Covid Creates Major Shift in Real Estate Demand for Various Greenwich Neighborhoods in 2021

How is Your Greenwich Neighborhood Doing in 2021?

How is Your Greenwich Neighborhood Doing in 2021?

May 2021 was a Dickensian month. It started out as the best of times and while it didn’t quite end as the worst of times, we won’t from possibly the best week ever in Greenwich with 85 transactions to 45 transactions by the end of the month. Having 45 transactions (sales and new contracts) in one week actually isn’t a bad week, it just that by the end of May it looked the Greenwich real estate boom might be over.

Well, the short answer is that June transactions show it’s not, though it’s not quite as good as it looks. The first two weeks of June, we had 57 and 55 transactions and then last week we jumped up to 72 transactions. That exceeds the highest number of transactions that we had in our best weeks in 2020, which itself was a record year.

The 72 transactions we had last week is 6% over the best week of 2020, but the details show it’s a maturing market. When we set the record of 85 transaction in the first week of May, we had 57 contracts and 28 sales or 2:1 ratio of contracts to sales. Our 72 transactions last week were in a 1:1 ratio of sales to contracts with 36 contracts and 36 sales. That ratio is actually fairly normal as June is typically our month with the most sales and contracts start to fall these deals close.

What we actually may be seeing is normal on steroids with more sales each month, but a more typical annual sales curve. In the first 20 days of June, we’ve had 82 sales which is very impressive given that our 10-year average for June sales in 86 single family home sales. If you gross up those 82 sales for the whole month, you’d be looking at new all-time June record of 120 single family home sales.

I wouldn’t hold my breath, but it’s a definite possibility that June 2021 could be third all-time, consecutive record sales month after April and May 2021 (and February 2021 also). Having said that the general consensus among agents is that market is going from frenzied to just hot, and you can see that when you look at total contracts. In the third week of May we peeked at 267 contracts waiting to close. We are now down to 250 contracts, which is still very good, but we have had 4 weeks of a flat to slightly down trend. This is what happens every year, just not at these levels, as the spring contracts mature into summer sales.

                The Neighborhoods

So where are all the sales? The answer is everywhere. If you look at a map of our sales in Greenwich it looks like a we have blue measles with major concentrations in Old Greenwich, Riverside, central Greenwich, Glenville and Pemberwick, and not so much in north Greenwich, but what the map doesn’t show is zoning. All of our “busiest” areas are also the areas that are mostly half-acre and smaller zones. In an R-7 zone (7,500 s.f.) you get 6 sales per acre or 24 sales per 4 acres.

Sold YTD Mid-June 2021

So north of the Merritt Parkway take the dots and multiple by 24 times in the four-acre zone and 8 times in the two-acre zone south of the Merritt Parkway. If you do that, backcountry, and particularly mid-country, are doing better than the hot front country, but will that continue?

Contracts mid-June 2021

The best indicator of how each area will do over the next couple of months is the number of contracts and there Old Greenwich and Riverside stand out as they have 85 of the 250 contracts waiting to close. The other thing you see is the grouping of contracts along our western border with New York. It’s not only Covid buyers from New York City, but also a fair number of buyers from Rye and other Westchester town that want a short drive to their relatives and former neighbors.

Actives

The other factor that’s having a big impact on sales this year is inventory. We have 3.5 months of supply and if you throw in those 250 contracts that are waiting to close, we have a super tight 2.8 months of supply. It looks like inventory is going to limit sales in Old Greenwich, and particularly in Riverside where we only have 26 listings with only 10 of those south of the Post Road. The other thing we are seeing is some pushback on prices as we saw in 2018, when we saw sales spurt in Cos Cob and Glenville as prices per s.f. in Old Greenwich and Riverside appreciated too rapidly for many prospective buyers.

This year has been an amazing year for Greenwich real estate. Our sales are up nearly 100% from 191 sales through the end of May 2020, to 376 sales this year. Our average sold price is up $932,951 to $3,062,441 from $2,129,489. This is a jump of 44%, but that doesn’t mean that your house went up 44% in the last year.

