What’s Your Greenwich Home is Worth in 2019?

How Real Estate Prices are Changing in Greenwich – Over $5M and under $1M

The most common question I get asked by homeowners in Greenwich is, “How’s the market doing?” People are very curious as to what’s selling and not selling, but as you would expect people are even more interested in how their house is doing? Has it gone up or down in price recently? Until the Great Recession, the question was not up or down, but how much up prices had gone, because year after year prices went up in Greenwich and in most of the United States.

If you want to see what prices are doing from one year to next, the best way is by looking at multiple metrics. The average, and even the median, is significantly affected by the mix of what’s selling. You can easily see why this is so when you compare average and median sales prices for 2018 and  2019 year-to-date sales.

May-18 May-19 % change
SALES PRICE
Average Price  $  2,530,970  $  2,387,636 -5.7%
Median Price  $  1,837,500  $  1,950,000 6.1%

Our median sales price as of the end of May is up 6.1% compared to sales through May of 2018. That sounds pretty good, but when you look at the average sales price it is down 5.7%. So what is it; are price up or down? The answer to that question is “Yes, they are.” Both answers are mathematically correct. If you are a glad-handing broker you use the median, if you are some reporters at Bloomberg or the Wall Street Journal looking to bash Greenwich you use the average.

What is causing the difference in these two values is the drop in sales in the $600,000 to $1,000,000 range. Last year we had 41 sales in this price range. This year we had 21 sales. As a result, you have to go higher in price to get 50% median price and so the median price is up.

At the same time, we had fewer sales over $5 million. We went from 20 sales last year to 9 sales through the end of May this year. Because Greenwich has such a long tale of high-end sales the change of only a few sales at the top, either way, dramatically affects the average sales price. If high-end sales drop the average price drops much more dramatically, than if low end sales drop.  As a result, the change in the average and median sales prices may not be a good indicator of how the value of your house is doing since they are both driven by the mix of what is selling. Luckily, these aren’t the only metrics that we have. Let’s look at what two other metrics are saying about today’s Greenwich real estate market.

May-18 May-19 % change
SALES PRICE
Average Price  $  2,530,970  $  2,387,636 -5.7%
Median Price  $  1,837,500  $  1,950,000 6.1%
PRICE/SF
Average $/sf  $              575  $              544 -5.4%
Median $/sf  $              529  $              502 -5.0%
ASSESSMENT RATIO
Average SP/Assmt                 1.65 1.62 -1.4%
Median SP/Assmt                 1.52 1.47 -3.3%

One metric you can look at is price/square foot. This metric looks at the whole market and for 2019 is down around 5% for both the median and the average. You’d expect the median and the average to be closer together as the mix of what’s selling has less effect. That’s not say it has no effect as we are seeing fewer very large houses selling so year to year its not an apples to apples comparison.

The next metric, and the one I like, is the ratio of the sales price to the assessment. Every 5 years the Greenwich assessor revalues all of the properties at 70% of what her department thinks is fair market value. If a house sells for exactly it’s assessed value the sales price to assessed value ratio will 1.42, the reciprocal of 70%.

Once nice thing about the average and median assessment ratios is that it can tell you something about the new construction and renovation market. If the average assessment ratio is higher than the median it means more new construction is being done. Assessment go up the most when a new house replaces a tear down and even more so when a new house is built on vacant lot. Our average assessment ratio 1.62 while our median ratio 1.47, so we are still seeing a significant amount of new construction and major renovations being added to our housing stock.

When you compare the 2018 and 2019 assessment ratios, our average is down 1.4% and our median is down 3.3%. If you want just one number to look at, the median assessment ratio of 1.47 is probably the best indicator.

For 2019, our median assessment ration is 1.47 which is only 3% higher than the aforementioned 1.42 ratio which indicates no price change between sales price and assessment. The 2019 1.47 median assessment ratio is up 3% from our last revaluation on October 1, 2015. It, however, is down from 1.52 last year. The result of all this is yes prices are down this year and if you need just one number, they are down 3.3% this year compared to last year.

