Real estate sales in backcountry Greenwich started off with a bang in the first quarter of 2021. So far this year, we have sold 22 houses north of the Merritt compared to 11 in the first quarter of 2020 or a 109% increase. That’s impressive, but what’s really amazing is the growth in contracts up from 6 last year to 23 contracts this year or a 283% increase. At the same time inventory has contracted from 83 listings last year to only 55 listings this for a drop of 34%. It’s a tight market, and buyers are moving fast and keeping us Realtors very busy.
Based on last year’s rate of sales and this week’s inventory we are down to the aforesaid 6.5 months of supply. The tight part of the market is from $1 – 5 million. (Can you have a tight market if you have no inventory and hence no sales from $1.5 – 2.0 million?)
Contracts are doing even better. If you add in our 23 contracts in backcountry (and assume they will close in 45 days) then the months of supply drops to 4.4 months for backcountry houses. This is a hot market, just about anywhere, but it’s truly amazing in an area where the median sales price is $2.6 million dollars. To see just how remarkable this market is let’s go back 22 years and look at how we got here.
Until last year our highest number of sales in backcountry was 90 sales in 2000. For much of what people thing of as the heyday of backcountry, sales actually fell from 90 sales in 2000 to 62 sales in the peak year of 2007. That year we sold $306 million worth of houses in backcountry with an average sales price of $4.93 million. If you look at graph of the period, you see a big rise in sales volume while the number of sales is actually dropping from 2004 to 2007. That’s a pretty good definition of a bubble.
In 2008, the bubble started to burst with the number of sales dropping from 62 in 2007 to 34 in 2008 and sales hit their nadir in 2009 with only 27 sales. Sales volume dropped from $306 million to $163 million in 2009. We actually had a pretty good recovery going from 2010 to 2015 when sales grew from 45 to 61 houses.
At the same time, our sales volume and median sales price bounced around. We reached our post-recession low price point in 2012 as our backcountry median sales price dropped to $2,012,000 only to all most match that number three years later in 2015 with a median of $2,043,000.
We didn’t start to see a real recovery until the 3rd quarter of 2019. At that point, prices in backcountry started to look pretty good compared to what you could get in say Riverside. In 2019, backcountry sales were up 31% in while they were down 11% for the town overall and Riverside saw a drop of 23% as the $10,000 limitation on local tax deductions finally hit Greenwich hard. (Not to worry Riversideans, you can feel pretty good about this year’s sales.)
In 2019 our days on market dropped from its post-recession high of 475 DOM in 2017 to only 220 days on market in 2019. In 2020, after a slow first half of the year DOM dropped steeply to 145 days on market. For the first quarter of 2021 we are looking at about the same DOM with 143 days on the market.
It’s easy to over analyze this market. There is a lot of Brownian motion in the numbers as the law of small numbers means that one sale like Tommy Hilfiger’s house selling for $45 million throws off the averages. Take out that sale and the backcountry average sales price drops from $4.94 million to $3.03 million, which is still a pretty good average.
What is clearly remarkable is the number of sales we had in backcountry last year. Our 102 sales last year is 13% better than our previous high of 90 sales all the way back in 2000. If you really want to make a “gee-whiz” graph, you can annualize our first quarter sales on a weighted basis. Most years the first quarter represents only 18.2% of our sales for the year, so, if you take our 22 sales so far this year and divide by 18.2% you get an expected 121 sale this year. This would be an increase of 19% in sales on top of our 73% increase in backcountry sales of in 2020 over 2019.
Will we get to 121 sales this year? I don’t think so, our inventory is much tighter than it was last year, and we’ve got a good chance of sales being supply constrained. We are however continuing to see some shadow inventory in backcountry that was mostly used up in 2020 in the sub-Merritt Parkway areas of the town. Our inventory is down 34% this year, while its down 45% for the town overall.
Additionally, backcountry has always being synonymous with larger houses, but when you look at the numbers that what we are seeing. Our median house size peaked in 2009 at 8,300 s.f. For the last three years, our median house size has averaged around 5,600 s.f. So far in 2021 our median size is actually down to 5,400 s.f. Our median house size for the town over all is 4,200 s.f. or 1,200 s.f. smaller than the median in backcountry.