The huge jump in the average price is more of a mathematical curiosity, than a useful number when it comes to buying a house or refinancing. It is a real number and can be used when talking to your father in NYC or your brother in Silicon Valley or your sister in south Florida, since they are probably reading about average price changes in their states.

Four things are driving the average price change.  First people want bigger houses. The median size of a Greenwich house sold in 2021 so far is 4,242 this is 573 square feet bigger than the median size for 2019. Arguably, 16% percent of the 44% average price increase is due to larger houses.

Second, we are seeing some inflation as the Washington continues to pour money into the economy and keep interest rates artificially low. Estimates put Y-o-Y inflation at over 4% through April. Third, are our base comparison issues. All these year over year numbers are comparing a very robust first 5 months in 2021 to two and half months of recovery in early 2020 and 2 and a half months of lockdown after the mid-March 2020 lockdown. Lastly, we are seeing real appreciation driven by increased demand for houses while at the same time we have decreased supply. Sales are up 97% while inventory is down 45%.

A better way to look at this price appreciation is by comparing either the sales price per square foot or the ratio of sales price to the tax assessor’s assessment. When you look at the sales price per square foot, we are up 26% townwide. If you look at the sales price to assessment ratio, we are up 16% year over year.

So how much have properties appreciated in Greenwich in the last year. Well, it’s kind of like the old lawyer joke. When the retiring CEO was interviewing for a successor, he asked his general counsel what is two plus two. The GC’s response, “What do you want it to be?” Our appreciation is like that. All of these numbers are mathematically accurate, they just measure price appreciation in different manners. One thing you can be sure of is, is that when all three factors are up, we are looking at real appreciation.

                Greenwich Neighborhoods Booming and Boomlets

If the CEO were to ask his COO/property manager what is 2+2 is response might be, “Well where are we talking about.” While our townwide average SP/Assmt ratio is up 16% Y-o-Y, in Glenville and Cos Cob, we are looking at 26% and 21% increases respectively. These are the areas that didn’t do well in 2019 as the SALT tax deduction limitations impacted Greenwich and their recovery looks bigger as it’s off a smaller base.

The other major area with above average appreciation this year is Backcountry where the SP/Assmt ratio is up 18% Y-o-Y. Backcountry was a major beneficiary of the Covid driven lifestyle. If a buyer wanted the much desired mini-country club with pool, tennis court and basketball court/enlarged parking area; it’s a lot easier to do that on 4 acres rather than two acres.

                Our Neighborhoods Leaders

                Greatest Y-O-Y Appreciation ($/sf) – Backcountry

Backcountry posted a 51% gain on price per s.f. This astounding number is a lot of real appreciation along with some big sales at a premium price per square foot. In second place was South of the Post Road, where we are some big waterfront sales and some real volatility in the high-end market. We have a bunch of folks putting their house on the market and bunch of people buying them almost as fast as they come on.

                Greatest 6-year appreciation (SP/Assmt) – Byram

Byram has some of our most affordable housing. It got hammered in the recession, but since the assessment it has come back strongly up 39% since our last assessment date of October 1, 2015. In fact, so strongly, that it’s up only 4% this year as there are good deals in other parts of town. (North Mianus actually did better but with only 5 sales and the same with Pemberwick.) Old Greenwich continues to do well as it does year in and year out. Since 10/1/05, OG has racked up 30% appreciation.

                Biggest percentage increase in sales

Byram once again does very well here as does Banksville. In the larger neighborhoods South of the Post Road saw a 187% jump in sales in the first five months of the year. Backcountry was up 124%. (Backcountry is back.)

                Biggest Sales Volume Increase

South of the Parkway our biggest GMLS neighborhood saw sales jump by $234 million from $156 million to $390 million in sales. Coming in second was South of the Post Road where all the move-outs allowed a lot of move-ins resulting in an increase of $142 million in sales.

                Overall, it’s a hot year and we are staying at a very busy level.

