Image
The First Half Market Report: Sustained Demand, Firming Prices
"Irrational Exuberance" refers to investor enthusiasm that drives asset prices higher than those assets fundamentals justify. The term was popularized by Alan Greenspan in a 1996 speech warning of the impending dot-com bubble and collapse. Is Connecticut real estate experiencing a bubble?

This is not a bubble. But, we can be accused of a bit of hyperbole. I thought of "irrational exuberance" by the headline in last week's New Canaan Advertiser, Multiple Offers. It's Crazy: New Canaan Homes in Demand reporting on a meeting of the board of realtors. Realtors across Fairfield County are understandably enthusiastic about the current conditions. But, is this exuberance borne out by the numbers?

While the number of sales is up this year when compared to last year, when we look at the last 8 years we see a mixed bag of results, seven strengthening markets, seven weakening markets. Darien has been steadily increasing the number of sales for 8 years but the average price has been declining steadily since 2015. In Old Greenwich this year we saw the first price decrease after 7 straight years of price increases. Don't judge Fairfield. In 2020 the number of sales is down when compared to a record year in 2019 but prices are rising and the number of high-end sales is way up. 

Where does the exuberance come from? Mostly, it's coming from a lack of inventory that spans every market, county-wide. Inventory levels that are down between 15% and 40% and are fueling this feeling expressed by many agents, "It is really tough to be a buyer's agent right now...I have cash buyers that would pay up to $2 million and they just can't find anything." A second source of excitement is the rental market. The need to get out of the city fed the Spring rental market. Uncertainty continues to feed the rental market now; uncertainty about school openings, the economy and whether our jobs will be there for us, and individual decisions about personal safety drive the rental market as we wait for a cure and a return to normalcy.

Governor Cuomo hit the pause button on March 20 and the severity of the NY lockdown was a big factor for the Connecticut real estate market as New Yorkers rented and contemplated purchases. On July 20 New York State began phase 4 of their reopening plan. New Yorkers began buying and selling real estate again in earnest. We have not seen the impact of that yet.. (Last week two condos closed for $55 million each at 220 Central Park South.) On the other hand the unemployment rate in New York reached 20.4% in June, double that of the 2009 financial crisis, and that is bound to have an effect on prices and purchaser's ability to get mortgages.

As we all contemplate the possibility of another coronavirus surge later this year, we inevitably think about how to stay safe and what places are safer than others. There is for some of us a natural tendency to imagine the real estate market as a great big game of musical chairs and a desire not to miss the opportunity to get to a safe place (with plenty of work-at-home space and play-space and school-at-home space) when the music stops again. But, real estate is not musical chairs, there really is a very big number of chairs available and more choices coming on every day. Let's not get caught up in the "irrational exuberance" of the current crisis but look at the numbers month by month, market by market, to find value and understand these long-term trends.

Comments? I'd like to hear from you. I'm John Engel at jengel@halstead.com
Cos Cob - flat, strengthening. It depends on whether you are looking at a brilliant second quarter, or a flat first half. And, 2020 looks great when you compare it to a terrible 2019 but is only average for the 8 year period. Second quarter sales are up +45% and up 4% for the year. Prices climbed 9% when you look at the quarter but fell -6% when you look at the half. Two mansion-tax sales over $2.5 million. Average list to sale ratio is a respectable 94.6% and the absorption rate is currently 12.6 months of inventory.

Darien - strong but weakening. Terrible second quarter down 2% but we had a strong first half up +12% to an 8-year high of 149 sales. Average closing price unchanged at $1.50 million in the quarter and half. Inventory is down -14% to 233 houses. There were 16 mansion-tax sales above $2.5 million. Average list to sale ratio is a respectable 95.7% and the absorption rate is currently 9.6.

Easton - weak, weakening. Down -8% for the first half. Down -26% in the second quarter. Prices down -12% in the half and down -11% in the quarter. No sales over $1 million this year. Average list to sale ratio is an excellent 97.1% and the absorption rate is currently 8.3 months inventory.

Fairfield - weak, strengtheningThe fewest sales since 2014, down -3% in the quarter and down -7% for the half. Prices are firming, up +11% to $790,000. We had 11 sales over $2 million, up 37% over last year. The average list to sale ratio is a strong 96.7% and the absorption rate is only 7.1 months.

Greenwich - flat. Flat, flat, flat. Closings and prices during the quarter and the half changed less than 1%. And this year is about average for the 8-year period. The absorption rate has climbed to 17.6 months inventory, up from a low of 13.5 months in January but down from 20.4 months a year ago. The average list to sale ratio was a 94.5%.