This lower median does indicate one issue in backcountry, which is that sales are distinctly slower when you hit $5 million. Over that price we have 3 sales and 7 contracts compared to 29 listings in inventory. Not to worry too much as the majority of high-end sales have shifted to the 4th quarter.
This has not stopped some folks from rolling some really big dice in backcountry. Of those 29 listings in backcountry, 3 of them are new construction with prices ranging from $23 million to $40 million.
Aquarion’s 2 4-acre tracts surrounded by a 72-acre park
In addition, Aquarion is selling two 4-acre tracts at 45 and 49 Cherry Valley for $1.45 million and $1.395 million respectively. These lots were retained by Aquarion, when the town and the Land Trust bought72 acres from Aquarion to create new Convers Brook Park on Lake Avenue just north of the Merritt Parkway.
It’s very likely to be a good year for backcountry; inventory will determine just how good.
In the first quarter, we sold 195 houses totaling $581 million dollars. This compares to the first quarter of 2020 when we sold 101 houses totaling $217 million. So, sales are up 93% and dollar volume is up 167%. The increased sales volume is driven by a major shift to higher-priced houses. As discussed last week, the work and schooling from home changes in lifestyles has meant that lots of the homes that people live in now are too small for the new 24/7, multiple offices and multiple schoolwork areas lifestyle.
We are seeing not only people moving from NYC to Greenwich for more space and much less crime, but lots of Greenwich folks right-sizing. For most families that means moving to larger homes with more rooms, more land and more amenities. As always though we have many folks, that have retired and are empty nesters, moving to central Greenwich to condos, co-ops and apartments. These senior buyers are coming from both Greenwich and Westchester County. The problem is that we don’t have enough people leaving these downtown units, leading to the pipeline clogging up.
The demand is there, but the supply until this week was flat. Finally, this week we saw inventory actually go up by 9% from 285 last week to 311 listing this week. The only problem is that we should be around 550 listings, not 311 listings. Part of this increase in inventory, may be the result of increased prices that we have seen, which will be discussed at the end of the article.
But let’s look at how the Greenwich neighborhoods are doing ….
Our sales numbers in the first quarter for several neighborhoods are just weird. Normally, we see a set of descending stair steps, as we have more inventory than we have sales for the for first three months and more sales than we have contracts. Byram, Pemberwick, Glenville and South of the Post Road, think downtown, Chickahominy and Belle Haven, illustrate this typical first quarter pattern.
Our weird neighborhoods are Cos Cob, Old Greenwich, and particularly weird is the pattern in Riverside. We actually have more sales in Riverside the first three months of the year than we have inventory, and we have more contracts than we have sales. The result is that we only have 2.3 months of supply in Riverside and if you add in contracts it goes from ridiculous to unthinkable at least if you are buyer.
If you are buyer looking in Riverside, because of the excellent Riverside School (nice job Mr. Weiss and teachers) and you are looking between $2.0 and 2.5 million, you have choice of four listings and one of those came on yesterday. For all of Riverside you only have 34 houses on the market. Now that sounds bad, but at the end of March you only had 19 listings for the whole neighborhood.
At the other end, is backcountry where we had 65 listings at the end of March with 21 sales in the first quarter and 20 contracts.
Backcountry has been slower this year than the rest of the town, but one place where it blows away every other neighborhood is for the highest sale so far this year. If you look at the chart, the maximum sale in backcountry goes to the top of the chart and then it keeps going one and half more times to $45,000,000. Our next highest sale is $13.3 million in mid-country.
We have Tommy Hilfiger to thank for taking a great backcountry property and making it even better. He bought it at $31.3 million in 2010 and made a lot of improvements. Over the years, he has done that to several property. I used to regularly see him walking on Buckfield when I had a listing at 37 Buckfield. One of my regrets is I never thanked him for what he did for high-end sales in Greenwich, but then one of the things you get in Greenwich is privacy.
The other things to note is how some areas have a relatively small gap between the lowest priced sale and the highest, while other areas have big gaps. For those areas with big gaps your averages are going to jump around every time there is a high-end sale, so take changes in averages in these neighborhoods with a grain of salt.
A little more than halfway up the months of supply chart is 6 months of supply, the traditional dividing line between a buyers and a sellers’ market. Only backcountry goes over that line into a buyer’s market. One of the reasons for that may be that we still have some shadow inventory left in backcountry, whereas in most of the rest of the town, those folks who wanted to move and had waited years, listed their house and got it sold last year.
