Greenwich single family home inventory as of the end of the first half of 2022 was down -37.4% versus the same time last year to 211 homes for sale. While we have attained some of the lowest inventory numbers during the first half of this year, unit sales and pending contracts have remained above the average for the past 5 years, up +5.4% and +7.4% respectively. Inventory has remained fairly stable because, what has come on the market so far this year—generally speaking— has sold. (See attached June 2022 Market Statistics Report).
Even though year-to-date unit sales and pending contracts are above average when compared to the last 5 years (2017-2021), they are down significantly when compared to 2021. It would be erroneous, however, to only compare this year’s statistics to last year’s since 2021’s market performance was an anomaly prompted by the pandemic. 2021’s numbers were so inflated that they will be very challenging—if not impossible—to ever beat. Comparing this year’s numbers to an average of the past 5 years gives us a more accurate picture of how our market is performing as compared to a normal, pre-pandemic market.
Unit sales were down -35.6% as of the end of June 2022 vs 2021 to 331 sales. When you compare these sales to the average number of home sales for the past 5 years (314), however, they are up +5.4 %. Likewise, pending contracts were down -34.7% to 390 contracts as of the end of June 2022 but, when compared to the average for the past 5 years (363), they are up +7.4%.
Not surprisingly, sales volume continues to decline this year versus last, down -33.6%, with approximately $1.02B on the books as of the end of June this year compared to $1.54B at the same time last year.
Continuing the trend that we have seen so far this year, Days on Market (DOM) for Jan- June (at 91 days) is -29% less than it was Jan-June 2021 (at 128 days). This is not surprising since sales have continued to be brisk. This is a positive indicator for the seller’s market that we have right now in Greenwich.
Another positive indicator is that the Sales Price/ List Price Ratio has continued to rise, up +2.5% to 99.4% as of the end of June versus 97% one year earlier. Homes in Greenwich are selling on average right now just below list price!
It is also no surprise that the Average and Median Sale Prices are rising. The Average Sale Price—based on the mix of single family homes that were selling as of the end of June — was up +3.1% Jan-June 2022 to about $3.09M vs $2.99M Jan- June 2021. The Median Sale Price was up +7.9% to $2.525M as of the end of June this year versus $2.341M last year. Lower inventory continues to push prices higher.
How does 2022’s market compare to the 5-year average?
If you take a look at page 6 of the Market Report, “Homes Under Contract by Price Range”, you can see that the number of pending contracts for Jan-June 2022 (390) are +7.4% higher than the average number of contracts for Jan-June 2017-2021 (363). This is another strong positive indicator for the Greenwich market since contracts are the predictors of future sales.
What is noteworthy is that—as we proceed through the year— we are seeing the gap between our current number of pending contracts and the 5-year average number of contracts is dwindling. For example, in May 2022, our pending contracts were 16% higher than average and now—as of the end of June— they are only +7.4% higher. Please The reason this gap is dwindling is because, as of the end of June 2022, we started to see that fewer homes in the lower price ranges —of $0-1M, $1-2M and $3-4M—were going to pending contract than their 5-year average number. You can see this in the “Percentage Change Jan-June ’22 vs ’17-’21 column on the far right.
It appears that we are returning to a more normalized market pattern with 59 contracts this June. (Page 5, “Homes Under Contract by Month” page.) This contract number more resembles the June average of 63 contracts attained in the pre-pandemic years between 2017-2019 versus the inflated average number of 110 contracts achieved during the pandemic years of 2020-2021. This change is significant of our market shifting and normalizing due to rising mortgage interest rates and slower sales.
Likewise, on “Home Sales by Month” page 7, we can see that home sales were down dramatically -49.6%, June 2022 vs 2021, with 69 in June 2022 compared to 137 in June 2021. In fact, if you compare anyof this year’s numbers to last year’s numbers, the percentage change will be negative because last year’s numbers were so abnormally inflated.
Also, as with contracts, we can see our sales market normalizing. The 69 sales attained this June is the same as the average of 69 sales achieved in the pre-pandemic years of 2017-2019 versus the inflated average number of 107 sales reached in the pandemic years of 2020-2021.
On page 8 “Home Sales by Price Range”, we compare this years performance to the average of the past 5 years and see that the percentage change has been positive. If you take the total average number of sales for Jan-June 2017-2021 (314) and compare it to the total number of sales for Jan-June 2022 (331), you will see that our sales so far this year are +5.4% higher than the average for the past 5 years. So, despite working with record-low inventory numbers, Jan-June 2022 has been above average for sales.
