CORT'S REAL ESTATE NOTES

CORT’S REAL ESTATE NOTES:

Commentary on Connecticut, Real Estate and Life

Vol. 1, No. 21 – 16 July 2024

        SOURCE: Erikephrim.com

1. MORE BUYERS AND INVENTORY?

If you listen to enough “pundits” on the real estate market, a sense of contradiction begins to emerge.  Over and over again we are reminded that high mortgage rates are holding down the number of buyers.  Yet the numbers of buyers are increasing.  The number of homes with sub-4% mortgage is large and keeps home owners from selling, yet more inventory is coming onto the market.

Conventional reasoning says that the rise in buying and selling is a seasonal event.  Year in and year out the data shows that from May to September the market becomes more active.  This suggests another insight which is not being articulated by the “pundits”.  Is it the weather?  That these market changes follow seasonal changes is a curious thing.  That does not seem to be a sufficient explanation.

Perhaps a factor like summer vacation from schools is a factor.  Kids go to college.  Time to downsize, or it is an opportunity to make other changes.  However, such changes ride on top of more typical factors.  For example, you get a job in another city, or a change in the family requires a sister to move closer to her parents; or a family death triggers the selling of a house; or there is a divorce; or a couple living in different houses and towns decide to sell their homes and buy a new home together.  These, and many other factors, drive the market.  But those tend not to be seasonal factors.  So, pending further study, this will remain a mystery for now.

2. A LOOK AROUND CONNECTICUT

The key question is whether the state’s real estate market is returning to a more normal level, or just experiencing a seasonal change which will subside in September.  So far, the market has the marks of seasonal change.  But is there something to learn from different parts of the state.  So below is a brief synopsis by county.

FIGURE 1

COUNTY MAP OF THE STATE OF CONNECTICUT

Source: https://www1.ctdol.state.ct.us/lmi/misc/counties.asp

Fairfield County – the three main markets in Fairfield county are Stamford, Greenwich and Bridgeport.    The data will show that this is A Tale of Three Weird Cities.  These markets are sufficiently different to draw some deeper understanding of the overall market in the state.  This county has one third of the state’s population.

TABLE 1

SUMMARY JUNE 2024 DATA FOR GREENWICH, STAMFORD AND BRIDGEPORT

METRICS	STAMFORD	GREENWICH	BRIDGEPORT
Average Sales	$1.1 Million	$3.6 Million	$381,000
Median Sales	940,000	2.5 Million	365,000
Year-to-Date Sold	242	226	198
New Listings	78	71	57
Units Sold	56	63	30
Total Monthly Inv.	407	368	309
Ave. Days on Market	23	70	20
% of Asking Price	102	102	105
$/Sq. Ft.	368	858	237

Source:  Williampitt.com

The important take away message of the above table is the mix of consistent and inconsistent data.  Not presented here is a year-over-year comparison which would show yet other odd short-term trends.

Why one city should have more listings yet fewer closings may only speak to the market conditions for that month.  Still, as a snapshot, the table can be informative.

Bridgeport-   Different sources give different numbers for Bridgeport.  Zillow lists 125 properties, while Movoto lists 328 properties, and William Pitt shows 309.  As is often the case, they do not necessarily define all their terms for each data point.  The Zillow numbers appear to be just residential properties.  The prices range from roughly $65,000 to $3.1 million.  The bulk of the listings are between $300k and $600k.  According to Redfin: “In May 2024, Bridgeport home prices were up 8.7% compared to last year, selling for a median price of $345K. On average, homes in Bridgeport sell after 39 days on the market compared to 43 days last year. There were 89 homes sold in May this year, down from 100 last year.”

Stamford-  Stamford is so unique it is almost an outlier for the rest of the state.  For the last 50 years, it has been on a growth path that far exceeds all the other cities.  The contrast between Stamford and Bridgeport is telling.  The population of Bridgeport in 1960 was 156,748 people.  Stamford’s population was 92,713.  At that time, that was 64,035 more people in Bridgeport than in Stamford.  By 2020, Bridgeport’s population shrank to 148,654 from the population in 1960.  That was a decline of 8,094 or -5.1%.  By contrast, Stamford grew to 135,470 by 2020. That was a growth of 42,757 or 46.1%.  Why are they so different?

The two easy explanations are Bridgeport’s loss of manufacturing over the last 60 years, and the proximity of Stamford to New York City.  Well, Stamford lost manufacturing as well over that time, so that doesn’t entirely explain the difference.

A political difference worth noting is that Stamford has been primarily run by Democrats, but with some interludes with Republicans.  Bridgeport has been essentially a one-party city run by Democrats.  Bridgeport has a reputation for corruption not seen, reportedly, in Stamford.  That could be a factor contributing to the declining population.

Greenwich-  Greenwich remains a bellwether of affluent real estate.  It has the largest concentration of high-end homes (>$10 million) in the state.  It remains a draw for the nation’s wealthy and powerful.  It is technically still a bedroom community for New York City.  That said, the population has grown much more slowly than it’s neighbor, Stamford.

