But For How Much Longer
by Mark Pruner
Berkshire Hathaway Greenwich, CT
The human mind tends to get bored with the same thing over and over, even when it’s another superlative, which is my way of saying that we set another record for sales in November 2020. November 2020’s 91 sales did not beat last year by just a little bit; it was more than twice November 2019’s 40 sales. These 91 sales are also more than our 10-year average sales in our busiest month of June, which only averages 86 sales. Or course, our sales in August, September and October 2020 exceed our June average as well.
The question is can December do the same thing and the answer is very likely, yes! But this may not be the answer for January, but more about that later. Right now, we have 171 contracts waiting to close. The odds are that December will be better than November as many of these buyers and sellers are tax motivated and want to wrap it up before year-end. Over the last 10 years we’ve had 38% more sales in December than in November. We also have more sales in January than in February as today’s sellers want to put off paying capital gains taxes until 2022. Right now, I have two clients who are pushing me for a sale this year.
In bad years, life-changing moments drive the market: births, marriages, divorces, and deaths. Covid and its associated changes are causing some changes in these life-changing moments; more deaths and divorce pressure, and some delayed marriages (Though my niece got married in our backyard last month. The groom’s father got ordained as a minister, so that they could keep the number of attendees under the state limit of 10 people.) Supposedly, births are down, but since blackouts lead to increased births, wouldn’t lockdowns do the same things? Regardless, these 2020 life changes in aggregate are not what is driving the number of contracts up 163% and November sales up by 127%.
So, if life changing moments aren’t increasing sales much, what is it? We have multiple factors that have combined with synergistic effect to increase our sales in Greenwich. The desire for young families to have an outdoor space for their kids to play is a major and well publicized factor, but maybe not the majority factor. Low mortgage rates also are driving increased sales nationwide. If we did not have record low mortgage rates, the number of Covid motivated buyers actually buying would be smaller.
Low interest rates don’t account for the fact that our median sales price is up from $1.87 million in 2019 to $2.1 million in 2020. This is an increase of 12.5%, and I would love to tell folks that their $2,000,000 houses last year are worth $2,250,000 this year, but that’s not the case. As usual, and as most reporters don’t focus on, what is driving the change in the median price is not a general price appreciation, but more sales of houses above the median price point pushing the median up.
For 2020 so far, the median sales price/s.f. is up 4.0% and the sales price to assessment ratio is up 2.4%. Both metrics are better measures of overall price appreciation than the change in the average or median price.
Above average-priced sales are up, but what is driving these sales? Part of it is buyers looking for more home amenities, the “mini-country club effect.” Last year many buyers saw a pool as an additional expense that required daily maintenance. In the Covid era, a private pool means summer fun, without having to be part of the crowds at the beaches and clubs, and also a personal sized hockey rink in the winter (well OK maybe not that yet.) People also want room for other adult family members to join them when needed. Buyers also need two, three or even more home offices/remote schooling locations. What was not needed last year is now a requirement for many buyers.
Another factor that has really impacted the very high-end sales are concerns about increased unrest and shootings in New York City. From Jan. 1 through Nov. 29, the NYPD recorded 420 murders, compared with 304 murders during the same period last year. The number of shooting victims in the city has more than doubled. All this is encouraging more sales, and especially sales at the high end.
I’m also seeing a few buyers with houses in the Hamptons who are realizing that the Hamptons are not the ideal place to sit out the Covid era. It’s not an easy commute to New York City, even if you only have to go once a week. School space is limited, and they don’t have a Yale affiliated hospital minutes away like we have at Greenwich Hospital. For Covid motivated buyers, Greenwich looks pretty good.
Lastly, in my experience another major factor is that people in Greenwich are upsizing. For decades, Greenwich people moving up was a major factor in purchases and sales. You bought a house and in five to eight years, you could take the appreciation and buy a bigger house. Post-recession there wasn’t lots of appreciation. The move-up pipeline got clogged and many people fixed up their present houses. This year, we’ve had a Covid roto-rooter clearing out this pipeline of people whether waiting to upsize, downsize or move out of town.
Can we keep this high level of sales up?
Year to date, we have 940 total sales and contracts. This is up 385 transactions from last year or 70%. Where did those additional 358 homes sales come from? Very little is from new construction as only 4.6% of our inventory was built in the last two years. Much of the rest of the 95% of inventory comes from Greenwich homeowners that wanted to change their present housing situation and felt stuck. The problem is that we are rapidly running through this shadow inventory of homeowners that have been waiting years for this market. You can see that it is shadow inventory coming on, as house prices have not gone up much even with the increased demand and sales.
Once we see the people wanting to move who have actually done so, are we going to get additional inventory? Our present inventory levels of only 378 single family homes listed on the GMLS make this question of more concern. We are down 142 listings from this time last year. We always see inventory drop in November, but usually not this low and not this early.
Our demand has not slackened, transactions were down last week, but only because it was a 3-day work week. On a per diem basis our sales were up last week.
Prices are going up slightly, a nice turn around for backcountry and mid-country and other areas of town. Increased prices do lead to increased inventory. This summer even some of our wealthiest families put their houses on the market as summer rentals at prices we hadn’t seen before, which led to inventory we hadn’t seen before.
I’m putting a couple of new listings on the market in the coming weeks of December, something I probably wouldn’t have done last year at this time, but “Winter is the New Spring” in this real estate market.
So, if you are thinking about selling your house in the next 12 months, now may actually be an excellent time to do so. Check out this week’s sales and new listings that Cesar Rabellino does for the Real Estate Dashboard: 54 sales and only 28 new listings. Inventory is down a lot this month and sales and contract signings continue to be just as hot as they have been for the last five and a half months. It’s worth a call to your Realtor.