That one number doesn’t tell you the whole story about today’s market. You can also look at overall supply and demand using the numbers for sales, inventory, days on market, months of supply and the sales price to original list price ratio.

             2,018              2,019 % change
HOUSE SALES                  208                  165 -20.7%
INVENTORY                  687                  738 7.4%
DAYS ON MARKET                  180                  158 -12.2%
MONTHS OF SUPPLY                 16.7                    22.4 34.1%
SP/OLP RATIO
Average SP/OLP 90.2% 88.4% -1.9%
Median SP/OLP 91.0% 89.0% -2.2%

What you see when you do that is a 21% drop in sales year to year and a 7% rise in inventory. Our months of supply is up 34% to 22 months of supply and our median sales price to original list price has slipped 2% to 89%. On the good news side our days on market has gone down by 12% showing that houses priced to today’s market are selling faster than last year.

Overall, it’s a weak market with only the $2 – 3 million market doing better than last year and much of the increased sales in that price category are concentrated in Old Greenwich, Riverside and Cos Cob. Our sales were up on in May over prior months this year, but so far sales in June seem to be returning to a weaker 2019 pattern. Let’s hope June repeats what we saw in May with most sales for the month concentrated in the last 10 days of the month.

So what about your house, is the price up or down this year and how much? The odds are it’s down a little bit, but value and convenience are what is driving today’s buyer. Today’s buyers aren’t depending on prices going up while they own their home and are working very hard to get the best deal that they can on purchasing the home. They also want to do as little work as they can before moving in as often we have two very busy adults who don’t feel they have the time to take on a large construction project. This results in them missing out on one of the best ways to generate value and that is the fixer-upper.

I have a great example of that at 108 Pecksland; it’s a classic house that needs work to be adapted for today’s market. We recently reduced the price from $1.99 million to $1.65 million. At that price it is getting a lot of showing, but most buyers, particularly, the under 40 set, who have been the primary lookers are concerned about the amount of work needed to create today’s popular open floor plan, walk-in closets and very large master bath.

Most of the buyers are focusing on the cost and their time needed to get the house modernized. What they are missing is that in this case the cost is not an expense, but an investment. Replacing a roof or putting in a new hot water tank are expenses; they don’t add much value to a house but solving a house’s problems does. The costs in this case significantly increase the value of the house now and going forward. Making improvements that the market wants and is the quickest way to add value to a house. Working with a realtor that knows contractors, the market and ways to solve problems can make for a nice return on your investment even in today’s market.

New York Times and Hartford Courant quote Mark Pruner this week

New York Times logoThe New York Times has an excellent, and to their credit, a balanced article about backcountry Greenwich. Lisa Prevost wrote this excellent article entitled “Living in Backcountry Greenwich“ with Jane Beiles adding some beautiful pictures that do a good job of capturing the spirit of backcountry Greenwich.  I got quoted on how sales were this year and last year in backcountry. (They are even better since the story came out as you can see below.) My listing at 633 Round Hill Road is also featured with a photo by Jane. That listing has been getting a lot of attention. It’s in excellent shape, has a beautiful pool, waterfall and hot tub and at $1.69M is on for less than $300/s.f. about 60% of the average list price per square foot. We are seeing more activity in backcountry with sales up 69% from last year as it’s seen as the value place to buy.

Hartford CourantNeal Vigdor wrote an article for the Hartford Courant entitled “Mansion tax draws the ire of the wealthy, real estate industry”. The article is a political analysis of how the law got passed and the reaction in the real estate community, which as you might imagine is not good. I got quoted on the number of sales statewide and prepared a map that got used in the story showing that the sales are concentrated in the Gold Coast towns of Greenwich, Darien, New Canaan, Westport and also Fairfield. He also quotes me about the big spike in sales in June 2011 the month before the last conveyance tax increase on July 1, 2011. You can read more of my comments on the new conveyance tax in my May market report and see the 2011 sales spike in the graph that was featured in the print version of my Greenwich Sentinel column.

