By John Engel
We are at the long-awaited inflection point where the Fed reverses course and lowers rates. The stock and bond markets rallied this week on the news. A survey of big banks predicts 30-year rates between 6.5% and 6.7% in the fourth quarter. 15-year adjustables, already in the high 5’s, will drop to the low 5’s this year. Historically, these are below-average rates.
Supply
Just when you thought supply couldn’t go lower, supply went lower. Supply of both houses and condos continues to decline both in New Canaan and in the larger Fairfield County market. We must be nearing the bottom because the rate of decline is decreasing. Interest rates won’t solve this. As prices rise and rates fall expect a return to speculative building such as the pair on Down River Road, a dozen apartments over The Connecticut Muffin, another dozen units on Husted Lane, and the redevelopment of any existing two-family homes and ranches.
Demand
Judging from the increase from 100% of listed price to 103% of listed price, both in New Canaan and around Fairfield County we can say there is no drop off in demand. First, we see the rise of both average and median prices in New Canaan to record-setting levels above $2.5 million. While there was a soft period last summer where New Canaan had 11 months of inventory available above $2.45 million, that number has fallen back to the more typical range of 5.0 to 7.6 months both in New Canaan and across Fairfield County.
Commissions
All of the Multiple Listing Services in Fairfield County (SmartMLS, GreenwichMLS, DarienMLS, New Canaan MLS) stopped publishing the seller’s offer of compensation, known as the “BAC” on August 17th. The removal caused some confusion in the marketplace, forcing agents to call and email each other individually asking for the information. To wit – one agent replied, “I don’t think I am allowed to email it to you.” William Pitt Sotheby’s is the first to take a bold step toward transparency by alerting all of the agents in Fairfield County that they are publishing offers of compensation for their listings on their website. I have not seen any other agency follow their lead, yet, but am hopeful this is a service the agencies will provide.
Avalon and Affordable Housing
Who says nothing happens in August? Not only did the town finally get enough points approved for an 8-30g moratorium, but the New Canaan Housing Authority announced plans to acquire over 100 housing units from Avalon. In a hastily-organized public hearing, required by statute, few details emerged. This is partly because the deal is still in development, and partly because the Housing Authority of New Canaan is not the Town of New Canaan. It is a separate non-profit corporation answering to its board, able to issue debt to own and manage housing, both market-rate and affordable, for the benefit of the community. While it is tempting to think that this purchase could solve our long-term need for affordable housing Avalon will probably become only partially so, as the Housing Authority will need some number of market rate units to service the debt. Fears of residents being displaced, or of a sudden concentration of affordable units in that area, are probably premature. While the purchase makes economic and strategic sense, allowing New Canaan some short-term flexibility, our newly formed Affordable Housing Committee still has a lot of work to do identifying additional opportunities, and how to pay for them. I must point out that our neighbor Darien, faced with these same challenges, has chosen a different path. Darien is not pursuing a strategy of linked moratoriums, and when presented with the opportunity of purchasing an Avalon development in Darien, Darien declined. Each town decides its own approach and this self-determination is a core value and why we live in Connecticut.
Confidence in the Housing Market
Heading into the uncertainty of a Presidential election, with two wars raging, nagging inflation and record debt we have to ask what is driving this housing market? Rates? No. Jobs? No. There is an unprecedented transfer of wealth taking place in America, and that money is buying homes. It is the reason for so many cash purchases. $84 trillion in assets is set to change hands over the next 20 years, according to estimates by the consulting firm Cerulli Associates. Generation X (those born between 1965 and 1980), Millennials (1981-1996) and Gen Z (1997-2012), are expected to inherit $72 trillion of that amount, mainly from Baby Boomers, with the rest going to charity. For perspective, Trump and Biden each passed about $6 trillion in stimulus packages during their respective terms. This is more than that. Is it any wonder then that real estate continues to appreciate at this rate?
Florida
Florida luxury buyers (above $3 million) of New York City real estate accounted for more than half of all sales. And, in 2024 Florida residents represented 12.04% of all inbound out-of-state New York City buyers, the third highest state after California and New Jersey. Who are these luxury buyers and how do we get in front of them? Are these so-called Floridians really returning New Yorkers who left during covid for tax reasons and who are now returning to buy a second home or a third home? Probably so. They are Floridians with New York accents.
Notes from the Monday Meeting
Still recovering from last week’s flood, this week our office meeting was held on Zoom while the carpets dried, reminding us all that we’ve had three 100-year storms in the last couple of years. We are definitely not going to have a problem for another 90 years. Electric bills are through the roof but this is a subject for another column…
John Engel is a Realtor with The Engel Team at Douglas Elliman. His daughter Charlotte is getting married Saturday so he needs to stop writing this newspaper column and begin work on a tasteful, yet creative, Father of the Bride speech that won’t embarrass. Wish me luck.
Publisher’s Note:
Good luck John! and congratulations.
