May Contracts: A Classic Look

Activity in the Greater Hartford real estate markets continued to build through the month of May, with a total of 687 Hartford County deals coming together in the Connecticut Multiple Listing Service. Markets are now back in line with the 2009 numbers.

Hartford Country Real Estate Contracts for May 2011

May’s result shows that there are still buyers on the hunt for homes. The peak of the spring market is often the month of May, so seeing the number of deals increase over April is reassuring, providing some level of confirmation that the market is returning to normal patterns.

Hartford County Contract by Town for May 2011Looking at the year-over-year comparisons, May 2011 outperformed May 2010 by 70%, which is a huge number. Although it’s always fun to make predictions and then see them come true, getting this one right (see the bottom of April’s commentary) feels like a hollow victory. There was no real insight here, just a solid understanding of how math works.

The important question is whether buyers will continue to shop through June. We’ve noticed that buyers seem to be coming out in waves this spring. There have been a few very busy weeks with lots of calls to tour homes, and showings scheduled on our listings. Then there have been other weeks that have been surprisingly quiet. We haven’t figured out the pattern, so your guess is as good as ours.

Buyers continue to prefer homes in which they don’t need to make any improvements. Picture perfect homes in popular locations sell quite quickly. Homes in very nice condition seem to find buyers who are excited to live there even if the counters aren’t granite. Properties that are clean and tidy are often more marketable than better updated homes that aren’t as well maintained.

Buyers willing to step outside of the must-be-perfect mindset can find interesting properties at a reasonable price. They just have to be willing to do a little work. Sometimes it’s a simple as painting and cleaning. Other times it’s more involved projects like updating the kitchen and/or baths.

One final thought … a lot of buyers seem to be thinking of their potential purchase as an investment more than a home. I understand that everyone wants to get the best deal possible, and would ideally like their property to appreciate over both the short and long term.

There’s a difficult-to-quantify side to residential real estate that relates to “quiet enjoyment,” or how much you like living in your new home. How much do you value a certain style of home, or layout? How much do you value the neighborhood a home is in? How much do you value your commute time? Are you willing to make compromises in one area to get what you want in another?

Slower January for Condos

The number of condominiums that went under contract in Hartford County this January trailed 2010’s total by just over 20%. The drop in activity continues the post tax credit trend from last year. Since this month’s deal count was actually in line with the January 2009 numbers, it appears that the market is simply returning to a more realistic activity level after being goosed by last year’s tax credit.

Buyers and sellers successfully negotiated contracts on 103 Hartford County condominiums in January. The table shows the results by town, and sorts it based on the number of deals. There are some surprising results in the data, both in terms of the number of sales and the change from last year.

Some towns have more condos than others – it’s just the way the housing stock was built in those areas. What’s interesting about the January result is that some of the towns with the most condos had relatively few deals. South Windsor has numerous condo complexes and is routinely at the top of the list in terms of the number of deals. This month they only had 4, which was well off last year’s count of 12. Rocky Hill is another town with an active condo market that got off to a slow start.

The other important stat is inventory. We ran the calculation using the current number of listings and the total number of contracts over the past 12 months. This is how we always do it so that we can minimize the impact of seasonality. Since we believe that the number of deals last year is artificially high (because of the tax credit), then that’s going to make the inventory look lower than it really is. Inventory is also often at a seasonal low in January. The spring market hasn’t quite kicked in, and sellers have not yet listed their properties.

With those two points in mind, the current inventory is concerning. The County is going into the spring with more than 8 months of inventory, which is already well into “Buyer’s Market” territory (more than 6 months). We’ll keep a close eye on this in the coming months and expect a large jump in the calculation in May once the tax credit deals are more than 12 months in the past.

January Listing Activity

Well that stunk. January is in the books and it seemed really slow. It takes a couple days for agents to get all their negotiated contracts into the MLS, so we still don’t know just how much slower it was than recent years. Hopefully we can get that data up by the end of the week.

January Listings for Hartford CountyIn the meantime, here’s a snapshot of the listings for the first month of the year. Overall, the number of listings was down 24% from last year. Looking back even further, the number of January listings for this year and the past few has been 702 (2011), 922 (2010), 845 (2009), 1099 (2008), 1129 (2007), and 984 (2006). Most individual towns showed a decrease in listings, but there were a few bright spots. My first reaction was that the more rural towns were more active than the denser urban towns, but I’m not sure that holds up under close scrutiny.

We actually don’t believe that the reduced activity points to the slowest year ever. There’s been a lot of snow this year. Well more than average, and it has consumed much more of people’s time and energy than during a usual January. We think that all the white stuff is postponing the spring market … but it will get here eventually. If I were a seller, I wouldn’t be in a rush to get my place on the market.

