Real Estate Market Analysis January 17, 2024

Southern CT | Real Estate Market Analysis | October 2023

Clients & Friends,

In preparing this report every month, I keep myself up to date on the market economics for all of Southern Connecticut. I have a financial background (MBA in finance), and I enjoy analyzing detailed financial data so I can maintain a good understanding of the market. I then use this knowledge to help my clients (both buyers and sellers) understand the market and get them the best deal possible.

Single-family home sales in October 2023 for Stamford, Greenwich, Darien, New Canaan, and Norwalk were 135 units vs. 160 in July 2023 along with 194 and 241 from October 2022 and 2021. The best leading indicator for future sales is homes with accepted offers/under contract. As of November 6th, this leading indicator is 92, which is higher than last month (75) and last year (87), but well below 2021 (146). This is the first time in several months that this leading indicator is higher than the prior month. This is good news, but we must be aware this is still much lower than 2021 and one month does not represent a new trend. However, I will be watching this very carefully. Overall, pricing continues to remain firm across the last several months due to the lack of inventory, which is the largest factor influencing sales. A comparison of the October 2023 inventory of 493 versus the October average inventory from 2011 – 2020 of 1,913 shows the October inventory was 25.8% of the 10-year average. The good news is last month’s September inventory was 24.3% so there are some signs of improvement.

Stamford condo sales in October were 56 units vs. 43 for August 2023 and 50 in October 2022. In Stamford, condos with accepted offers/under contract as of November 6th were 81 versus 86 last month 74 in October 2022, and 146 in October 2021. As reported in the last several months, condo sales have also been impacted by the lack of inventory. Similar to single-family homes, condo pricing softened in July but picked back up in August, September, and October.

Over the last few months, I discussed my view on the potential impact of a decrease in interest rates. I think this is worth repeating, as buyers should consider what a change in interest rates may do to housing prices. Recall that a 1-point decrease in interest rate reduces a monthly mortgage payment by approximately 10% – 11%. The mortgage principal could be increased by 11% for each point of interest decrease and keep payments the same. The big question is what happens to selling prices if interest rates go down. I have talked to a lot of real estate professionals, and most believe it will prompt higher selling prices. We all doubt that a one- or two-point change would have any significant change in inventories. Buyers would have more purchasing power which would probably result in higher selling prices. Therefore, in my opinion, lower interest rates will not be a financial benefit to buyers. If I were in the market today, I would try to purchase today, and then refinance whenever interest rates came down.

Looking forward, I still expect inventories for both single-family homes and condos to increase modestly as they did in October. I expect the market to continue to be a very strong sellers’ market as demand remains high. I cannot think of any reason why pricing would change so long as interest rates remain near the current levels while inventories are so depressed. The real estate market is driven by supply and demand, and with high demand and low supply, prices will increase.

With so many homes selling at, or above, the asking price, I have to believe that most of the recent sales were multiple offer situations. This is when buyers are asked to submit their highest and best offer. In many cases, the highest offer may not be accepted if a lower offer has better terms. For example – a home with a list price of $800,000 receives 2 offers. One for $840,000, subject to mortgage, appraisal, and inspection contingencies while the second offer is $835,000 cash with no contingencies. The majority of sellers would take the lower offer because there is less risk of the deal falling apart, and the buyer is committed when the contract is signed (as opposed to waiting for the bank to approve the mortgage). Therefore, when submitting offers there are ways to improve the quality of your offer. Some points that should be considered are:

1. 20% or more down payment – a larger down payment is attractive to a seller because it helps mitigate the risk of the appraisal not coming through.
2. Consider a certified pre-approved mortgage. A pre-approved mortgage has already been reviewed by the underwriter, and the only step that needs to be done is the home appraisal. This should reduce the time significantly to have a clear-to-close for the mortgage.
3. Waive the appraisal contingency – if you do this, you must be prepared financially to cover an appraisal shortfall.
4. Waive the inspection – this could be risky, particularly for older homes, but is certainly attractive to the seller.
5. Waive the mortgage contingency – only consider this if you either don’t need a mortgage, or you know for certain that a mortgage will not be a problem.
6. Cash with no contingencies – obviously the best option for a seller.
7. Close at the seller’s convenience – possibly even rent the home back to the seller if they need time to find a new home.

All of these options do have a certain amount of risk, and as your agent, I will help explain all the angles and pressure points for you.

If you have any questions regarding this report or are interested in buying and/or selling a home, please contact me anytime. If there is anyone you know who is interested in buying or selling a home, I would very much appreciate you giving them my name or sending me their email address and I will contact them.

To view the detailed report please CLICK HERE

Howard Dubman
Mobile 203-981-7047
License in Connecticut and New York