I’d also like to thank Neal Vigdor for his many years of covering Greenwich at the Greenwich Time and Connecticut politics for the Hartford Courant. He was a reporter you could trust to present the story fairly including lots of information in a concise writing style. He got a great offer to covering breaking news for the New York Times, who recognized his excellent reporting. Connecticut will miss his insightful reporting.

May 2019 Greenwich Real Estate Report – Sales are Up

A good average month and a new conveyance tax

by Mark Pruner

Many years ago, I took taekwondo classes. When we would spar, my instructor had a tactic where he would feint three quick kicks to my head and pull them back. Each time my arm would go up to block the kick and then come down to be ready for his next move. The fourth time the kick would start out looking just the same, and I again raised my arm to my head to block the kick, but this time he’d go for my now exposed ribs and connect every time. It didn’t matter how many times he did it I’d get kicked in the ribs every time because my instincts told me that fourth kick was also headed for my head.

This is kind of like the May market. We had three down months and the first two-thirds of May looked to be just the same and then sales picked up. We closed the month of May with 56 sales and 24 of those sales were in the last 10 days of the month. Those 56 sales were 2 more than last year and just one less than our 10-year average. So, all in all an average month, which looks pretty good after 3 down months.

6/1/2019 Inventory Contracts Last Mo. Solds Last Mo Solds+ Contracts  YTD Solds  YTD+ Contracts Mos Supply Mos w/ Contracts Last Mo. Annlzd
< $600K 5 4 1 5 6 10 4.2 3.3 5.0
$600-$800K 19 5 5 10 9 14 10.6 8.8 3.8
$800K-$1M 40 11 3 14 12 23 16.7 11.3 13.3
$1-$1.5M 74 17 11 28 33 50 11.2 9.6 6.7
$1.5-$2M 106 16 9 25 27 43 19.6 16.0 11.8
$2-$3M 165 24 16 40 42 66 19.6 16.3 10.3
$3-$4M 113 15 6 21 18 33 31.4 22.3 18.8
$4-$5M 74 6 4 10 9 15 41.1 32.1 18.5
$5-6.5M 54 4 1 5 3 7 90.0 50.1 54.0
$6.5-$10M 52 5 0 5 3 8 86.7 42.3
> $10M 36 1 0 1 3 4 60.0 58.5
TOTAL 738 108 56 164 165 273 22.4 17.6 13.2

The corollary of more closings is fewer contracts waiting to close. So, we are down 24 contracts from last year to 108 contracts this year, but I’ll take sales over contracts any day.

On the inventory side we are still up at record post-recession levels with 738 single family home listings, up 51 listings from last year. This extra inventory and slower sales from February to April means that for the whole market we are up 5.7 months of supply to 22.4 months compared to last year. This is high, but it’s lower than the 25.7 months of supply we had at the beginning of May.

Backcountry sales up

That the 5,000-foot view, but the situation is more nuanced as you get to treetop level. For the month of May, it’s the backcountry trees that are sticking up particularly high. Last year we only had 13 sales in backcountry at the end of May 2018 with 4 of those 13 backcountry sales in May. This year backcountry sales are up 70% with 22 sales and 10 of those sales were in May. (I have two listings in backcountry, and they are both getting a lot of activity.) Lisa Prevost at the New York Times also wrote an excellent article about “Living in Backcountry Greenwich“.

It’s not all rosy for backcountry as half of our inventory over $5 million is in backcountry. Townwide in that price range we had only one sale in the month of May out of 142 listings. June will be better as we have 10 contracts over $5 million waiting to close. The lack of sales in this price category is worrisome as so much of our total volume is in that section, but the legislature is working to increase sales there as you can read below.