For our larger neighborhoods, Riverside is leading the pack with 2.3 months of supply. Now this is really amazing when you consider that the average sales price in Riverside is $2.39 million dollars. For most Connecticut town, that average price would be the high sale for the year and for many towns, the high sale for the decade.
Townwide we have 4.4 months of supply and most neighborhoods are between 3 and 5 months of supply. If you are coming to buy in Greenwich, you need to come with an underwritten pre-approved mortgage or have cash.
As you might expect with sales prices in the first quarter for single-family houses going from $520,000 to $45,000,000, we have widely varying prices per square foot. At the moment, South of the Post Road has the highest sales price/sf at $728/sf followed by Old Greenwich and backcountry. Normally backcountry wins this category, but this year we need more high-end, high $/sf sales. Backcountry is actually much better than we have seen it in many years, just not as good other sections are doing.
Part of that is the one area where are seeing enough supply is our over $10 million market. Luckily, Governor Cuomo, has really taken an interest in supporting Greenwich’s high-end real estate. With the help of the NY Legislature, NY state will now have the highest state taxes in the nation even exceeding California. For high earners in NYC, combined city and state taxes can be almost 16% compared to 6.99% in Connecticut.
I expect you’ll see some rather impressive high-end sales later in the year. In fact, post-recession most of our high-end sales have happened in the 4th quarter, so trust in Cuomo and be patient.
One of the best indicators of sales appreciation in Greenwich is the ratio of the sales price to the tax assessor’s assessment. Our chart for the first quarter of 2021 is remarkable in that every neighborhood, but Banksville has a SP/Assmt ratio that is up from the last revaluation in 2015. (I also wouldn’t worry about Banksville, that price drop is based on only three sales in the first quarter.)
What’s really remarkable is that for all the press that Old Greenwich has gotten for price appreciation, the best neighborhoods to put your money in back in 2015 was Byram where sales prices are up 45% from the revaluation that was effective 10/1/2015. This all the more remarkable, because Covid has hurt Byram and Pemberwick in particular due to their higher density in the last year.
The other nice thing to see is backcountry and midcountry with SP/Assessment rations in positive territory. This is actually good news for front country, since we are going to have another tax revaluation this year. With prices coming up in northern Greenwich, the shift of the tax burden to front country will not be as great as it would have been had the numbers in 2019 been included.
Overall, the SP/Assmt ratio is up 15% in the last 5 years. If your assessment percentage increase goes up more than the townwide average, you can expect your taxes will being going up. If you live in a neighborhood that has appreciated, but less than the townwide average your taxes are likely to go down in 2022 when the new assessments will be used to calculate taxes.
Overall, things are looking up for Greenwich real estate. The one major fly in the ointment is half a dozen bill in Hartford including a proposal for state-wide mansion tax.
Work from Home (WFH) Drives 427% Increase in High-end Sales
In the first quarter of 2021, Greenwich home sales were up 93% to 195 sales compared to 101 sales in the first quarter of 2020, and it’s going to get better. Our contracts are up 115%, so you can expect that April 2021 will be much better than last April. The first quarter would actually have been even better than that if we only had had more inventory.
At the high-end, transactions (sales and contracts) over $4 million are up 427% from 11 houses last year to 58 house this year. Homeowners at the high-end are adapting quickly to the Covid-driven once in a century change in work patterns and lifestyles. Changes that were already underway in the work/life balance that would have happened over the next 10 years happened in one year.
March 2021 Inventory, Contracts, Sales and Months of Supply
WFH is driving home buyers at all price levels to upsize their houses and if the buyers can do an all-cash deal this transition happens a lot faster. This trend will likely continue for years as millions of homeowners rightsize their living needs. We are seeing Covid driven buyers who are moving from the high-density, and unfortunately high crime rates in NYC, to the suburbs, but also lots of buyers in town that just need more space as everyone is home most of the time. Buyers want more space, more land, more rooms and more amenities.
Change in Inventory, Contracts and Sales from 1st quarter 2020 to 1st quarter 2021
INVENTORY IS WAY DOWN
I used to lead with sales, now it’s inventory, since that is determining sales. We had 508 single family home listings as the end of March last year. This year inventory is down 45% to only 282 listings. While we added 23 new listings last week, we also had 46 listings go off the market for a net shrinkage of 23 listings. We lost twice as many listings going off the market as we saw come on the market. We normally would be adding dozens of net listings every week at this time of the year.
