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.