In the two far right hand columns on this page we can see— as with contracts— that compared to the 5-year average, single family home sales so far in 2022 are higher in all price ranges above $4M but are lower in the $0-1M, $1-2M and $3-4M ranges. June 2021 unit sales were so strong in these 3 price ranges that, when averaged with the preceding 4 years, 2017-2020—they have superseded our 2022 numbers. If we look back to the Home Sales by Month page, we can see that June 2021 sales numbers were significantly higher (at 137) when compared to the average of the preceding 4 years (at 71.25 sales). Despite this, we still have a total sales increase of +5.4% overall for Jan-June 2022 vs 2017-2021: another very positive trend.
When will Greenwich housing inventory return to normal?
Greenwich housing inventory was down -37.4% year-to-year. But, if you compare the average number of homes for sale for last 5 years (2017-2021) as of the end of June (593) to the number of homes for sale as of the end of June 2022 (211), housing inventory was a whopping -64% less than average. Inventory has risen steadily in Greenwich since hitting its low point of 148 homes in February 2022. As of 7/23/22, single family home inventory is at a high point for the year at 222 homes.
According to an article by Lance Lambert in the 6/7/22 edition of Fortune, “How fast your local housing market is cooling amid the Great Deceleration”, “All signs point to a slowdown in the rate of home price growth”. Lambert has dubbed this shift the “Great Deceleration”. The main influencing factor of this “deceleration” is the rise in mortgage rates. In the 6 month period between January and June 2022, “the average 30-year fixed mortgage rate
has spiked from 3.11% to 5.09% as the Fed has moved into inflation-fighting mode,” he said.
This, of course, has made it even more difficult for buyers to purchase an affordable home, either because they simply can’t afford the type of house they were originally in the market to buy or have become ineligible because they can’t meet lenders’ stringent debt-to-income ratios, Lambert pointed out. “The biggest indication of cooling comes from the housing market’s premier leading indicator: inventory,” he said. “The pandemic’s housing boom saw inventory—the number of unsold listings—fall to four-decade lows.”
So, prompted by the rise of mortgage rates, real estate inventory has started to rebuild and the rate of home price growth has started to slow. According to this Fortune article, the lead analyst at HousingWire, Logan Mohtashami, said: “As home shoppers temporarily delay their purchase in the face of rising rates, that gives inventory the breathing room it needs to rise. When those buyers reenter the market, in theory, they return to find inventory higher and feel less pressure to overbid”.
According to a Zillow survey of industry experts, most expect inventory to return to pre-pandemic levels by the end of 2024. In a 5/4/22 Motley Fool article by Aly Yale, “When Will Housing Inventory Return to Pre-Pandemic Levels?”, the shortage of housing inventory stems back to the 2008 recession “when home values plummeted and new home construction ground to a halt.” The real estate market has been bumping along since then— until the pandemic. What really sent the market into an upward spiral last year was the Millennial generation coming of age. “Millennials are now in their prime home buying years—as the biggest generation our country has seen— and construction just can’t keep up nor make up for the huge deficit,” Yale pointed out. This article noted that last year Freddie Mac estimated that the current market was almost 4 million homes short of demand!
The rising mortgage rates, construction industry labor shortages, the rising cost of building materials due to inflation and the rising length of home ownership tenure are all variables that could impede inventory recovery.
What can we expect in the Greenwich real estate market for the second half of 2022?
One thing experts agree on is that our market is shifting. Gone are the days of skyrocketing prices, chronic bidding wars and frenzied offers with no contingencies. Buyers will start to regain power as the number of buyers decreases. We will see our Days on Market start to increase again and homes will be selling closer to their fair market value. Buyers will not only be able to find their dream home but, will actually be able to buy it. Given all the uncertainties in our lives with inflation, the conflict in Ukraine and other economic factors, Greenwich real estate provides buyers with a solid, long-term, secure investment.
Trying to “time” the market or predict what will happen next year is not the best home buying strategy. It is always better to buy based on your budget and needs. If you find a home you love in a good location that also fits your budget, then it’s a good time to buy. In a seller’s market like this one, it is always best to buy in the best location possible with good “upside” so that any funds you invest in making improvements can be at least recouped —and likely profited on— when it is time to sell.
The moral of this story is: if you are planning on waiting to buy a home, DON’T! Contact your realtor or me at 203 273-3668 to discuss options and strategies for how to buy in this seller’s market and/ or for a complimentary home valuation if you are thinking about selling.
