I recently put on 26 Parsonage Road. It’s a very special property. It’s over 3 acres in a 1-acre zone and the house was designed by Phil Ives; the same architect who designed the Pan Am terminal at JFK. The property is close to town and has some world class garden. It is listed for $4.3 million. Check out the video.
First Week of May may be Best Week Ever in Greenwich Real Estate?
Back in April 1999, we sold 67 houses in the month of April. Since then, we’ve had a couple of Aprils where our sales got to the low 60’s, but we’ve mostly been around our 10-year average of 38 sales. This April we broke out of the 60’s, zoomed past the 70’s and almost made it to 90 sales. We ended the month at 88 sales, 132% above 10-year average and 31% above a record that had stood for 21 years.
So far, May has been even better. Last year, we had two weeks where in one week, we had 68 transactions, the total of sales and contracts. Not surprisingly, these two weeks were in our biggest sales months, August and September 2020. Two weeks ago, in the third week of April we matched the 68 transaction in one week. Then came the first week of May and we had 85 transactions. To show how much the demand there is, only 28 of those 85 transactions were sales. The other 57 transactions were contracts evidencing better sales to come in the months ahead.
A Very “Green” Spring
So far this year, we have sold 288 houses up 153 sales from last year, when we sold just 135 houses. Sales are up 113% from April 2020 and April 2020 sales were up 25% over April 2019. In total, sales are up 167% in two years.
I find trends easier to visualize when I color code a spreadsheet to showing the differences from the previous year. I use green for pro-seller numbers; higher sales, lower inventory and pink for pro-buyer changes. I have not been using much pink and none for this April’s numbers.
A quick glance might tell you that April sales and contracts for houses listed under $600,000 are down by 75%. That might seem pretty pro-buyer, until look over at the inventory numbers. The reason April sales and contracts are down this year is because we have no inventory, nada, zip, zilch, the bagel. Rising prices have pushed our lowest price range houses, of which there were never a lot under $600K, out of existence.
2020 vs 2021 Months of Supply Tells the Story
If you want to see just how tight a market is check out months of supply. This tells you how long the present inventory would last based on the monthly sales demand so far this year. From $3 – 4 million dollars last year we had 16 months of supply. This year we have 4.6 months of supply or 71% lower. Throw in the 46 contracts that we have and assume they will the contracts close in a month and half and we have 3.0 months of supply. This is houses costing as much as $4 million, not for $300,000 condos. (BTW: We do have 4 listings under $300K, one studio apartment and 3 boat slips on River Rd. in Cos Cob. It even costs money to just float in Greenwich waters.)
We have not seen such low months of supply at such high price ranges possibly ever. The one slight area of concern are sales over $6.5 million. In April, we only had 3 sales and none over $10 million. However, you don’t need to worry about the market from $6.5 million to $10 million as we have 23 contracts waiting to close. This is up 1,050% from last year when we only had 2 contracts between $6.5 and 10 million. Our high-end sales have shifted to the 3rd and 4th quarter so I wouldn’t worry too much even over $10 million unless the Connecticut legislature passes some of the soak rich bills that are still circulating in Hartford.
If the legislature really wanted to increase tax receipts rather than just stick it to the rich, they could lower our top rate from 6.99% to 6.5%. The resulting influx of high-net-worth individuals would more than make up for the cost of lowering the rate by 0.49%.
We clearly saw this, when the Greenwich BET held our mill rate flat in 2018 due to the Trump $10,000 limit on SALT taxes passed in late 2017. Unlike the rest of the metro area, our house sales actually went up in 2018, as property tax refugees from NY jumped the border. With NY deciding to raise the income tax rates on their millionaires, a little top-end tax cut in Connecticut could raise a lot of tax dollars from a lot of new residents.
A Deep Dive into the Inventory “Problem”
While we have high demand for housing, it’s the persistently low inventory that has led to these record low months of supply. However, if you look at listings over time our shortage of inventory is not as bad as the charts make it appear. As of the beginning of May, we only have 328 single-family home listings. This is down 185 listings from this time last year.
But our inventory is even lower than it appears in the year over year comparison. In April 2020, we were in the middle of the first lockdown from Covid. Everyone was staying home, and we were seeing minimal new listings, hence listings dropped to 513 single-family homes. If you go back two years to April 2019, we had 693 listings, which means that we are actually down 291 house listing from 2019 or -53%.
Inventory is just a picture at a point in time. It is like looking at a picture of a river and trying to guess how much water flowed by in the last month. Our inventory is a very dynamic process. We have new listings constantly coming on, pushing up our inventory, while at the same time other listings go to contract or expire pushing it down.
