Interest Rates Up - Sales Fall - Market Stays Tight - 09/24/2022

We have 217 listings on the market which is a record low for this week. We only have one listing under $700,000 which is 0.5% of the market. Under $1 million we only have 10 listings, and only 1 of those 10 listings has been on less than 45 days. Listings that have been on for 45 days in this market are feeling pretty middle-aged. We actually have more listings over $25,000,000 than we have under $1,000,000; 12 ultra-high-end listings versus the 10 sub-$1M listings.

So far, we have sold 33 single family homes, which if you monthlyize (which at least one other website says really a word), we might expect 43 sales by the end of September. This is a 64% drop from September 2021, when we had 118 sales, the highest sales month in 2020. Last year, we dropped to “only” 81 sales in August 2022.

Grossing up our 33 sales to 43 looks pretty poor against the Covid years. Those 43 sales are also lower than our 10-year pre-Covid average of 48 sales. However, it’s more the knock-on effects of the Fed’s dramatically raising interest rates, than the higher rates themselves that is causing the slow down in sales. Higher rates are leading to fewer contingent contracts, but the stock market drop is having a bigger effect at the high-end than higher interest rates which are mainly affecting sales under $1 million.

The increase in interest rates causes bond prices to drop and while at the same time encouraging investors to move money out of the stock market towards those higher interest rates causing the stock market to drop also. As a result, what’s really dropped is the wealth of high-end buyers with lower bond, stock and crypto prices. (It always amazes me the number of people in Greenwich who have some or a lot of money in crypto-currencies or crypto related companies.)

Along with this drop in wealth has come an increase in uncertainty. Nothing slows a housing market like uncertainty. A lot of the growth wealth we saw in the Covid years was on paper and many people are still up a good amount of where they were pre-Covid. Any crypto investors who bought in a while ago, are still seeing triple digit appreciation, but are these people going out to buy a $10 million house? But, are any of these wealthy folks more likely to invest in a house, when their wealth is dropping. Most people won't, but the really smart money is considering doing just that as I found out this week from calls from two investors looking. They are looking for an inflation hedge with limited downside risk and a house to live in. That last factor is something that other types of investments can't provide.

Also, since the Great Recession, we’ve seen many of our high-end sales happen from September to December. We do have 18 contracts for properties listed over $5M, this compares to 3 contracts over $5M in August 2018. We will see an upturn in sales over our 10-year average, for the $5 – 10 market with 78 sales so far compared to 31 sales in 2018. Does that make for 47 more smart buyers in 2022 or more than double. It remains to be seen, but they all have a nice house and a nice town to live in.

The one place that inventory is not tight is our over $10 million particularly least compared to the market under $5 million where months of supply is measured in a few months not a couple of years. This year we have had 8 sales over $10 million, but then that’s only 2 less than we had in the hot market of 2021. 

This year , we’ve had no sales over $18 million and we have 18 listings above that amount. While the over $5 - 10 million have done well so far. That’s not the case once you get over $15 million. Don’t expect this number to go soon as we have no contracts over $10 million, though we do have 2 contracts on houses listed over $9.7 million. Not all of the lower ultra-high-end market is due to a weak buyer demand. Sellers are also keeping sales down with some aspirational pricing. In Greenwich, you never want to price your house off of national news stories regardless of the price.

The other thing that we are seeing are more price reductions. We have less than two months left in the fall market, so now is the time to take a price reduction. The property at 562 North Street just got relisted at $2,995,000 a price drop of $400,000 and that's resulted in a lot more showings. If you have to reduce a listing, you want to only do it once, so make it big enough that that will get it sold.

Overall, our inventory is ticking up slightly, but contracts are falling as they do each year, but without more inventory, we are going to see the days on market continue to rise. The buyers that need a mortgage are feeling squeezed with the number of these buyers offers down, but so far, we’ve got plenty of cash buyers, or at least buyers that don’t need a mortgage contingency in their purchase contracts. Of our 78 contracts only have 15 have contingencies.

 Stay tuned and hope that the month that came in like a lamb goes out like a lion . . .