|The Noyes-Graff House of 1966, coming on the market tomorrow at $1.78 million|
We are getting a lot of panicked questions about the market this month because of the unusually high inventory levels. Why so many houses? Are there any buyers out there? What do I have to do to sell my house? Why isn’t anybody looking? How long is this going to take.
Susan and I have 15-20 listings on the market and we do open houses every weekend. We are in the biggest, most productive office in town and we listen carefully to the feedback each week from some of the best agents in town, both in and outside of our office. I have some answers to those questions.
There are three pools of buyers. This has not changed in the last ten years. They represent each of the thirds of the market. They are looking for different things and they behave differently. Do not expect to use one marketing strategy to reach all of these buyers equally.
The local buyer represents one third of all sales in New Canaan. This is primarily empty-nesters downsizing, small families getting bigger, big families getting smaller, and sometimes divorce. For the most part this third of the market is moving into town. They are downsizing into the 600 condominiums in the New Canaan market and most of those are within one mile of town. They are downsizing into smaller homes and smaller properties because their kids have gone off to school and they want to begin traveling, want to maintain less house and less yard. This group is a big reason for the interest in houses close to town. The way we reach these people is through OPEN HOUSES, through the brokerage community of 400 agents in New Canaan, using our storefront windows, the New Canaan Advertiser and the NewCanaanite.com. We are meeting many, many local buyers and prospects at our weekend open-houses. In fact, 50% of the traffic at some weekend open houses are neighbors and New Canaan residents. Some are looking for themselves, anticipating a job change, children leaving for school, or the needs of an elderly relative. I think that it is this group that is bidding up houses on Church Street, Harrison Avenue, South Avenue and other downtown neighborhoods because they put a disproportionate value on location over square footage and land. The local buyer (and Darien) is driving the condo market, the downtown trend market. The only reason the condo market is not stronger is because condo sales are often dependent on the prior sale of a single-family house. When those houses take a year to sell it affects both the local buying psychology and the condo market.
Some call this the trade-up market. This is a group of buyers who already have an awareness of New Canaan. They live in Stamford, Wilton, Westport, Weston, Norwalk, Rowayton, Fairfield and sometimes Westchester who are looking for the combination of low taxes, good schools and a relatively fast commute. Both sets of my grandparents lived in Stamford and they called New Canaan “fancy”. My mother’s parents moved here from Shippan Point in Stamford and moved to a house on 4 acres with a pond and a barn and a pool on North Wilton Road. This is the group that are looking in the 4 acre zone. They love the value they are seeing. Big yards and big houses are suddenly on sale in New Canaan. The low taxes are key since New Canaan is at a 15.99 mil rate and those towns all have mil rates at least ten points higher. You can move from those towns, pay a little more for your house but pay less in taxes. When residents in the surrounding towns realize they can shorten their commute, pay lower taxes, and get a bigger house they come out and look at our OPEN HOUSES.
This is New York. London. Miami. California. This is entirely, entirely, entirely an Internet-based market. Everybody who is not local is relying heavily on Internet portals to evaluate the market. It is said that the average buyer in this group spends 6 months looking at listings online before they engage an agent and start going to houses. And, the most important three things you can do for listings that are going to sell to the DISTANT third of buyers is to take great photographs. It is more important to launch a listing with great photographs than it is to launch it on-time. If you don’t have the photos that are going to provoke people into making an appointment, then you are not ready to list. Some of the profiles of recent calls in this category:
– I am looking at New Canaan because the Hudson Valley is too far from Manhattan.
– I am looking at the $2mm price point in New Canaan because that it costs to enlarge or improve upon my apartment in Manhattan.
– I want a weekend home and the Hamptons are too far away. So is Nantucket. Does everybody in New Canaan live there full time and will we be the only ones?
What does this mean for real estate values in New Canaan and the current malaise about high inventory?
First, the market is going to go sideways. The underlying reasons for moving to New Canaan are still in place: Low taxes, a great quality of life, proximity to Manhattan, great schools are all great draws for young families, old families, non-traditional families, couples, empty nesters, children, teens, etc. As long as New Canaan provides great value we will continue to see demand for the inventory. Demand has not diminished in the last few years and we don’t see that changing.
Second, there is going to continue to be price pressure on homes as long as we have these inventory levels. Many of the towns around us have already experienced a correction. Wilton is currently selling at a 40% discount to New Canaan and that is a change from the days of perhaps a 25% or 30% discount. Do New Canaan prices have to come down another 10% before we are competitive with the surrounding towns? Some people think so. When you compare New Canaan to Darien and Greenwich, two of our historic rivals, and you realize that New Canaan prices are equal to similar houses in both of those towns you realize that we not only have competition from within, but we have competition from similar outstanding LOW-TAX towns.
Third, we need to make adjustments in our zoning laws that anticipate the changing housing demands. As a town we are looking for a balance of many different types of resident. We don’t want to be all about schools, or all about seniors, or all about large families. We need a balance in order to properly fund great schools, recruit volunteers for our many service organizations, support the arts and cultural organizations, and support a diverse and vibrant downtown comprised of a great variety of shops and restaurants. If we were only about great schools and that is the only kind of person who moved in we would quickly find ourselves in an imbalance. We need young professionals, seniors and everything in between. Unfortunately our housing stock is out of balance with demand. Developers have built an abundance of $2.5+ million dollar houses which offer large yards, big garages, and target large families. Zoning laws do not allow the developer to build two small houses on one lot, or five small apartments on two lots. Opportunities to build condominiums are as scarce as hens teeth. When we adjust our zoning laws to anticipate a greater diversity of housing, in keeping with our Plan of Conservation and Development, then the free market will respond and small houses will be built, they will sell, and we will improve