The 2021 Greenwich Rental Market

High Demand for High-End,  Little Inventory for the Lower-end

Last year was an amazing year for rentals in Greenwich. Our overall rentals were only up  25% for the year compared to our 10-year average, but rentals over $12,000 per month were up 233% from 60 rentals to 200 rentals. Above $20,000 per month, our rentals were up 468% from 14 rentals in a normal year to 79 rentals in 2020, and, those numbers are certainly an undercount. The rental market was so hot, that many listings never made it to a public listing in 2020. If you had a rental listing with a pool last year and let your fellow agents in your office know, three other agents would announce they had someone that wanted to rent it.

This year we are seeing the number of rentals return to more normal numbers, but the mix is different. Rentals below $8,000 are down in 2021, while rentals above $10,000 have doubled. This seemed curious, so I talked to our rental guru here at Berkshire Hathaway, Roberta Jurik, who said that people don’t seem to be moving around as much this year compared to prior years. The uncertainty of people’s office situation means they are often staying in place.

 10 Yr Avg20202020 vs 10 yr Avg 2021 Anlzd2021 Annlzd vs. 20202021 vs 10-yr avg
    
1-200012971-45% 70-2%-46%
2001-40003223509% 283-19%-12%
4001-600016119219% 137-29%-15%
6001-80008310122% 60-41%-28%
8001-10000527747% 60-22%15%
10001-12000295071% 43-14%47%
12001-140001636128% 360%128%
14001-16000142899% 293%104%
16001-180001032208% 7-78%-31%
18001-20000625331% 14-42%148%
>200011479468% 72-9%418%
Grand Total8361,04125% 811-22%-3%

The pandemic increased sales about as much as we saw in the depths of the Great Recession. In the recession, sellers, particularly developers couldn’t sell their houses, so they decided to rent. Also, many people who could buy decided not to do so not wanting to buy a declining asset. By 2012, we were back to a “normal” rental market of 780 to 860 rentals per year. In the post-recession years from 2012 to 2019, our rental market was fairly steady within those bounds. Our rental market was also fairly tight with most properties renting in weeks or a couple of months as our rental market is always tight below $6,000/month where the majority of rentals is.

In 2020, demand for homes took off as people wanted to get out of NYC. This increase in demand resulted in increased prices and this led to a big jump in inventory, which led to more home rentals. People who never would have considered renting their houses were happy to do so if they could $30,000 or $50,000 or more per month. Below $2,000, the number of rentals actually dropped as people who wanted to get out of apartments in NYC were not jumping to move into an apartment in Greenwich that also had shared hallways and elevators. Also price appreciation was pushing up the asking price for rentals above $2,000. This is particularly true with single family homes where they was big demand and significant price appreciation.

Once the pandemic hit in 2020, people did not wait around.  Our rentals took a huge jump in March of 2020 and stayed high all the way to October when rentals started to return to normal. In 2021 with an estimated 811 rentals if you an annualize our first 5 months of rentals,  it looks like we have dropped back to an average year, but that conceals major changes in demand by price range.

In 2020, our rentals under $2,000 were down by 45%. Annualized rentals our first five months of rentals under $2,000 are down an almost identical 46%. Part of this is a continuing reluctance to rent apartment style units, but much of it is just that we have have fewer units under $2,000 per month as prices have been pushed higher. Also as noted by Roberta Jurik, we are seeing fewer rentals come to market as people are waiting in place. Above $4,000, our rentals were up at all price ranges over the 10-year average, but particularly above $10,000/mo.

Above $10,000 our 10-year average of rentals is only 89 houses, but in 2020 that jumped 181% to 250 high-end rentals. If you annualize the first 5 months of rentals in 2021 we are on a pace to rent 202 houses above $10,000 a drop of 19%, but still 127% above our 10-year average. Above $20,000 per month, rentals jumped from the 10-year average of 14 to 79 rentals or 464%. At the present pace we will see about the same number of high-end rentals in 2021. Part of the increase in high-end rentals may be driven by the millionaire tax in New York encouraging high-income families to spend less than 6 months in NY and NYC.