Last year, we started the year with 432 house listings and by March 31st we were up to 508 listings or an increase of 17.5% in the first quarter of 2020. This year we started at 293 listings and by the end of March we were down to 285 listings a drop of 2.7%. If there is any good news in this, it’s that the drop isn’t greater. Our inventory has been essentially flat since the beginning of the year. What this means is that our new listings, for the moment, are essentially matching our demand.
A TOUGH TIME TO BE A BUYER, BUT MAYBE NOT QUITE AS BAD AS YOU THINK
The low inventory makes for a very challenging time to be a buyer. When you are ready to buy, there is a good chance that what you want won’t be there, so you have to wait for new listings to come one. So far this year, we’ve had 302 listings come on the market, which is actually up 4.1% from last year. So, all the harping by agents that we need more listings have gotten us 9 more listings. The result is a very tight market with only 4.3 months of supply down from 15.1 months of supply last year.
As a buyer in this market, you wait and check the new listings multiple times a day and finally something comes along, that while not perfect looks pretty good. You call your agent and start driving hoping that he or she can set up an appointment to see this rare, though slightly flawed, gem. Your agent amazingly is able to set up an appointment in only 2 hours. You meet your agent and find out they are running behind and it’s going to be another hour before you can get in. You get in line with the other buyers’ cars and wait your turn.
You have 10, maybe 15, minutes to walk through the house and to make a million dollar plus decision with your agent. It’s a tight market and who knows when something else this good will come along, so you decide to put in a bid. Your agent checks with the listing agent, who informs her that yours was the 10th showing and they already have 3 offers. You decide to up your bid from full list to 108% of list. (The kids cannot stay in that apartment another year.) You scribble out your offer on the offer form your agent brought. She hands it to the listing agent who glances at it while showing out the people behind you and showing in the next people. The listing agent tells your agent that at 108% of list you are in second place and he has 15 more showings, two more than when you arrived.
THE ODDS OF GETTING INTO A BIDDING BATTLE
The whole experiencing is exciting and dreadful all at the same time; and it’s mostly not true. Even though our inventory is down 45%, and we do have bidding wars, only 22 of our 195 sales so far this year have gone for over list price. We have had another 38 listings go for the full list price. This means 60 listings or 31% have gone for full list price or better. Of the 22 listings that went for over listing price only 4 went for more than 5% over list price. For those with particularly nervous spouses, it’s actually a little bit better than that.
If you look at the original list price, then we are down from 60 sales at list price or above to only 53 at original list or above which is 27% of our sales. The odds are almost 3 out of 4 that you aren’t going to get in a bidding war on a new listing. You are even less likely to get in a bidding war if you are looking over $4 million. We have had only three houses go for over original list price above $4 million. In all three cases, these houses had been on for months. One had even been on for 1,356 days.
Also, to provide more reassurance to those who see the glass as half empty and draining fast, 11 of the 34 sales that went for what appears to be full list price actually were for “reporting purposes only”. These sales were private sales that are posted on the GMLS so we can point out to our fellow agents that we did it. They are also very helpful to me, and everyone else that follows the market closely, to know what things are selling for in these private transactions.
After all that, how many of our 195 sales this year went for (a) over list price, (b) without a price reduction and (c) were in contract in less than 21 days? (hey, some of these negotiations, inspections and due diligence really drag out.) The answer is 6, only 6 of our sales were super-hot and even for these hot houses the median amount over original list price was only 4% over list price. So, don’t panic.
OUR INVENTORY IN THREE SEGMENTS
When you look at our inventory overall:
33% of our listings have been on for less than 30 days (86 houses)
37% have been on for 30 – 180 days (105 houses)
30% have been on for more than 180 days (86 houses)
So two-thirds of our listings have been on for a while. You can probably wait till the weekend to see many of these houses, but make a phone call first as I frequently find, that properties listed as active have accepted offers. This is not a time for a slow and measured pace, move quickly, but most of the time you have time, if the listing has been on for a couple of weeks.
