When the Greenwich Real Estate Market embarked on the second half of 2019, we realtors knew that there was a lot of ground for which to make up. We ended the first half of 2019 with single family home sales down -18% versus the first half of 2018. (refer to “Home Sales by Month” on attached Market Report
As we progressed through the second half of 2019, things were looking better. July- October monthly sales were either up over last year or, just slightly below.
Additionally, July- November sales either kept pace with or, exceeded our market average over the past 5 years. But, then, November sales slipped -14.9%, compared to 2018 and December sales slipped -27.5%. We ended the second half of 2019 with single family home sales down -5.7% versus the second half of 2018. The second half was better than the first.
Overall, single family home sales in Greenwich ended 2019 with -11.3% less than 2018, with a total of 527 homes sold. This is the lowest number of single family homes sold since 2009, when only 334 homes changed hands due to the recession.
What happened??
The answer very basically is that not as many sellers in Greenwich were selling and not as many buyers were buying in 2019. The main issue may be rooted in the 2017 Tax Cuts and Jobs Act.
If you look at these market stats through a different lens, by way of Pending Contracts, we could have predicted this shortfall in sales in the fourth quarter.
Pending contract numbers were down all year, with the exception of 4 months when they were up: June, July, August and September. Since contracts are predictors of future sales, it is not surprising that, when contracts slipped -35.7% year-to-year as of the end of October, November sales numbers were also down. And, when contracts slipped -17.8% again as of the end of November, December sales numbers were down.
Overall, Pending Contracts were down -11.5% year-to-year. These Pending Contract figures on the attached Market Report, however, do NOT include the additional Contingent Contract figures. Contingent Contracts have a lesser chance of proceeding to close than pending contracts but, still, usually close. So, we have more Contingent Contracts waiting to move to Pending which –for the most part—will ultimately close. This bodes well for first quarter 2020 Pending Contract numbers and closings.
“Pending” means that all contract contingencies have been met and “Contingent” means that there are still some issues—most commonly a buyer obtaining his/her mortgage—that need to be resolved before the contract can be considered “Pending”.
Overall, single family home inventory was down year-to-year by -4.8%. Contrary to the negative press regarding the “population flight” from CT, not as many people are listing their homes this year as last year. But, not as many people bought in 2019 as in 2018 either.
The Median Sale Price, meanwhile, was up +5.9% to $1,866,666. This increase is due to 2 things: 1) fewer homes sold this year versus last and 2) the homes that sold this year were more expensive. Our average sale price, on the other hand, remained basically flat versus last year, at $2,376,977. This is also the second year in a row that our best month for sales was later: July instead of the traditional June. This could be a result of Wall Street firms no longer paying bonuses at the beginning of the year.
When the 2017 Tax Cuts and Jobs Act (TCJA) was passed, the expectation was that, since this new law eliminated the deductibility of State & Local Taxes (SALT) over $10,000, that the lower end of the market versus the higher end would be negatively affected. Buyers who spend $600,000 or less on a new home, for example, will be below the SALT deductibility cap of $10,000 but, homes priced at more than $600,000 will be above this cap. It’s not surprising, then, that sales in the less than $600,000 range in Greenwich increased in 2019 40% versus 2018, from 15 to 21.
What has resulted from the TCJA in Greenwich, however, is the opposite. The lower end of the market—the $600K-2M range– here has become weaker because first-time homebuyers and downsizers are negatively affected by this loss of SALT deductibility. This is a phenomenon not only in Greenwich but, in West Chester County and the entire northeast. Sales in the $2-3M range in Greenwich didn’t appear to be affected by this lack of deductibility, however, with an increase of +7.3% 2019 vs. 2018. Meanwhile, the higher end of our market is thriving.
As mentioned earlier, the median sale price went up because the homes that sold this year versus last year were more expensive. Homes sales in the $6-10M range in 2019 were up 21% versus 2018. This is due to luxury sellers becoming more realistic about price.
Year-end Days on Market for 2019 hit an all-time high of 199, up +19.4% in 2019 versus the average of 2014-2018. This is the highest number of days on market that we have seen in the past 6 years. Many homes in the $6-10M range sold in 2019 after being on the market for several years. Hopefully, we will start to see this Days on Market number decline.
Back Country is Coming Back
Many of the homes that sold in the $6-10M range in 2019 were in “Back Country” Greenwich. Back Country sales (or, those in the “North of the Parkway” section of Greenwich, usually with 4+ acres) were up 34% year-to-year, with 59 sales in 2019 vs. 44 in 2018. Back Country sellers have become more realistic in their expectations regarding price and savvy buyers are realizing the tremendous bargains that can be had there, in terms of square footage, acreage and unfettered privacy.
If you take a look at the chart below, you will see that Sales Volume was up +32% in Back Country, 2019 vs, 2018. While the Average Sale Price remained flat, the Median Sale Price was down -10.5%. This is because the large majority of homes that sold in Back Country were lower priced, in the $1-5M range, with an increase of 34% year-to-year. Altogether, some pretty remarkable numbers:
BACK COUNTRY GREENWICH
2019 2018 % Change
SALES 59 44 +34%
VOLUME $193,124,350 $146,193,880 +32%
AVE SP $3,273,294 $3,322,588 -1.5%
MEDIAN SP $2,350,000 $2,625,000 -10.5%
2019 Back Country Homes Sold by Price Range
2019 2018 % Change
$0-1M 4 2 +100%
$1-5M 47 35 +34%
$5-10M 5 5 ——–
$10M+ 3 2 +50%
In 2014, I listed an 8,500 square foot Georgian Colonial in upper mid-Country, just below the Merritt Parkway. At that time, the collective, driving desire on the part of both younger and older families alike to be “close to town” was just getting a grip. By 2015, the collective attraction to downtown Greenwich was pronounced and became more pronounced as time went by. This is what has caused the decline in prices in both Mid Country and Back Country Greenwich.
Back Country assessments are still high and will start to come down as sales prices come down. The tax burden will then need to be re-distributed elsewhere in town, obviously to downtown real estate. Back Country real estate used to be the most sought-after 20 years ago and, I have no doubt that it will be again someday.
The economy is poised for a better real estate market place, with excellent employment gains, wage growth and very low mortgage interest rates. This has been evidenced in other parts of the country. With the superior lifestyle that Greenwich has to offer, with Back Country coming back and the upper end of the market thriving, I think that 2020 may be the year that we pick up some real momentum. Clearly, Tom and Giselle Brady think so!!
