October Contracts: Impact of the State Budget

2017-11-02 Hartford County Single Family Contracts in October 2017

Hartford County had 727 single-family homes deals come together during the month of October. The total was about 3% fewer than October 2016, though on a year-to-date basis the market is very slightly ahead of 2016.

Discussion of the State budget situation was unavoidable during October. It was regularly a leading news story, and was not fully resolved until the Governor signed a budget on Halloween. Budget talk seemed to come up all the time, in a way that made it plausible for the budget uncertainty to have a cooling effect on the regional real estate market. Now that the data is in, we can attempt to answer whether the State budget situation actually impacted buyer behavior.

Taking the widest possible view, a 3% variance from last year suggests that the budget debate wasn’t such a big deal. The chart at the top shows a tight cluster of October contract totals over the past three years. There was no huge miss for the month. Additionally, the chart shows that wild month-to-month swings are actually not unusual for the County. At a high level, there is no way to say that the uncertainty about the State budget definitely slowed the market in October.

There are trends with individual towns, many of them quite interesting. However, they are year-long trends rather than new and unique situations that popped up when the State budget took over the headlines.

One of the strongest trends is that buyers are showing a lot of interest in the core price bands of the more densely populated towns. The table below shows that East Hartford, Manchester, Bristol, Hartford, and Windsor Locks experienced year-to-date deal activity increases of more than 10%. Looking more deeply into the numbers, the increases were primarily due to an uptick in contracts on homes priced in the $100,000s. The October results for those five towns ranged from a 112% increase in the number of month-over-month deals to an 18% decrease. Again, it is not possible to reach a definitive conclusion about the impact of the State budget standoff.

The narrowest view of the impact of the State budget uncertainty comes from conversations with individuals interested in real estate. Numerous home shoppers that I interacted with over the past month independently raised the State budget as a concern. I had multiple guests at a Hartford open house tell me they that lived in West Hartford and were concerned about buying a larger home in West Hartford because of the potential for even more property taxes if the State cut education funding to the town (as was proposed at one point by the Governor). My own buyer clients noted the budget standoff as a concern, though they did not tie it to any specific decisions. Agents in my office reported conversations about the State budget with their clients too.

At the end of the day, it is important to recognize that all sorts of factors impact the real estate markets. The State budget was the primary talking point in October. It was definitely on people’s minds, and influenced their decisions. However, there is no convincing statistical evidence (that we’ve seen) that those individual decisions caused October to be an unusual month in the noisy world of real estate.

It is interesting though … I wonder what everyone will be talking about in November?

2017-11-02 Hartford County Single Family Contracts in October 2017 by Town

September Contracts: A Tentative Return

2017-10-02 Hartford County Single Family Contracts in September 2017

Hartford County finished September with 739 single-family home contracts, in line with the September 2016 result. On a year-to-date basis, 2017 is about 1% ahead of 2016 in terms of the total number of deals.

This month our series on contract data tentatively returns. The local MLS system still does not allow the method of data gathering that we have been doing since 2009, but tech support helped us find a workaround. It is more difficult to collect the information, but we believe it is comparable to our previous process. We will scrutinize the results each month for the rest of the year to make sure the data continues to look correct.

Although we feel good about the accuracy of the September data point, we believe that the August numbers are understated. August results were re-collected yesterday using the new collection process. Measuring the number of contracts at the same time each month, shortly after month end, is important because deals tend to fall apart over time. For every 100 contracts in place at the end of the month, there might only be 95 (hypothetically) in which the buyer and seller are still working together 30 days later. Because the August number shown in the top chart was collected in early October, it is very likely that the August total would have been higher if it had been collected in early September.

With the disclaimers out of the way, it is good to be able to look at market activity again in near real time. Deal counts have been falling over the past two months, as is typical of late summer. Hopefully there will be a small uptick in activity during October as the fall market kicks in. At the big picture level, 2017 has been a strong year for the local real estate markets.

Trends by price band show a slight increase in deals in the $100,000s, the $200,000s, and the $300,000s. Those three price bands represent over 79% of the single-family contracts in Hartford County, showing that there is strength at price points representing our core housing stock.

Inventory levels continue to be neutral below $400,000, and then increase to favor buyers as the price point rises. At the extreme end of the price spectrum, there has been a decrease in the number of million dollar homes that have gone under contract this year compared to last year. There are so many million dollar homes on the market that it would take over 2 years to sell them all at the recent pace of deals. It continues to be a good time to be a high end buyer in Greater Hartford.

2017-10-02 Hartford County Single Family Contracts in September 2017 by Town

June Contracts: One Thousand

2017-07-08 Hartford County Single Family Contracts in June 2017

Hartford County finished June 2017 with 1,000 single-family contracts. Hitting four digits in a month is rare, a level of activity that the market only reaches during spring months of busy years. Despite reaching the 1,000 deal milestone, the month trailed the activity level of June 2016 by about 2.6%. On a year-to-date basis, 2017 trails 2016 by 0.5%.

