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Column: The Fed Strangles Greenwich Real Estate Market…

Column: The Fed is strangling Greenwich Real Estate Market, but it’s not interest rates

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October 2022 single family home sales below our 10-year Greenwich sales average

By Mark Pruner

Sales down, inventory down, contracts up

The Federal Reserve finally strangled the Greenwich real estate market (or did they? More on that later.) Probably not in the way the Fed expected, though. Last month, in October 2022, only 30 single-family homes were sold in Greenwich. This compares to 43 sales last year and 99 sales the year before. Our 10-year pre-Covid average of 41 sales in October, so our October sales are 27% below an “average” year.

Under $1 million

The biggest drop in October sales was in the $1 – 2 million price range, where sales were down 53% from last year. You would expect higher interest rates to slow sales, and the lower the price range, the greater the impact. However, this is not what we see in the market. From $600,000 to $1,000,000, we had the same sales as last year, which was a total of 3 sales in both October 2021 and 2022. Our months of supply for the $600,000 – $1 million actually shows a tighter market in October 2022 when you compare to October sales annualized months of supply YTD months of supply going from 5.5 months of supply year to date to 3.5 months of supply for the sales rate in October.

Still, you would think that having only 3 sales would be a sure sign of a weak market, but what it really is is a sign of how little inventory we have. Under $1 million we have 10 listings and under $600,000 we have no listings. This compares to 15 listings in that price range last year and 53 listings under $1 million in October 2019, our last pre-Covid year.

High-end market

Where higher interest rates have hurt the most is the Greenwich market over $1.5 million and especially the over $4 million market. The correct answer here is that it shouldn’t be, since homes over $4 million rarely use traditional mortgage financing, so why are they being hurt by higher interest rates? Not only should high-end sales not be harmed by higher interest, but high-end sales should increase as higher inflation pushes people into hard assets. Hard assets traditionally see their value increase in inflationary times, and we certainly have.

The problem is that the people at the high end today have fewer assets. Stocks, bonds and crypto are very much down. To take an extreme example, Mark Zuckerberg’s Meta stock is down $100 billion from its peak last September. He’s still the 29th richest person in the world, but he probably won’t buy many properties. Then again, that’s exactly what Bill Gates did.

The higher the house price, the lower the demand. We had no sales over $6.2 million last month out of 54 listings over $6.2 million. When you compare annualized October months of supply to months of supply for year-to-date sales, we see a jump of over 2 months of supply from 5.9 months of supply to 8 months of supply in the $4 price range – 6.5 million. That end of the market is getting tougher for sellers.

Not only is it uncertainty about the Fed, inflation, the economy and interest rates; you also have an election that could very well lead to even more gridlock in Washington and a war in Ukraine that could lead to an even worse situation. Homebuyers have a lot to worry about and decide the best course of action is to wait.

Inventory is falling again

Despite declining sales, our inventory numbers can’t seem to increase. We did see inventory go from 198 listings at the end of August to 227 listings at the end of September or a 15% jump in just over a month. Then came October and inventory continued to dwindle. This week we are back to 207 entries.

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October 2022 Sales, Inventory, Contracts and Months of Supply

Signs of an improving market

This is the gloom and doom, what about those signs I mentioned at the beginning that indicate the Fed’s attempt to strangle the Greenwich real estate market may not be working out the way they planned? Let’s start with that dwindling inventory, which can only hurt sales. Well, not really. The main factor leading to the drop in inventory is an increase in contracts. We went from 66 contracts at the beginning of October to 77 contracts at the end of October and that was with 30 of those contracts at the beginning of October turning into sales by the end of the month. Those 30 sales were more than replaced by an increase in signed transactions.

Of the 30 sales we had in October, an incredible 25 of those 30 sales were on the market for less than 2 months, ie 83% of what sold were newer listings. Eighteen of the 30 sales were of homes that had been on the market for less than 30 days.
Most of them have also been renovated fairly recently. The average construction date was 1959, while the average renovation date was 2015. These 30 homes sold for an average of 102.2% of list price. Homes in good condition and well priced sell quickly. We still have very motivated buyers, even with the uncertainty we have.

If you look at October sales compared to the first half of the year, both the average and median sales prices are lower, but that’s because of the mix of what’s being sold. If you look at the price per square foot, it is 6.3% higher than the first half of the years. Our average sale price to original list price is up from 100% in the first half of the year to 102.2% in the month of October. Our days on market went from 44 days on market in the first half of the year to 19 days on market. That all sounds great, but the mix is ​​also changing here, so beautifully renovated homes are selling, while older homes that need work too often sit.

Who is looking to buy

Russ and I are sitting at 35 Sterling Road, a recently renovated contemporary on a private backcountry road with a pool and tennis court for $3.29M. We got a variety of buyers; Greenwich families looking to expand, Armonk residents who want to drastically reduce their tax bill but wanted to stay close to friends, international buyers now that travel is back, Covid renters who have decided to stay in Greenwich and NYC buyers who want both weekend homes and safety .

What next?

The market has a variety of buyers and one thing we have seen repeatedly in the market is that when uncertainty is removed or reduced, even when change is in a “bad” direction, people move forward. Elections are next week, and the Fed may back off the big jumps in rates. We have Olympic powers fighting each other to push the market in opposite directions. (NB The RMS Olympic, sister ship of the Titanic, sailed for 24 successful years as a liner and WWI troop ship, despite a few bumps here and there.) Our market is going through turbulent times, but some of that turbulence itself will solve.

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Greenwich months of supply by price range – sales, sales with contracts and October sales annualized
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Greenwich Sales YTD, Contracts, Inventory and October Sales by Price Range

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