The pandemic profoundly changed the dynamics in Greenwich's luxury real estate market. As we head deeper into 2021, sellers continue to carry the advantage.
Early on during the 2020 COVID-19 pandemic, the situation for real estate seemed dire. Sellers were not listing, buyers were not buying, and real estate professionals across Greenwich, the Northeast, and the country were uncertain when any normalcy would return to the world of luxury residential real estate. No one knows the exact moment, of course. It could have been sometime in mid-to-late May. Or perhaps it was early June. Regardless, the market shifted and surprised even the most optimistic experts. Despite the ongoing pandemic and varying degrees of lockdowns and shelter in place mandates, buyers returned to the market. And they returned en masse.
The result was an ultra-competitive market. The best homes in the best neighborhoods regularly saw bidding wars erupt. Prices were driven higher, and perhaps somewhat surprisingly, buyers remained undeterred. In some instances, their home-work balance was rapidly changing by the day, and newer larger homes were necessary to maintain their sanity. Dropping interest rates also fueled the frenzy. But perhaps more so than any other factor, a historical lack of housing supply in the Greenwich market continues to supercharge pricing and the breakneck pace at which aggressive buyers are snatching up new listings. In other words, if you've been considering listing your home for sale, now more than ever, it's a great time to sell in Greenwich.
The Greenwich Market is Hot
Fast forward to the 1st quarter of 2021, and the hot streak that began around late May and early June of 2020 has continued mostly unabated. There was a seasonal drop off in single-family home sales over the final quarter of 2020, but the market still outperformed 2019 and the historical 10-year average. It outperformed them by a considerable margin. For the start of 2021, sales were up versus 2020, 2019, and the 10-year historical average. From 2020 to 2021, that increase in sales is a whopping 97%.
Based on how the market ended last year, that isn't too much of a surprise. Even with a seasonal lull, buyers remain active. They're teeing up what could be another banner year for home sales in Greenwich and the surrounding submarkets. Several factors are feeding the continuing phenomenon of buying without regard to rising prices. Culprit number one is a dramatic shift in lifestyle.
Demand Is at an All-Time High
The pandemic changed a lot of people's perceptions about their current lifestyles. One of the most critical was in how they viewed their homes. Demand throughout 2020 was driven mainly by a shift in homeowners’ priorities. Staying at home and working or studying all day with other family members in close, constant proximity made average-sized homes feel small. It made small homes feel tiny.
With a new outlook on their needs and wants, serious buyers hit the market in droves looking for dedicated interior spaces to work, outdoor areas to relax, and generally larger homes to have room to roam. These same buyers also chose to move from major cities to the suburbs. Though this particular transition wasn't nearly the mass exodus it was first reported to be, it did signal younger individuals and families accelerating their timetables to seek larger homes. Of course, with commuting to work proving less of a burden, workers were happy to find homes more suited to their current lifestyles.
Ultimately, it remains to be seen just how permanent the work from home and large home craze will be. At the moment, office building vacancy has reached 16.4% across the county. That represents some of the highest such rates in decades. Should companies continue the movement to more remote work, or a hybrid arrangement, it may prove a genuine change in how companies approach the need for their employees to be tethered to a desk in an office building. Some forecasters see it becoming a long-term normalization while others sense collective working spaces will return shortly. Whatever may materialize down the road, it currently does nothing to help the current lack of housing inventory.
Lack of New Development
The shift in priorities is placing a heavy burden on the single-family housing market. So too is a shortage of new housing starts. With new development coming to a standstill during the height of the pandemic, resales are carrying the market. There's only so much to go around. Spring is often the most productive season for new construction. The season was lost entirely in 2020. It was nonexistent for much of the year, and it has been sluggish to restart in 2021. The stoppage wasn't unique to any one part of the country either. Overall, U.S. housing entered 2021 at less than three months supply of available homes, a shortage of about 2.5 million homes. Those numbers represent the lowest in over two decades. There is some optimism that, with rapid vaccination efforts and a slowly building economy, new construction will bounce back quickly. Unfortunately, rising material and land costs will continue to stifle new starts for much of the remainder of 2021. While projects will ramp up, and some even completed (mainly those left unfinished before April 2020), it won't be until 2022 when new housing makes a dent in the low inventory. The deficit is that significant, not just in Greenwich but across the entire U.S.
Interest Rates Remain Low, Though on the Rise
2020 proved a first for many things in our modern era. One such first was a pandemic-influenced drop in interest rates to levels never before seen. Throughout 2020, interest rates were on a seemingly endless downward spiral. Looking back, in January 2020, a 30-year fixed rate was available at 3.62%. Not too bad for new homebuyers, considering the previous all-time low was 3.35% in November and December 2012, as the country struggled to shake free of the Great Recession that closed out the prior decade. By the end of 2020, interest rates had bottomed out at 2.68%. To put 2020 in perspective, before last year, rates had never before dipped below the 3% threshold. The run, however, won't last forever. Rates are already starting to climb back above the 3% barrier, and many forecasts have rates closing out 2021 at around 3.25%.
Inventory Is at All-Time Lows
Add it all up, and there's but one conclusion. What's driving the current market is a historical lack of inventory. For Greenwich specifically, the numbers are shockingly low. As April 2021 came to a close, only 195 single-family homes were listed in Greenwich down from 513 single-family home listings at the beginning of March before the onset of the pandemic. Even during the busiest time of year for new listings—the needle is moving down, not up. To crystallize the shortage of home listings even further, supply has gone from nearly 17 months down to three months in a year. To reiterate a point made earlier—if you have a home to list in Greenwich, now would be the optimal time to do so.
What to Do as a Seller?
Rarely does a market such as this one occur with any regularity. Nationally, listing prices are on the rise. The story is the same locally. For current homeowners who may still be skittish about listing, the potential competition should prove lucrative if yours is a highly desirable home in a highly desirable area. Sellers can also take advantage of their current home equity to assist in purchasing a newer upgraded residence. The key is not to wait out the market too long. With interest rates rising, new development slowly getting back on track, cities beginning to open back up, and employers still on the fence about future work from home accommodations, the current market conditions could disappear just as quickly as they arrived. The time is right if you want to ensure a sizable return on your home.
If you're ready to explore the best of Greenwich real estate and need a trusted partner to help sell your current home and secure your next residence, contact Mia Simonsen today to start your home selling (or buying) journey. For Greenwich to New York and Boston, allow Mia's years of experience and expertise to be your guide on your real-estate journey.