While overall single family home sales are down -11.1%, January-September 2019 versus the same time period in 2018, a closer inspection of 3rd Quarter Greenwich Real Estate Market stats reveals that the large majority of this shortfall occurred during the first half of this year. As a matter of fact, almost as many homes sold in the 3rd quarter of 2019 as in the 3rd quarter of 2018: 183 versus 185. And, both of these figures are better than the average number of homes sold in the 3rd quarter between 2014-2018: 177.5. So, 3rd quarter sales are the silver lining for overall sales in Greenwich so far this year.
One price range in particular that has contributed to this jump in overall sales is the $6-10M range, where 19 homes have sold year-to-date in 2019 versus 14 in 2018, an increase of 26%. Sellers are becoming more realistic with their expectations and prices are declining as a result. Many of the sales in this $6-10M range can be attributed to sellers in the higher price ranges reducing their prices to the next range below. This increase in higher end sales is also why the median sale price has gone up 3.7% year-to-year.
Similarly, while overall Pending Contracts year-to-year are down -10.5% as of the end of September, 3rd quarter contracts are up 5%, 2019 versus 2018: 147 single family homes went under contract in the 3rd quarter of 2019 versus 140 homes in 2018. So, the number of homes going to contract in Greenwich is improving in 3rd quarter, with the overall shortfall being attributed to the lower numbers during the first half of the year. Again, 3rd quarter contracts are the silver lining for overall contracts in Greenwich so far this year.
Another indicator that has improved for sellers in third quarter is Current Inventory, which has declined -1.6% January- September 2019 versus 2018. This means that there are slightly fewer homes available for buyers to choose from now, than at the same time last year. 3rd Quarter Sales, Pending Contracts and Inventory combine to make this a silver lining for sellers in Greenwich right now.
There are also a healthy number of “Contingent” Contracts waiting to move into the “Pending” column once the buyers in these transactions are able to satisfy their contingencies. Contingencies in Greenwich typically include the buyer being approved for his or her mortgage or, the home being appraised by the lending bank to be of equal or greater value than the agreed upon sale price. Hopefully many of these contracts will go to pending by the end of the year, to further bolster our fall market and year-end averages.
Homes listed below $1M have always been difficult to come by in Greenwich and have affected the entry-level market here. Inventory as of the end of September 2019 versus 2018 in Greenwich in the $0-1M range was down -7.4%. This accounted for 7.9% of the current inventory and 18.8% of all 2019 contracts. So, homes that are listed in this range are more likely to sell due to lack of inventory.
But, a more recent phenomenon in Greenwich has been a decline in the number of homes selling in the $1-2M range. In the recent past, since the Recession, the $1-2M range has been the strongest and has driven our market. While this range is still driving our market this year with the highest percent (34.5%) of all 2019 single family home sales, the number of contracts and sales have been depressed this year. Homes under contract in the $1-2M range are down – 11%, January-September 2019 versus 2018, and sales are down -10.2% year-to-date. The question is: why??
There is a possibility that this is due to the federal Tax Cuts and Jobs Act of 2017, which reduced the amount of state income tax and local property tax that can be taken at the federal level (up to $10,000) and the limit on mortgage deductibility (up to $750,000). We may be experiencing the fallout now from this tax law, where buyers in the lower ranges are especially touchy to this loss of deductibility. It is definitely more expensive to be a homeowner now than before December 2017 when the law was enacted.
Another factor that may be contributing to this decline could be generational. One of my avid readers responded to my First Half Quarterly Blog post on the challenges of the real estate market here in Greenwich with an observation. He said that his son, who is 38 years old and a “millennial”, prioritizes the “convenience” of his and his wife’s “commute over home ownership”. As of 2019, millennials are the group between the ages of 23 and 38. He believes that there is a “cultural shift going on” because “with a booming economy, low unemployment and record stock prices, you would think that real estate would be much better in Greenwich”. Not to mention low mortgage rates!
He continued: “I commuted 30 years without a thought while my son can’t get over the fact that he would have to commute to Wall Street everyday” if he lived in the suburbs outside of New York City! He went on to say that his son “would rather pay $10,000 a month in rent and childcare” than move to the suburbs and commute! He said that he is sure that this is affecting the entry- level numbers for real estate in Greenwich. This could certainly be another contributing factor.
The millennial’s advancing age certainly puts them in a prime position now to be first-time homebuyers. They have a reputation for being “lazy, entitled, self-centered, oversensitive and unprepared”, according to published “millennial therapist” Tess Brigham. She says that—to the contrary—she has found millennials to be smart, highly ambitious, empathetic, diverse and eager to make a social impact. Brigham elaborates that millennials make poor choices because they have too many choices. They have too many choices because they have too much information in this computerized era, an inescapable downside. And, when they make a poor choice, they become paralyzed from making future choices. This is a definite “catch-22” situation.
Despite this new generation of home buyers and, despite the 2017 tax law, Greenwich still offers amenities that are difficult to match. Our close proximity to NYC, low property taxes and superior lifestyle potential should be enough to tempt rent-paying millennials and lure them out of the city! Maybe the millennials will change their minds and help us to retain the upward sales and contract momentum in 4th quarter that we have achieved in 3rd quarter in Greenwich!