Now, don’t get me wrong. It’s a tight market our months of supply are ridiculously low. If someone lists a nice house in a desirable neighborhood at a good price it will get a lot of showings and probably also multiple offers, but the statistics so far say that happens less than half the time. Also, what the above analysis can’t see are houses that are priced fairly and have a bidding war, but none of the bidders go over list.
These bidding wars can also happen at any time and it’s not unusual to have a house sit on the market for several months and then have a bidding war when the price is reduced. So being prepared, particularly if you don’t like what is on the market is crucial. My article on how to be the winning bidder in a hot market is one of my most popular articles.
What I am saying is we have a hot market, it’s just not the market that you often read about in the press, not everything is going for over list with multiple offers. For sellers, this means that if you significantly over price your house, it’s going to sit on the market even in the hot market. Our buyers today are very knowledgeable about price and know when something is too high.
WHAT ABOUT CONTRACTS?
Contracts also show that a little anxiety is due. We have 195 sales, but we have more contracts waiting to close and we won’t know until they close just how competitive the market is right now. Last year at this time we only had 94 contracts. Our contracts have more than doubled and of those 202 contracts, 51 or 25% were on the market for less than 21 days and 34 were only on the market for 14 days or less. For all practical purposes listings that went to contract that quick were only on the market for days. Over list price sales are going up when we finally seen these price close.
ECONOMICS 101 FINALLY AND INCREASING PRICES
Is the hotter market and these bidding wars driving up prices? Definitely and also, it’s about time. We actually didn’t see much price appreciation in 2020. Yes, our average and median sales prices went up for single family homes, but that was mainly because of a big increase in sales of high-end homes, pulling these averages up.
If you look at the price/sf in 2020, it went up from $501 at the end of the first quarter to only $525 by the end of the year. This was an increase of only of 4.7% in possibly the hottest Greenwich real estate market every. We’ve had many years where the appreciation was in double digits. Lots of shadow inventory coming on market in the second half of 2020 kept the amount of appreciation down last year.
This year it looks like there is not much more shadow inventory left to go through. High demand with low inventory means prices increase. Our median price/sf is up 9% from the first quarter of last year and is up 4% from the end of 2020. Does this mean we are going to see 16% appreciation this year (4% x 4 quarters)? Last month I would have said that’s too high, but it’s not looking so crazy now.
MAY YOU LIVE IN INTERESTING TIMES
We are seeing a once in a century lifestyle change. Not since the invention of the car, the telephone and the radio are we seeing so many changes in the home. The work from home movement is not going away, even when Covid does. WFH means that people need bigger houses; at the moment they need much bigger homes because of remote learning and remote work. People also want more amenities and more property as well as more rooms.
This plays right into Greenwich’s forte. Our 4-acre zoning I believe is the largest in the state. We have more houses with more rooms. We have a great hospital and excellent schools all factors that bode well for us. I do think we will evolve from WFH to WOFH where the “O” stands for either “occasionally” or “often”. Even after Covid is gone, people will still want a home office.
The concept of the home office is also evolving. It’s no longer just a desk and some bookshelves. It now comes with a whole set of accoutrements. You have copiers, scanners, supply closets, and printers. The old 3-in-1 device is just too limited. People who can afford it are not going to scan a 20-page document one page at a time.
THE EVOLUTION OF THE MASTER OFFICE SUITE
We are also going to see Zoom rooms for video conferencing. You should not negotiate $100 million deals with barking dogs and crying babies in the background. I think we’ll also see more assistants work in the home office and not just remotely. The next step is a master office suite and also guest offices. I can even see the Biden administration giving carbon credits to businesses for people not to commute. (At the same time, former presidents with lots of commercial office space being freed up will need excellent deal making skills.)
The Covid era is not like Hurricane Sandy or 9/11. The world pretty much went back to a gradual evolution, after a year or so had passed. Covid could have been like that, but ubiquitous connectivity, smart phones and a whole series of technologies that were just maturing allowed us to quickly morph to new ways of living and working. At the same time, people really want to get back together to facilitate teamwork, I just don’t see them doing that 10 hours a day, 5 days a week as many workplaces had become.
While the future is rapidly evolving around us, let’s wear masks. Covid is at another inflection point, which really needs to be a downward inflection this time. Having a low Covid rate is a real competitive advantage.
Mark Pruner is a Realtor in Greenwich, CT with Berkshire Hathaway. He can be reached at firstname.lastname@example.org or 203-969-7900.