May 2018 was a good month for transactions, but not everyone may feel that way as the tax acts changes explained below work their way through the housing market.
In May, our single-family home inventory was up significantly to a monthly high for the year of 687 single family homes listed on the Greenwich MLS. This is 33 more listings more than we had at the end May last year or an inventory increase of 5%. The mid-market price range saw an even greater percentage increase. Between $800,000 and $2 million we saw an increase of 51 listings which was a 31% increase over last year. This increase was partially offset by a decrease of 20 listings in our over $4 million market or a high-end inventory decrease of 9%.
|As of 6/2/18||Inventory||Contracts||Last Mo. Solds||Mo. Solds+ Contracts||YTD Solds||YTD+ Contracts||Mos Supply||Mos w/ Contracts||Last Mo. Annlzd|
On the sales side we had 53 sales up 4 sales from last May. The good news is that the price ranges where increases in sales were the greatest are the two price categories where we were also seeing the biggest increase in inventory; $1 – 1.5M and $1.5 – 2.0M. This increase in sales brought down the months of supply for the $1.5 – 2.0M price range by 2 months to 13.4 months of supply, (Months of Supply: If no more listings came on the market in that price range it would take 13.4 months to sell all the listing at the sales rate so far this year.)
Now 53 sales is better than last year, but it is not as good as our ten-year average of 58 sales. All the cold, damp and snow weather earlier this year has not been great for sales. Luckily, by May people were out looking and making offers faster than last year so our contracts are up over last year.
The price range where people were really busy was $2 – 3 million where we were up 14 contracts over last year. This will catch us up, and then some, with the YTD drop in sales in that price category, where YTD we are down by 10 sales. Somebody, who looks on at sales will report this drop in sales as a problem. Luckily, it is a problem that will cure itself in the next couple of months as these contracts close.
We have 147 houses listed between $2 and $3 million, but unlike the next three lower price ranges this is the same as last year. Year-to-date we have 35 sales from $2 – 3 million, 34 sales from $1.5 – 2.0 million and 33 sales from $1.0 – 1.5 million. The two price ranges between and $1 and $2 million are very interesting. From $1.5 million to $2.0 million our sales are up 8 sales from last year to the aforesaid 34 sales, and we have 27 contracts pending which is up 3 contracts from May of 2017. Just below that from $1.0 – $1.5 million our sales are down 11 houses and we have 19 contracts pending down 3 from last year.
The curious thing is that if you ask agents the whole segment from $1 – 2 million feels slow with significant amounts of time between both showings and offers. This is because we are up 185 listings in this price range, 43 more than last year. The 2017 Tax Cut and Jobs Act has encouraged owners thinking about moving to a low tax state to retire to accelerate their plans resulting in more inventory.
This $1.5 – 2.0 million range is where we see another issue for Greenwich house sales which is the locked-in, working, Westchester downsizers. Before TCJA, the Westchester downsizers generally waited until after they retired and had to pay the high Westchester property taxes out of their savings, before they sold their place in Westchester and bought a place in Greenwich. These retiring downsizers were principally in the 65 – 75 year age range.
With the loss of deductibility of these high property taxes caused by TCJA, they are looking to move earlier, often when they become empty-nesters in the 50 – 65 year age range. The problem for them, is that unlike the buyers who are driving the over $4 million market, carrying two houses is not easy and they are having trouble selling their houses in Westchester. The result is more inventory, more lookers and a couple more sales, but not enough to heat up the market.
The price range, from $1.0 – $1.5 is where TCJA has had its greatest impact. Our inventory is way up from 62 listings to 94 listings as many of our own retiring downsizers decamp to Florida where sales over $1 million are seeing a nice bump up. We have always had folks retiring and moving to Florida. This increase in people selling is likely just a one-year bump as this group adjust to a new steady state moving rate at an earlier age.
The demand side of the $1.0 – 1.5 price range is where TCJA’s $10,000 limitation on the deductibility of property taxes and SALT is having the greatest impact. Most of the people buying in this property range, like most of America, need a mortgage to purchase a house. To buy in this price range they are also likely earning over $198,000 where Connecticut income taxes exceeds $10,000 for a joint return. Alternatively, on the property tax side, those buying a house assessed at over $1.2M FMV are paying more than $10,000 in property taxes to Greenwich. So, in total buyers in this price range are going to be paying a significant part of their Connecticut income tax and Greenwich property tax burden in after tax dollars.
As a result, they have less money to spend on monthly payments at the same time that interest rates are rising. For young families the result is that they can’t get the house they want. This segment is also losing demand due to the locked in Westchester downsizers, whether working or retired, who want to move, but can’t.
This is not a Chicken Little situation; the sky is not falling in Greenwich. Transactions, sales and contracts, are up. Sales last month were up over last year. Inventory above $4 million is down. Under $1 million it is still a seller’s market.
What we have is a series of adjustments as a result of the new tax act effect working their way through the NY metro real estate market. Much of that will be accomplished this year and the worriers will have to find something new to worry about next year. However, at least for this year, the young family reaching above $1 million for a house for their growing family, and the locked-in Westchesterite, and the Greenwich retiree wanting to move to warmer weather with a house under $2 million may find that 2018 is not be the best of times. For folks with houses over $4 million they are seeing a much better market than last year with months of supply way down due to the lower inventory and higher sales.
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