Buyers also seem to be taking their time because of the weather. It will be interesting to see what the contracts data tells us, but our anecdotal experience is that buyers are not in a rush. Some are concerned about doing a home inspection with all of this snow on the ground, while others just aren’t seeing any new listings that they like.

We placed a quick call to one of our favorite home inspectors to get their take on the weather. They said that the snow isn’t a big problem. Although it may interfere with some portions of an inspection (looking at the outside of a roof), it actually makes it easier to do other things (look for roof leaks in the attic). They felt it was essentially a wash and that buyers should still feel comfortable that the home inspection would give them a good sense of the overall condition of the home.

Well, off to shovel some more…

November Market Statistics

This month we’re reporting statistics a little differently. They’re based on the number of contracts written rather than the number of closings. Why? Because it’s fun to shake things up every now and then. And because I honestly think it’s a more relevant way to look at the market.

By focusing on contracts, we get the most up-to-date view of market activity possible. The contract date is when deals are struck, when prices are negotiated, and when homes go off the market. That’s where the action is. Buyers should care about contracts because it will give them a sense of the activity level of their competition for homes. If there is a lot of buyer activity, then they may need to be more aggressive. Sellers should care about contracts because it shows when the buyers are active. If there’s a lot of activity, and their home isn’t selling, then it might be time to take some action.

What we lose by shifting the focus away from closings is information about the final sales price. We can’t report on changes in median sales prices since that figure doesn’t become public information until the closing. But is the final sales price that important? It is in individual deals, and when finding comparable sales for a specific property, but I have not been impressed with its relevance when looking at entire towns. We’ve been tracking and reporting on closings for years. Over that time I’ve noticed that the median (or average) sales price bounces around from month to month. Looking deeper into the data, it’s almost always because the mix of homes that sell is different each period. Every comparison is apples to oranges. Using longer time periods (quarters instead of months) helps smooth out some of the randomness, but it doesn’t completely go away.

Reporting on contracts makes more sense to me, but I’ll be curious to hear other opinions. We’ll definitely continue to look at the pricing trends, because they are both important and interesting. However, high level stats for an entire town on a monthly basis doesn’t seem like the best approach.

With that, here is some data about contracts written in Hartford County this past month.

November 2010 Contracts in Hartford County

Home buyers were more active this November than last November, with an 11% increase in the number of deals. The differences between towns are considerable, with some showing a big increase and others with many fewer deals. November is traditionally one of the slower months for real estate deals because buyers begin to wind down for the winter. The past two years have been a little different than usual due to the various tax credits. The number of contracts by month is shown below for 2009 and 2010, which can be contrasted to a more typical seasonal pattern that we published late last month.

Contracts by Month in Hartford County in 2009 and 2010

Although the number of November deals is up versus last year, there has also been an increase in the days on market for the homes that did go under contract. Inventory, as measured using contracts written over the past 12 months and current listings, stands at just over 7 months. This means that there is a slight buyer’s market for the County overall, though that too varies by town.

NOTE: As always, the data used comes from the CTMLS and is deemed reliable, but not guaranteed.

October 2010 Market Statistics

Here’s a quick look at how the Hartford County real estate markets performed last month. Closings in October reflect deals negotiated during the summer and fall depending on the amount of time between the contract date and the closing date. The data comes from the Connecticut Multiple Listing Service (CTMLS), which is deemed reliable but not guaranteed.

October 2010 Market Stats for Hartford County

Some Observations

There was a wide range in the percent change in number of transactions for this October versus last October. Most towns were considerably less active, though there were some positive towns. Glastonbury had 25% more sales than last year (6 deals), while Rocky Hill saw 3 more deals close for a 50% gain. At the other end of the spectrum there were 7 towns in which the number of deals fell by more than 50%. Hartford County overall saw a 38% decrease in the number of transactions for October 2010 versus October 2009.

Part of the reason for the drop in activity was the Federal Home Buyer Tax Credit. Last fall there was a version of the credit scheduled to expire at the end of November, before the program was extended for the final time. Many buyers planning to take advantage of the credit scheduled their closings for October and early November, so the activity this year should be less.

Buyers should have some very good choices in the market, as inventory levels show a buyer’s market for nearly all the towns in the County. The standard benchmark for a buyer’s market is when there is 6 months or more of inventory available. Based on recent activity, only four towns are NOT in a buyer’s market. West Hartford has the least inventory, at 5.3 months, while the other three are each much closer to the 6 month dividing line.

Sellers need to be willing to price their homes attractively if they really want to sell – this isn’t the time to stretch for that extra few thousand dollars. Buyers do have a lot to choose from and seem comfortable taking their time to make a decision. Sellers need to give them a reason to pull the trigger. Make sure the property shows as well as possible and consider touching up any problem areas before putting it on the market.