Inventory reductions from sales and contracts get most of the attention, but so far this year, we’ve had 58 listings expire. Now you might ask how in what is possibly the hottest market ever, a listing could expire unsold. Most of these expiring listings are over-priced, but they may actually comp out based per acre or dollar per square foot basis. They may not have sold at a “comparable price” because they are next to one of our highways, or the property could have lots of wetlands, or it’s a funny shape, or it smells like cat pee (seriously we have listings that do) or the house could need lots of work.
Alternatively, houses can be over-priced because the owner, or one of them, doesn’t want to sell. In both estate situations and divorces, the resident owner may want to stay and doesn’t want the house to sell. You see the same thing with foreclosures and financially distressed owners. One of the more interesting listing is a situation where the bank foreclosed and has title to the property, but the former owner refuses to leave. The property is listed, but you can’t go inside to see what condition the property is in.
Another way that listings shrink is through cancellation and being taken off the market. So far in 2021, we’ve had 65 listings this year that have been cancelled or are temporarily off the market. Last year, we saw a big jump in listings that were temporarily off the market, since owners didn’t want to show their houses during the height of Covid. This year most of our 48 cancellations are for properties that had been doubly listed as “for sale” and “for rent”.
Our rental market is actually hotter than our sales market, so the odds are good that if an owner lists a house for sale and for rent that they will get more offers and sooner for the rental listing. When my clients want to test both markets, I suggest giving the sales market at least a month, before putting on the rental.
But, back to why we don’t have an inventory shortage, or at least not as much as people think. So far this year we have had 498 listings come on the Greenwich MLS this year. This is up a huge 63% from last year’s 305 new listings. Of those 498 listings, only 187 are still active. We have 96 closed already and another 187 have gone to contract. Only 2 have expired and 26 have been withdrawn or cancelled.
Interestingly, of the 498 new listings in 2021, we have the exact same number still active as have gone to contract. We have 187 listings still listed and 187 contracts. (To be clear, this doesn’t count the 291 listings that we began 2021 with.)
Our inventory is a swan, on the surface the swan is moving serenely at a nice and steady pace, but underneath there is a lot of churning activity.
How many houses could we sell this year? Based on our 10-year average, the first four months of the year average 24.4% of our yearly sales. If you take our 288 sales so far this year and divide by .244 you get 1,180 in 2021, which would break last year’s record of 863 sales by a lot. It all depends on the number of new listings we get, and not whether our inventory stays low.
An Unprecedented Period
Last year, Covid drove lots of people, and particularly families, out of New York City. Initially this resulted in a hot rental market and an amazing summer rental market. We had dozens of houses renting for more than $20,000, $30,000 and several at $50,000/month. These summer rentals also extended into the fall. Local families with beautiful houses, that I never thought would consider renting, once they saw what they could rent for were only too happy to take an extended summer vacation and come back with extra money in the bank.
Having said that we had a huge shortage of summer rentals last year. I rented one house with a pool for $25,000/mo. in five hours with multiple offers. I was able to find another renter a summer rental, but had four clients that I couldn’t find a summer rental for. This summer we still have very good demand and lots of the folks that rented last summer are renting the same place again this summer. We have good demand, but this year we are seeing, or better said, we are not seeing new summer rental inventory.
Our rental market then, as now, became very active, but lots of people decide it wasn’t renting, but buying that they should be doing in Greenwich.
Home Sales – Five Quarters and One Month
The year 2020 started out pretty normal. In the first quarter of last year, the Greenwich real estate market had a typical first two and half months with transactions (sales and contracts) building week by week. Our first quarter market proceeded normally with little thought that a virus spreading from a wet market in town most people hadn’t heard of was going to upend the entire world including Greenwich starting in the third week in March.
From that third week in March 2020 until the first week of May our market took a major Covid-induced pause with transactions eking along at about 20 sales and contracts total per week. Then came the second week of May with transactions shooting up to 33 transactions and followed by 43 transactions the next week. By the end of June our transaction hit 64 in one week.
3rd and 4th Quarter 2020 Sales Take Off and Stay High in 2021
Then the third quarter of 2020 came along and we have not had a slow period since, particularly if you seasonally adjust the numbers. Our sales peeked in September with 118 sales, a new record for September sales. This record September had followed a record 108 sales in August 2020, which was 41 more sales than normal. Our sales did fall in October and November, but they were 58 and 53 sales respectively higher than our 10-year average.
