that Greenwich is the most expensive market in the country outside of California. Now you combine these two articles headlines and the impression is that high prices on overpriced houses lead to poor sales.
If you read beyond the headline in the Greenwich Time article you see that what CB is actually analyzing is the average price in each market of four bedroom two bath houses. The report says the average price for a 4BR, 2BA house in Greenwich is $1,349,000. This average is right in the hottest part of our market so what this survey shows is that Greenwich is, rather than the worst market as some people would have you believe, one of the most desirable places to live in the US. It clearly is where people are willing to pay the most for a four bedroom, two bath house outside of California.
Now you have to take all of these surveys with a large grain of salt. In the GT article I got quoted as saying that downsizers from Westchester move here because of high taxes in Westchester County. Several of my fellow Douglas Elliman agents from Westchester chided me for implying that that meant that Westchester is a less desirable place to live and it isn’t. You could just as easily say that many young families prefer to live in Westchester, because they get more house for their money, which is also true. The great thing is that each buyer can find a place that meets their family and financial needs.
So the sky isn’t falling, lots of people would love to live in Greenwich. At our high-end prices have adjusted slower as many people can afford to carry two or more houses until they get their price, which. This “price” often seems to be at least what they paid for it at the height of the market and those prices are not coming back.
We’ve had 59 high-end buyers decide they like Greenwich this year so far and there is very good chance that number will rise significantly in the rest of the year. If the dollar drops US real estate will be not only a safe investment, but also a better bargain. (It would be nice if the Connecticut legislature came up with a better tax system.) Lastly, the best news of the week was that the U.S. Census reported that household income was up 5.2% in 2015. This is the biggest gain ever reported for by the Census and means that people have more money for down payments at a time of extraordinarily low interest rates. It all depends on how you look at it.