Non-listed rentals

We have more rentals each year in Greenwich on the Greenwich Multiple Listing Service than we have house sales, but this is not all the rentals in Greenwich. Under $2,000 the majority of listings are done privately; either listed in the newspaper or put on Craigslist. Under this price we have between 100 and 150 rentals per year on the GMLS. The units available under $2,000 include everything from a one-room-garage apartments to smaller condos throughout town. If a place is livable in Greenwich and listed for under $2,000/mo. it goes pretty quickly.

Also as noted above, our high-end rentals often didn’t make it to the market for a public listing as they got rented quickly in the hot, high-end market of 2020. So take these numbers with a grain of salt. The actual numbers are higher.

                Inventory or lack thereof

As anyone knows who has been looking for a rental our rental market is very tight. At the present time we only have 91 rentals of any type listed on the GMLS. If you are looking between $10,000 and $12,000 you have a choice of two houses. If you are looking in Riverside from $7,000 to $12,000 you have a choice of three rentals.  The low inventory in the rental market makes the sales market look easy and it’s not.

Monthly RentInventory
1-20005
2001-400028
4001-600011
6001-800012
8001-100008
10001-120002
12001-140004
14001-160004
16001-180002
18001-200004
>2000111
Grand Total91

As mentioned at the lower price points most of our inventory consists of a variety of apartments, condos, garage apartments and the occasional small carriage house. From $4,000 to $6,000 we are about evenly split between single family houses and all other types of rentals. Above $10,000 per month nearly all of our rentals are single family homes. Overall, we normally are about evenly split between single family homes and all other types of rentals. This year 60% of our rentals are single family homes. If you are not looking for a house to rent, then you only have 37 listings to choose from. The result, says Roberta Jurik, is that we are seeing a lot more multiple offers in lower price ranges in 2021.

Even though Greenwich is considered a high-end town, when it comes to rentals 77% of our single-family home rentals in 2021 are below $10,000 and with lots of competition. Our high-end rentals are way up, but we also see 60% of our single family listings in that category. The result is that our overall days on market is down. We normally average around 74 days on market, but 2020 that dropped to 64 days and so far in 2021 we are down to an amazing 33 days on market.

 It’s a good time to be a landlord.

Greenwich Real Estate in the News (MP quoted)

Last week was a busy week for talking to reporters about Greenwich real estate.

You can check out In Greenwich, luxury rentals might be hotter than sales in the Real Deal by Suzannah Cavanaugh. Rentals have been particularly tight this year. For houses our inventory is down, but that hides a 60% increase in listings for 2021. It’s just those sales listings have been going off the market as fast as they are coming on. In the rental market, we haven’t seen a big increase in listing, but demand is up so the rental market is even tougher than the housing market.

In the Greenwich Time and the CT Post check out From Greenwich to Lyme, which CT towns are leading the real estate boom?, This is a really interesting article analyzing all of the municipalities in Connecticut. Greenwich was the big winner in most categories. One of the advantages of Greenwich is that it is the first town in Connecticut making for shorter commutes to NYC and for New Yorkers, they can hop across the border and still see their old friends knowing they are paying a fraction of the property taxes their New York friends are.

Home prices continue to surge in Connecticut, where real estate is already red-hot by Alex Soule – We are seeing real, and significant price increases in Connecticut. In previous years, what was characterized as a property increase in reality was often mostly just a desire for bigger houses. In 2021, we are seeing a clear drive to bigger houses in Greenwich and all Connecticut, but size independent price stats such as sales price per square foot and the sales price to assessment ratio are seeing double digit year over year gains. No matter how look at house prices are up.

Greenwich May 2021 Real Estate Report

May is Another Record, but is This the Inflection Point?

