April Contracts: A Sideways Step

April single-family contracts came in at about the same level as Hartford County saw last month. Activity remains much higher than we observed in 2011, and the month-to-month count of negotiated contracts seems to be following the same pattern as last year.

Hartford County Single-Family Contracts - April 2012

We’ve already commented on much of what we’re seeing in the market right now. Some towns are very active, and multiple offer situations are common. Inventory is on the low side, so buyers feel they need to follow the market very closely in order to have a chance at the “good” homes. And buyers are much more inclined to pay extra for a move-in ready home than take on a renovation or two.

Just this week we learned that mortgage rates are once again at historic lows. Attractive rates for purchases, combined with the challenge buyers experience in borrowing money for renovations, goes a long ways towards explaining why move-in ready homes are in such high demand. Why not spend a little more to get a home that’s already been updated? For most buyers it’s an easy decision since they don’t want to deal with renovations and don’t have the cash available even if they were open to a property that needed a little work.

We learned one other interesting tidbit the other day. Apparently about 20% of contracts have been blowing up recently. This is not a stat that we are able to research and calculate, but it was reported to us from a reputable source – our broker got it from the people who run the local MLS. We’re not surprised by the number, as we regularly see homes return to the market in the MLS, and have had a few of our own deals fall through.

Happy spring … and feel free to write or call with all of your real estate questions.

Hartford County Single-Family Contracts by Town - April 2012

March Market Stats from West Hartford

The other day we wrote about the high levels of activity in the Hartford County market during the month of March. West Hartford really stood out on the chart because 83 homes went under contract, which dwarfed the next highest town – East Hartford with 53 contracts.

Part of the model we built to analyze MLS contract data allows us to look at trends in individual towns. Here is the number of West Hartford contracts each month this year compared to 2011.

West Hartford March 2012 Single-Family Contracts by Month

Each of the first three months of 2012 was stronger than the corresponding month in 2011 in the West Hartford single-family market. January and February showed meaningfully higher activity levels, while March dramatically outpaced last year. What does this suggest for April and May? Just how deep is the West Hartford buyer pool?

West Hartford March 2012 YTD Single-Family Contracts by Price Band

Looking at the year-to-date West Hartford single-family contracts by price band, we can see that activity has increased the most for homes priced between $200k and $499k. Homes with asking prices between $500k and $699k have been up slightly, while activity in the $700k through $999k band is actually down compared to last year.

West Hartford homes in very good condition are selling immediately, often with multiple offers, and sometimes above the asking price. We have been seeing this consistently at a broad range of asking prices. Buyers need to follow the market very closely in order to even have a chance to bid on these homes.

Sellers should go the extra mile to prepare their property for sale. Clean up, do a little staging, and hire an agent who will market it properly. For an updated home it could be the difference between just one offer and a bidding war. For a more average property it could enable you enough to reel in that first offer.

West Hartford March 2012 Current Single-Family Listings

The number of active listings in each of the price bands up to $499k is approximately equal to the number of year-to-date contracts. This tells us that there is about 3 months of inventory in those price bands, which suggests that West Hartford is a seller’s market.

The $700k to $999k price band is more complicated. Inventory is much higher than the sub-$500k price bands, yet we still see strong interest in new listings. Taking a look at the actual properties available, many of the homes have been on the market for an extended period of time. Buyers have likely evaluated them and concluded that they didn’t meet their needs for one reason or another.

Real estate markets evolve gradually over time. The strong activity and interest in the sub-$500k price bands of West Hartford may be an early sign that the regional markets are improving. We are hopeful that the trends we see here will begin to spread to other price bands, and other towns, over the coming months and years.

As always, buyers and sellers need to have a solid understanding of their local conditions to make the best decisions possible. We have this data for all 29 towns in Hartford County and would be happy to share.

February Contracts: Full Speed Ahead

We had a sense that the real estate market was picking up, but numbers are even more impressive than we would have guessed. The number of single-family contracts written in Hartford County was up 50% over February of last year. The pace of deals this year is also ahead of 2010, when there was a first time home buyer tax credit.