Backcountry’s 22 sales do add up to $79 million in sales, second only to the mega-section, South of the Parkway, which has 40 sales totaling $106 million. In third place Old Greenwich has 30 sales, which total $75 million. Old Greenwich’s days on market is 150 days for sold properties versus 258 days for backcountry.

May sales up to average

When you look at the sales just in May it’s a mostly average month with two areas that stick out. One is the poor sales over $5 million, though inventory is lower there. The other is the jump in sale in the $2 – 3 million range where we are up 10 sales over last year 42 sales YTD. When you map these sales compared to last year, the 2019 increase in sales are mostly in the southeast in Old Greenwich, Riverside and Cos Cob.

This price segment also has the highest increase in inventory, up 18 listings from last year to 165 listings. This segment has the most inventory and the most sales and it equates to 19.6 months of supply, which is not great, but is still down from 21.0 months of supply last year and this includes our poor February to April sales. If you annualize the May $2 – 3 million sales, you come up with a pretty good 10.3 months of supply.

Our $1 – 2 million price range actually has more listings at 176, but this is traditionally broken down in to two segments above and below $1.5 million. It’s a good thing, because this year, as we often see, the $1.5 million price is a break point for demand changes. Below that price range we are looking at less than a year of supply, particularly when you add in contracts, which show where the market is going. Above that price range you have more than a year’s supply and above $4 million you are looking at more than 2 years supply.

The New Higher Connecticut Conveyance Tax

Our legislature is doing what they can to encourage sales above $2.5 million for the next thirteen months. They increased the conveyance tax for sales over $2.5 million by 1% to 2.25% starting on July 1, 2020. The last time the conveyance tax was raised was in July 2011. That month the conveyance tax was increased by only 0.25% all price ranges. The result was that, the prior month, June 2011, was our biggest sales month ever with 114 sales when we normally have 83 sales.

2011 Single family home sales in Greenwich showing sales spike in June 2011, the month before the Connecticut conveyance tax went up by 0.25%.

2011 Single family home sales in Greenwich showing sales spike in June 2011, the month before the Connecticut conveyance tax went up by 0.25%.

 

An unique, and possibly unconstitutional, feature of this new tax is that after 2023, the tax is refunded at the rate of one-third per year if you don’t move out of the state. You would need to stay for six years to get the full amount refunded. That kind of burden on interstate commerce will have a tough time getting past the U.S. Constitution’s commerce clause. (For more analysis of this tax increase check out Neal Vigdor’s article, “Mansion tax draws the ire of the wealthy, real estate industry” in the Hartford Courant.)

This tax is aimed squarely at the Gold Coast towns of Greenwich, Darien, New Canaan and Westport, and also Fairfield which has been quietly putting in a fair number of sales over $2 million to join the “golden” four. Of these towns, Greenwich has the majority of $2.5 million plus sales with 196 sales last year. In the rest of the state, there were less than two dozen sales over $2.5 million in 2018.

2018 Connecticut sales over $2.5 million showing concentration of sales in Fairfield County Gold Coast

This tax won’t raise a lot of money in the just passed $43 billion budget. Last year we had 196 sales that sold for $2.5 million or higher. These sales totaled $870 million, when you subtract the $2.5 million base and apply the additional 1 percent you get an additional $3.87 million of conveyance tax from Greenwich.

2018 Sales over $2.5 million showing sales in Greenwich, Darien, New Canaan, Westport and Fairfield. Data is from the SmartMLS and only shows about half of the over $2.5 million sales in Greenwich which are shown on the Greenwich MLS.

So why would the legislature pass a tax that will only raise a tiny fraction of a percent of the $43 billion needed for the budget? It all goes back to Hartford tradeoffs. Senator Looney and others wanted to raise the capital gains tax, the top income tax bracket and other changes that would impact lots of Greenwich residents every year and not just when they sold their house. This would have had much more impact on the housing market, so given the choice between a higher conveyance tax and higher income and capital gains tax, I’ll take the conveyance tax. What I can tell you is that June 2020 will be a really good month for high end sales.