New Haven County – There were 2,527 homes for sale in New Haven County in April 2024.  Of that, 400 were on the market in New Haven.  In the county, 589 homes were sold.  This was much lower than a year prior when 630 units were sold.  Other county wide data is hard to find.  The data for New Haven include 25 days on the market, and dollars per square foot of $233.  The asking price was 104% over the bid.  The inventory for April was 331 units.  In June 39 units were sold, as compared with 27 in June 2023.  The median price for homes was $405K.

Hartford County– The most recent data suggest that the real estate market in the Hartford County area is fairly robust.    The days on market are shorter than in other areas at 15 days.  However, the inventory is reportedly around 2,600 while having declined over 40% compared with June 2023.  The reported number of units sold, according to William Pitt, is 2,711 from January to June 2024.

This appears to be a bit more of a seller’s market with the asking price being 107% over the bid.  This isn’t exactly market ferment, but it suggests an unusual amount of market activity in a state with a relatively weak economy.

Tolland County- There were 357 homes for sale in Tolland County in April 2024.  That number was 285 in March 2024.  The median prices were $249k.  Houses here averaged 44 days on the market.  93 homes were sold in April, and 80 in March.  In April, 61 homes were for sale.  While questionable, the claimed number of homes for sale in April was 505.

Litchfield County-  Litchfield County is both the geographically largest area and and one of the last populated.  The 2020 census put them at 185,186.  The most recent data has this county with an average of 65 days on the market.  The median house price is $590,000.  92 units were sold in June 2024 with 127 new listings.  The total inventory at that time was 649 units.

Middlesex County- For June 2024 there were 628 homes for sale, and 172 were sold. In May 620 were for sale, and 155 units were sold.  Of the 172 that were sold, 103, or 63% were sold over the asking price, 20 were sold at asking and 49 were sold under asking price.  This indicates it is still a seller’s market.  Compared to other counties, this seems to be a higher asking price.  This will require closer analysis.

New London County-  Different sources report wildly different numbers of listings in New London County.  Coldwell Banker lists 947, Realtor.com lists 1089, and Redfin lists 115.  Again, there is a lack of clear definition of terms.

The most important point to keep in mind is that the greatest beneficiary of federal spending on Electric Boat is the area around Groton and New London.  It is at least $1 billion in federal money which will go into this area over the next few years.

The impact on the real estate market does not appear to have been felt yet.   The average dollars per square foot are among the lowest in the state at $172.  The median home price is lower than the state median; i.e., $275k for the New London area versus roughly $350k for the state.

The market does seem to be trending towards more of a seller’s market.  The number of properties sold in New London for over asking price rose from 1 in February to 13 in June.  Again, separating a seasonal trend from a secular trend is hard to do here.

Windham County- the median listing for a home was $335K in May 2024.  The number of homes sold in June 2023 was 278, and 308 in May 2024.  Homes for sale was 118 in June 2023 and 129 in May 2024, while the number of homes sold in June 2023 was 561 and 564 in June 2024.

Even though these are not dramatically different numbers, oddly, the dollars per square foot figure shows greater variation.  It was $235 in April 2024 and $179 in June 2024.

It was also reported that at this time there were 53 foreclosures, 6 bank owned properties and 17 that went to auction in Windham County.

3. INSPECTION AND THE POWER OF OBSERVATION

There are two forms of house inspection to consider:  That done by the inspector, and that done by the prospective buyers.  As will be explained, there is a bit of contradiction between these two mindsets when it comes to inspecting a property.  While even inspectors can miss flaws in a house, buyers will typically miss a lot more.  That should not be surprising.  The check list for an inspector is long:  Electrical, structural, and mechanical parts cover so many things:  HVAC, electrical wiring, electronic connections throughout the house, not to mention the foundation and any signs of settling or cracking.  With all that and more, missing some items is quite possible.

While a prospective buyer would typically accept the report as it is, instead, it is an opportunity to critically evaluate the report and think carefully about all the different facets of the house.  This is also the opportunity to avoid the mistake many buyers make by failing to notice critical issues until after the home is bought.

Train Yourself to Look for the Unexpected – How many times have we heard about new homeowners who notice a problem with the house only after they moved in and have lived there for a time.  In a way it makes sense, in another it does not.  It seems that in most cases, these are unpleasant surprises they have. 

A first question is why didn’t the inspector point it out to them.  While the answer to this probably depends on how good the inspector is and how well he communicates, there is  an important thing to consider:  You, the buyer, should train yourself to look for the unexpected.

There is an exercise to do in your own home in order to prepare.  We are creatures of habit.  That includes how we use our eyes when we walk into a room.  There are familiar objects, and we may look from one to another in a habitual pattern.  To improve your powers of observation you have to start by breaking that pattern.  The next time you walk into that room, consciously move your eyes to unfamiliar parts of the room such as the baseboard, the top of the curtains, or notice the wall fixtures or pictures you usually ignore.  You will notice things never saw before even though you have been in that room many times.

Now apply the same exercise to the house you may buy.  Take notes.  Who knows, you may see things even the inspector may miss.

4. CLINTON ARTS FESTIVAL

Clinton, Connecticut has a busy summer of celebrating the arts.  This includes a special event towards  the end of July.  It will be the Summer Festival Craft Fair on the Stanton House grounds.  The date is Saturday, July 27th.  The rain date is for Sunday, July 28th.