This activity continued into the first quarter of 2021, where we averaged 30 sales higher each month in what is normally our slowest quarter of the year. Our 193 sales in the first quarter of 2021 is almost as much as we had in the whole first half of 2019.
April 2021 – It’s All About the Inventory
In the second half of 2020, even as we were setting new sales records monthly, our inventory was down only a little bit. Our shadow inventory was constantly resupplying fresh inventory, so we had enough inventory to sell. Then came January 1, 2021 and inventory dropped like a rock. We went from 378 listings at the beginning of December 2020, already a very low number, to only 287 listings on January 1, 2021. A drop of 24% in one month, now that’s a little dramatic, since we always get a lot of listings expiring on December 31st and we get several listings that start on the first business day of the new year. In 2021 that barely happened.
By the end of the first week of January 2021 we had only recovered to 293 listings. We just don’t see inventory numbers in the 200’s, but we did this year. We didn’t break 300 listings until the third week of March this year and it wasn’t until April that our inventory was able to stay above 300 listings, which is just absurdly low>
So far this year our weekly inventory numbers have varied between a low of 273 listings at the beginning of March to last week’s high of 317 listings. (On Tuesday, 4/27/21 we actually jumped up to 332 listings only 35% lower than last year’s 517 listings at the beginning of May. 2020. However, it is 52% lower than the 693 listings that we had at the end of April 2019.)
2021 Inventory – A Dynamic Equilibrium
Given our increase transactions our inventory should be dropping, but so far this year our market has been like the fraternity trash can punch (Green Machine punches at Dartmouth). As fast as the seniors can drink the punch, the freshman are filling the punch bowl. Though in Greenwich, a better analogy would be that the freshmen with their younger families are taking houses off the market while our seniors are supplying the inventory and downsizing to condos or moving south for the winters.
Is April the Beginning of the End or the Beginning of a New Trend?
So far, we’ve had 61 sales in April 2021. If you monthlyize them (there has to be monthly equivalent of annualize that doesn’t involve the word “gross” as in gross up) you come up with an expected 68 sales for the whole month, which is a record for April, but it is only 21 sales above our 10-year average for April sales. This is down from an average of 30 sales above our 10-year average in the first 3 months of the year.
The pessimists can argue that we may see a continued drop in sales as the vaccination rate goes up. Per Senator Kasser’s weekly email, 66% of Connecticut residents have gotten at least one shot and an amazing 90% over the age of 65. (Let’s hear it for us seniors, but particularly for our governor and the government employees who made this process run pretty smoothly. And, thanks to all the hospital and charities and their personnel who have taken the risks to make this happen. It’s really nice when things actually work in Connecticut as well as Greenwich usually does.)
For our optimists, the key thing is that our inventory has been coming on fast enough to meet most demand for housing. If not, inventory would have dropped and the last three weeks, it’s been going up like it is supposed to do in our spring market. At the same time, it’s combat-buying out there. Nine of our 61 sales so far this month went for over list and another 15 went for list price.
That latter number is actually deceptive as 12 of the 15 sales at full list price never made to a public listing. These sales were FRPO’s [not to be confused with FSBO’s (for sale by owner]. FRPO’s are listings that appear on the GMLS “For Reporting Purposes Only”. These properties sold in private sales and are always reported as being sold at 100% of original list price. An increase in FRPO’s mean that sellers can more easily find buyers due to their number and motivation to buy.
WOOFH Will Drive Sales for Many Years
In the second half of the year, we are going to see a lot more people who buy houses for WOOFH’ing. These are the folks that are “Working Occasionally or Often From Home”. Some businesses are reporting more production from having people working from home, while other businesses in the same industry are pushing to get employees back in their offices. It’s not clear just exactly how much people will be WOOFH’ing, but it is clear that there will be lots more WOOFH’ing post-Covid than pre-Covid. The need for two and even three offices and home schooling rooms are pushing both New Yorkers and Greenwichites to buy larger houses.
High-End Sales to Get Even Better?
I also expect that high-end sales will pick up, as in one of New York’s dumber moves they just raised taxes on very high income people to 15%+ when NYC taxes are added in. This at a time when huge numbers of high-net worth people had already relocated to low tax states and Connecticut’s lower, but low taxes. Greenwich is just looking better and better for New Yorkers.
We have lots of forces pushing Greenwich sales and inventory in both directions. Will we beat last year’s 863 single family home sales. In this over/under bet, I’m taking the over, but I think it’s an even bet at this point.
Stay tuned the second quarter will probably set the tone for the rest of the year.