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.