There's an old joke about economists. If you put 10 of them in a room, you will get 11 opinions. Don't worry, the real estate market isn't quite at that point. But there are some notable trends in the broader metrics that impact the real estate market. They don't always follow the path expected and predicted by the so-called experts, and are open to interpretation.
For example, heading into the quarter, there was a lot of concern that because the Trump administration had not yet been able to deliver on the president's economic campaign promises, like tax cuts, that would negatively impact the stock market. And yet, on June 30th when the quarter closed, the stock market had turned in the best quarter in years. The Nasdaq rose 14 percent, with the Dow and S&P 500 notching gains of 8 percent. Reality defies expectations.
For our real estate market, sometimes things appear one way at first, but a broader view tells a more thoughtful and complete story. For example, one way to look at the market is that it has tempered a bit in the second quarter compared to the beginning of 2017. But taking a broader view, the Greenwich market still experienced gains in the first half compared to the same period a year ago. We feel the long-term perspective is the more indicative view.
Also of note: average prices are on the rise, up nearly 4 percent. We believe that number is a vote of confidence. When buyers decide to commit to a well-priced property, they will be willing to pay up at least a little. But here's the reality check. The number of homes sold declined by 6 percent. We interpret that to mean that only homes that are priced right, get the serious buyers who appreciate value and complete the purchase at a good price. Sellers must strategically price their homes when they first come to market and not fish for an unrealistic price.
Here are some trends we are seeing this summer:
More millennials will likely be able to get mortgages. High student debt has kept many young people from qualifying for a mortgage, preventing them from buying their first home. Starting in July, Fannie Mae and Freddie Mac are going to allow buyers to have higher levels of debt and still qualify for a home loan. Specifically, they are raising their debt- to-income ratio to 50 percent of pretax income from 45 percent. Some experts worry about the risk, but as a practical matter, financing will be more available.
Demand continues to be highest at the more affordable price points. Homes under $1 million dollars showed the most demand in the first half of the year. Those under $2 million were not far behind.
Banks are getting more eager to lend. Higher interest rates have meant a downward trend in mortgage refinancing. And as we noted above, home prices are higher and sales are down. That means less demand for new mortgages. Expect the banks to be at least a little more open-minded when it comes to issuing loans.
Time remains on the buyer's side. Days on market continues to expand. It now takes 220 days on average to sell a home in Greenwich, CT. There is a lot of inventory to choose from, and buyers are aware of the options. They demand value.
Dream homes are seeing more interest and may be reaching a tipping point. As the quarter ended, while overall deal activity declined, there was a pickup in high-end deals which had been a slower price point. For example, in the first half of 2017 sales of homes in the $6 million to $8 million range doubled from the same period a year ago. This could serve as a catalyst for buyers on the sidelines to start getting more serious about locking in the home they have had their eye on. We're closely watching this trend for more signs of a pickup.
Some regional statistics we'd like to share:
Greenwich North of the Parkway continues to be a place where buyers can find value. Sales declined significantly, and when they did occur sales prices were only 86 percent of the asking price. Homes have been on the market an average of about 450 days. Buyers who want privacy and convenience to the Merritt Parkway will find attractive options.
Prices are also lower in Greenwich South of the Parkway. But the lower prices are driving sales, which were up more than 20 percent this past quarter compared to the second quarter of 2016. Days on market, at 221, is less than half the time of Greenwich North of the Parkway. The larger lot sizes and private schools, along with convenience to Greenwich avenue give it an edge. Buyers will find value but do need to move faster.
We are seeing pricing strength in Greenwich South of the Post Road. Sales, however, declined in the second quarter, and it took longer to sell homes. A large portion of this area is waterfront where big deals continue to happen. The strongest demand year-to-date has been in the $1 million to $3 million price range. Prices are also rising in Cos Cob. However, sales declined more than 40 percent in the second quarter.
After struggling a year ago, Riverside is showing strong gains in both sales and prices. Homes are selling faster, signaling buyers recognize value. The most affordable price points are seeing the most demand.
The quaint village of Old Greenwich remains a favorite of NYC buyers. They love the walkability to the train and the proximity to the beach, shopping and dining. While sales and prices did move lower in the second quarter, annualized year-over-year prices did rise. The Condominium market is up modestly so far in 2017, and prices are on the rise.
Newbies no more! Houlihan Lawrence participated in seven of the top 10 sales this year. It's hard to believe we only opened our Greenwich office in 2013. We feel so firmly rooted in the community. Thank you for embracing us and making us part of one of the most important family decisions of your life.
Stephen Meyers
CEO
Chris Meyers
President
Jared Randall