May 2021 was an interesting month in Greenwich. We had the same sales in May as we had in April at 88 sales. Our 10-year average for April sales is 47 sales and for May it is 61 sales, so both month’s sales are well above average. In fact, April and May are all time records for their respective months going back to 1999 when the GMLS records start. Townwide we are still at a ridiculously low 3.5 months of supply down 11.4 months from last May when we were in the heart of the pandemic shutdown. However, when you look at the details, our market seems to be going from very hot to hot.

When you look at weekly transactions our high this year was the first week of May with 85 transactions, (sales and contracts). By the last week of May we were down to 45 transactions in that week, which looks like a big drop until you look at contracts. Our contracts are at their highest level all year with 267 contracts up from 242 contracts at the beginning of May and only 136 contracts at the beginning of 2021. The number of contracts is like a bucket with a hole in it. For the level of contracts to go up, you have to fill the bucket with new contracts faster than the number of sales is draining away contracts.

Personally, I think part of what we are seeing is people breaking out of their Covid induced home confinement. In May, my wife and I went on a 4-day vacation, the first time we’d been on a plane in 15 months, we went to an indoor wedding (with an outdoor dinner), had my brother’s family over sans mask and I just went to a friend’s funeral indoors at the Hyatt. Things are getting back to normal.

The result has been a market that slow down a little in May, but even at the end of the month it was still well above average. We are very likely to see sales go up in June as the number of contracts waiting to close says May was probably a pause for people to celebrate the beginning of the transition to normalcy.

If you go back to May of 2018, our last year with somewhat normal sales, we are

  • Inventory is down 361 listings or 53%
  • Contracts are up 133 or an increase of 101%
  • YTD sales are up 170 or 83%, and
  • May 2021 sales are 35 sales greater than May 2018 or 66%

We barely saw a rise in inventory in March and April; months when the spring market listings normally cause big jumps in inventory. In May our inventory has been flat. We started the month with only 328 listings, and we finished the month with 326 listings. On the contract side we started with 242 at the beginning of May and by the end of the month we were up to 267 contracts. Both of these numbers are “holey bucket” numbers that are pushed up by one factor, new listings and contract signings and pulled down by another factor, contracts and closings.

When listings are rising, we are seeing more houses come on the market than are going to contract. In years past, we also had a fair number of listings expiring unsold pulling down the number of listings. We are not seeing as much of that this year. Last year in the first 5 months of the year we had 92 listings expire. This year we have had 69 listings expire or a drop of 25%. This proves that even in the hottest market you can still overprice a house.

What’s amazing is how contract signings this year have been matched by the number of new listings coming on the market, and that continued in May. We are actually up 60% in listings this year, but our increased pace of contract signings and closings have kept our inventory from rising. With the number of weekly transactions falling May, I would expect that we will start seeing our inventory rising.

Of course, we could see listings fall, to balance out the reduced transactions, but there is no inherent reason why listings should match contracts, in fact the reverse is true. Our market has a major seasonal factor with listings rising in March and April, contracts being signed in April and May and sales peaking in June and July. None of that happened last year. In 2020, the whole market froze, both listings and contracts from the middle of March to the middle of May. We then started climbing through the middle of July.

Most of those first half sales were our family market. We didn’t start seeing significant increases in our high-end market until July, when the unrest in New York City spurred people to look for a second home. We continued at a high sales rate through October, when we saw some seasonal drop in activity, but we were still well above what we normally saw in the months of November and December.

This year we started off at high level in January. We had an excellent February and transactions accelerated in March and April. May has been busy, but our transactions dropped back though the month, but still at well above average levels. June will tell whether May was an inflection point or whether it’s just indicative of our volatile market.

I expect that our sales will continue high as WOOFH (Working Occasionally or Often From Home) continues to be a major factor shaping our housing market. It is clear that the U.S. is not going back to doing business the way it was done pre-pandemic. Companies have seen that they don’t need their employees altogether every day from 9 – 5 pm. As a result, space needs are declining in the office market and increasing in the home market. Until we reach a new equilibrium between office and home space our sales will continue to be elevated, but the question is just how much.

Stay tuned ….