New Canaan - strong, strengthening.  Closings up this quarter +13% and up this half +10%. Prices also up 8% and 10%. This is the third year in a row of increased sales in the first half and represents the third best year in the last 8. This is the first year since 2014 that house prices went up. Condo prices are down sharply -23% to $564,438. Average sale to list ratio is 94.6% and the absorption rate is 11.6 mos, down from 17.

Norwalk - flat, weakening. A strong first quarter followed by a weak second quarter -24% leaves prices and transaction levels flat for the first half. This was true for both houses and condos. The average sale to list ratio is a strong 97.5% and the absorption rate is low at 5.3 months of inventory, down from 7.5 months. 

Old Greenwich - flat, strengthening. A flat first quarter followed by a strong second quarter +27% buoyed by smaller sales caused prices to decline -7% despite inventory levels down -22% Average price to sale ratios were 95.8% and the absorption rate is now 8.4 months down from 12.5 months last June. Avg home is $2.1 million.

Redding - flat, weakening. A terrible second quarter, down -29%, led to flat results for the half with 62 sales. Prices declined -11% this quarter, dragging prices for the first half down -2%. The average sale to list ratio is 95.9% and the absorption rate is down to 8.2 months inventory.

Ridgefield - strong, but weakening. A weak second quarter, down -14%, couldn't harm the results for the half, up +5.4%. Prices also strengthened, up +15% in the quarter and +9% for the half. The condo market is flat. The average list to sale ratio is 95.9% and the absorption rate is 8.8 months, down from 11.9.

Riverside - strong, flat. Despite a flat second quarter we see closings up +19% this year and prices rising an incredible 70% this quarter and 46% for the year. It bears repeating. The average price for the 29 sales this quarter rose from $1.8 million to $3.0 million and for the first half from $1.86 million to an average of $2.7 million. That can be explained by 16 sales over $3 million versus only 5 sales a year ago. Inventory levels over $3 million unchanged.

Rowayton. flat, weakening. Sales for the half were flat at 35 despite a weak second quarter down -21%. Prices came down -7% in the quarter and -12% for the half. Inventory levels continued to fall, down -39% from a year ago.
Absorption rate is 8.0 months, down from 16.1

Stamford - weak, weakening. Transactions this quarter were down -18% causing the half to end up down -8%. Prices also fell -8% this quarter and -2.6% for the half. Condo sales are down -9.6% while condo prices rose a modest +5% The average price to sale ratio was a strong 96.7% and 97.0% for condos. Absorption rate is 6.1 months of inventory, down from a high of 9.2

Weston - very strong, strengthening. Wow, this is Weston's year. After a strong first quarter things just got better in the second quarter, up +73% in sales to average +44% for the half.
Inventory is down -33% so how did they close 92 houses in the first half, an 8-year high and the third straight year of price increases? Relative strength in the $700-$900 category, and 6 sales over $1.5 million instead of 2 account for some of the success. Absorption rate is 7.7 mos.

Westport - strong, strengthening. Closings in the second quarter were up only +7% but Westport posted 121 sales for the first half, up +25% over last year. 2019 was a down year in Westport but these numbers are still respectable against the 8 year average. Prices rose 1.1% and what is amazing is pending sales on June 30 is now 94, up 225% from last year. Sale to list ratio is 95.4% and the absorption rate is 8.6 months.

Wilton - strong, strengthening. Sales rose +11% in the quarter, and rose +5% for the half. Prices up +7% for the half and +11% in the quarter. Pending sales are up 95%. Condo sales are up +50%. Wilton has a 9.7 month supply of houses.

ImageImageImageImage
Image

ImageImage
ImageImage
ImageImage
ImageImageImage
ImageImage
ImageImage
ImageImage
ImageImageImage
ImageImage
ImageImage
ImageImage
ImageImage
ImageImage
ImageImage
ImageImage
ImageImage
ImageImageImageImageImage

Image
For a link to the "Boroughs to the Burbs" panel of experts, click here. We asked economists, builders, mayors, and NYC realtors what to expect in this market. You might be surprised at how they answered.

For the house videos, click here. We will be releasing two new videos next week with the next market report. Watch for it.

Image
Melissa Engel, Charles Anello, Susan Engel, & John Engel 
Licensed in Connecticut. 183 Elm Street, New Canaan, CT 06840
203.966.7772
203.247.4700
jengel@halstead.com 
Image
Image