Town-by-town results (below) are often widely scattered, but June’s results seem to be exceptionally diverse. Even in the smaller markets it’s unusual to see outperformance or underperformance of more than 50% for a month. Five of the 28 towns had at least a 50% swing in the number of deals compared to June 2016.

The year-to-date trends also show quite a bit of diversity. Many, but not all, of the less dense suburbs to the west and north of the City lagged last year’s performance by over 10%. At the other end of the spectrum, East Hartford and Manchester recorded the two largest increases in deals. East Hartford is 59 contracts ahead, while Manchester is at +57 contracts.

Inventory of active listings continues to follow the same trend we have been reporting for years. In the County overall, it is a seller’s market for properties worth less than $200,000, a neutral market for homes between $200,000 and $400,000, and a buyer’s market for prices above $400,000. The dynamics of individual towns definitely vary, but the general trend typically holds. Sellers have the advantage at the low end, while buyers have the advantage at the high end.

Although the summer has the reputation of being a slower period for real estate, the chart at the top shows that July and August are still active months for buyers. We’re looking forward to keeping the year going as we work with our buyer and seller clients. Let us know if you need some real estate help!

2017-07-09 Hartford County Single Family Contracts in June 2017 by Town

May Contracts: Rebound

Hartford County Single Family Contracts in May 2017

May contracts rebounded sharply from the seemingly out-of-line data point reported for April. Hartford County finished the month with 1,123 single-family contracts. It was a higher total than any of the spring months in 2016, or any other month since we began tracking contracts using this methodology in 2009. The May total brought the year to date deal count to within 2 of May 2016 count.

Inventory data showed that there was a modest increase in the number of available homes. The County’s months of inventory increased from 3.3 to 3.5. Additionally, the number of municipalities with 3.0 months of inventory or less declined from 12 to 8. There was more balance between supply and demand in May than in April.

Buyers intent on purchasing this spring faced two headwinds that may have caused the April data point to be an outlier.

First, competition from other buyers may have prevented home shoppers from “winning” properties that they tried to buy. This headwind was caused by the low inventory levels that were observed.

The second headwind was psychological, the natural tendency to want to wait to see if better options appear. The Greater Hartford real estate market is dominated by homes that were built decades ago. There is relatively little new construction, and virtually no large-scale subdivisions that offer new, cookie-cutter single-family homes.

Because of the nature of the housing stock, every home is different. Buyers who don’t love their options will often wait to see if something better comes onto the market. They want to find the right fit. However, there is a limit to their patience. At some point they have to pick from the available options so that they have a place to live.

May continued the strong spring real estate market. Hartford County is back on pace with 2016, and shows signs of continued strength into the late spring and early summer months.

Hartford County Single Family Contracts in May 2017 by Town

April Contracts: It’s a Miss

2017-05-07 Hartford County Single Family Contracts in April 2017

Hartford County finished April 2017 with 967 single-family contacts. The total was a 6% decrease from April 2016, putting the County about 2% behind last year on a year-to-date basis.

April was a miss. It was a surprising decline in market activity from the March 2017 total. Deal counts are usually highest in April, May, and June. March is also generally an indicator as to how the spring will go. How did March get it so wrong?

I believe that the answer is in the supply of available homes. The number of active listings is down compared to previous years. The CTMLS includes a statistics function that reports historical monthly data on the number of active listings. The chart below shows the number of active single-family listings in Hartford County during April going back to 2007.

2017-05-07 Active Hartford County Single Family Listings in April 2017

From 2007 through 2014 there were right around 5,000 active listings in April. The total dropped to about 4,000 in 2015 and 2016. This year is even lower still, with only about 3,500.

The low supply is also visible in the inventory calculation included in the table below. At the current pace of sales, it would only take 3.3 months for buyers to put all the active listings under contract. A “seller’s market” is generally defined as being 3 months of inventory or less, so Hartford County is quite close to that threshold. Twelve individual towns have a inventory of 3.0 months or less.

We don’t have an answer to the big question … why are there so many fewer listings this spring?

One hypothesis is that owners of starter homes are content to stick with their smaller spaces rather than moving up to larger homes. Another hypothesis is that rising interest rates are trapping homeowners in their current properties since higher financing costs make their next home less affordable. A third possibility is that homeowners are being squeezed financially on other fronts (higher costs for taxes, healthcare, utilites, food, etc.), encouraging them to stick with their current housing option.

At this point we just don’t know, though we keep an eye out for articles, studies, and surveys that investigate this question.

Despite the decrease in the number of deals in April, Hartford County real estate markets are doing well. It’s possible that we will see price appreciation in the lower price bands, which have the largest mismatch between supply and demand.

2017-05-07 Hartford County Single Family Contracts in April 2017 by Town