The Second Quarter in Greenwich Real Estate has just closed, with Unit Sales (-5.2%) and Sales Volume (-0.3%) slightly down over the first half of last year but, with Contracts slightly up, +3%. This dip in Unit Sales and Sales Volume may be due—at least in part—to some growing pains from the new 2017 Tax Cut and Jobs Act.
Unit Sales finished second quarter at 274 versus 289 for the first half of 2017 and Sales Volume finished at $697,135,087, down from $699,191,067 a year ago. This has resulted in an Average Sale Price of $2,544,288, up +5.2% from this time last year and a Median Sale Price of $1,870,000, up +1.9% from this time last year.
This increase in Sale Prices can be attributed primarily to the increases in the sales of higher-priced homes in the $4-5M range (+23%) and to an astounding +250% increase in homes closing in the first half of 2018 in the $10M and over range!!
Current inventory is up +4.2% over the first half of last year, with 670 single family homes on the market for sale as of the end of June. This is down from a month ago, when inventory peaked this year at 687 units. Things are heading in the right direction!
Meanwhile, we are pacing ahead of last year, with Contracts up +3%. The strongest price range motivators of this increase were the $2-3M range (+23%) and the $3-4 range (+43%), testifying to the resurgence in strength of our middle market after being negatively affected by the new tax laws earlier this year. This will certainly help to fuel our sales figures in the third quarter.
Why is Inventory up?? The 2017 Tax Cut and Jobs Act has hastened the plans of potential retirees to retire earlier so that they can move to a state with a lower tax rate, like Florida or, to a town with a lower tax rate, like Greenwich. Because this new tax plan greatly reduces the amount of property taxes that homeowners are able to deduct from their income tax, they are retiring earlier. In Westchester County, this stings even more.
The issue arises because these downsizers are having difficulty selling their homes in Westchester County. Greenwich’s inventory has been elevated this year, at least in part due to these potential buyers having their hands tied. Inventory in the strongest price range in Greenwich, $1-2M, for example, is up +9% at the end of second quarter this year versus last.
The issue is also being exacerbated in this $1-2M range because young families who are looking to trade up are having trouble finding the right house because interest deductibility on new home mortgages is limited under the new tax plan while interest rates are going up! Meanwhile, the rental market is booming!!
A case in point: I put a completely renovated 1972 split level on the market in the beginning of March this year, with a brand new kitchen, baths, hardwood flooring, light fixtures, etc. This home was on Leslie Avenue in the Glenville section of Greenwich.
As you may recall, March was a terrible month weather-wise, with a snowstorm every week. Despite this, I did a Broker’s Open House every other week and a Public Open House every Sunday, except for Easter. The majority of the Public Open House attendees were from Westchester, especially because Leslie Avenue is so close in proximity to New York. We had some interest but, no offers.
By mid- April, my owners decided to list the house for rent. At this point, the snow had stopped and the multitude of spring flowers that surrounded the house started to bloom. Immediately, we got several offers for rent, followed by two more offers to rent with a guaranteed buy out after one year! Still, no offers to buy immediately!!
This is illustrative of the fact that, out of the 470 transactions that have closed as of the end of June, 196 or 42% of them were rentals. This means that 4 out of every 10 prospects are renting! Some of these prospects aren’t sure about settling in Greenwich and others aren’t sure about settling at all. They look at renting as the ability to “buy time” until they gain more confidence in the market. These prospects look at real estate as more of a necessary expense than as a sound investment.
Do not despair!! This is– in part at least– a knee-jerk reaction to the 2017 Tax Cut and Jobs Act. While we may be going through a period of uncertainty while adjusting to these new rules and regulations, there are many things about living in Greenwich that are certain:
- It is a family-friendly place to live
- It has wonderful public spaces, like parks & beaches
- It has rigorous private & public schools
- It has great museums
- It has exceptional programs such as continuing education, special needs, senior programs, volunteer programs and sports programs
- It has an outstanding nature center and Bruce Park Arboretum
- It has a brand new public pool
- It has plentiful restaurants and shopping
- It has great entertainment: the Town Party ticket is now one of the most sought-after in Fairfield County!
- It has well- maintained roads, buildings and public landscaping
- It has an affordable tax structure
- It is a quick 45-minute train ride to New York City
These are just some of the distinct advantages to living in Greenwich, CT. These advantages will continue to provide a safe haven for real estate investment dollars here.
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