Hartford County Single-Family Contracts Feb 2012

The strong January result is starting to look less like an abnormality. February continued the trend, so perhaps this is a sign that there has been a meaningful shift in the residential real estate environment. The next few months will be interesting to watch to see if the trend continues.

The biggest challenge we see right now is inventory. We are seeing buyers compete for attractive listings, and multiple offer situations seem rather common at the moment. There are not enough interesting new listings coming on the market to meet demand.

The increasing pace of deals has begun to push down the number of homes for sale when it is expressed in terms of months. At the end of January our stats showed the metric at 6.6 months. Now we’re down to 6.4 months. Over six months of inventory is considered a buyer’s market, but we see things as more balanced and in some sub-markets favoring sellers. Many of the listings are homes that have been on the market for an extended period of time. The current set of buyers have evaluated and passed on those homes, so they are inflating the inventory stats without being a serious option for the majority of the buyer pool.

Hartford County Single-Family Contracts Feb 2012 by Town

January Contracts: A Fast Start to 2012

The number of single-family homes that went under contract in January 2012 jumped 14% over January of last year. The total of 458 deals that came together signals that the local real estate markets are off and running for 2012.

Hartford County Single-Family Contract - January 2012

We have heard a number of theories as to why buyers are active so early in the year. One is that the lack of snow has everyone acting like it’s spring. Another line of thinking is that buyers who had their search derailed by the Halloween snow storm and subsequent power outage regrouped after New Year’s weekend and resumed their search. Finally others believe that the activity level is up due to favorable buying conditions. The truth is most likely a combination of these, and other, factors. But the end result is a quick start to the year.

There are a few main factors that play into the favorable buying conditions that we should note:

1. Mortgage rates are very low with 30-year fixed loans often having interest rates below 4%. The government announced that they plan to keep short-term rates at current levels for years, so it is possible mortgage rates may also remain quite low for an extended period.

2. Prices have fallen back to the levels of the early 2000s, making homes much more affordable than they were near the peak in 2006/2007.

3. Buyer confidence has increased to the point where people seem comfortable with the idea of either becoming homeowners or moving up to a larger property. This is partially a reflection of the local business environment where we see companies more inclined to hire workers than lay them off. There also appears to be more people relocating to the Hartford area for jobs than there has been over the past few years.

We’re expecting a busy spring real estate market in 2012 and already see activity picking up. Sellers should feel comfortable listing their homes at any point in the next few months, as buyers are already out there bidding. Buyers need to realize that they will have competition for the most desirable homes and plan their bidding strategies accordingly.

Hartford County Single-Family Contract by Town - January 2012

2011 Closed Stats From 50,000 Feet

Last year we gathered up all the Hartford County residential transactions since the beginning of the CTMLS in 2000 and showed how the very high level trends had changed over 10 years. Today we update those charts with the data from 2011. As always, the CTMLS is deemed reliable but not guaranteed.

2011 Closed Single-Family Hartford County Transactions

2011 Average Single-Family Home Prices in Hartford County

Observations

The total number of single-family home transactions fell again in 2011, decreasing about 8% from the 2010 total. With the latest data point, activity for this type of property is about 41% off the 2005 peak in Hartford County. Last year we wondered whether we had seen a bottom in the number of deals – clearly 2010 was not the bottom.

As sales volume fell, showing a decrease in overall demand, the average sales price was apparently not changed. We don’t put a lot of faith in average prices because they are strongly influenced by the mix of homes that sold in a particular year, so we think something else is going on.

Our anecdotal experience is that home prices are still falling in all the towns and markets in which we do business. We also see more interest in higher priced homes, which will tend to inflate the average, and believe that’s why the average sale price edged up slightly. We’ll work on building the case to either prove or refute this hypothesis and share that result too.

Big picture analysis like this is never especially satisfying since we usually end up with more questions than answers. What are you guys seeing out there as you follow the markets? Michael called 2011 almost perfectly in the comments from last year’s post, so we clearly have knowledgeable readers!

Also, we have this data broken down by every single town in Hartford County. If you’re interested in a specific town, email us and we’ll send you the charts.