The warm winds of spring are whirling our way, and with them, one of the busiest seasons for real estate. Whether you’re selling a home, shopping for new digs or just keeping close tabs on the current value of your primary investment, this snapshot of the local real estate landscape provides key information. As this analysis reveals, there’s good news (sales volume is up) and bad news (lackluster demand for luxury properties) on the residential front, but while the numbers present a mixed picture, they also indicate that the worst of the housing downturn is behind us. As the long and labored healing from the Great Recession continues, there are signs of life in the local real estate market and they’re buoyed by basics such as low loan rates and pent-up demand. All of this seems to augur good things for the year ahead.
1. Sales Slow but Steady
The Fairfield County home market may not be out of the woods yet, but since the worst of the recession in 2008 and 2009, the region has made slow and steady gains in sales activity, even if prices have room for improvement. In 2012 in New Canaan, for example, there were 222 sales of single-family homes, according to data from the town’s multiple listing service prepared by Brotherhood & Higley. That number was not only a tick up from 2011, when 214 homes sold, but was considerably higher than the 150 deals in 2009. Prices, though, remain soft: The average sale price was $1.69 million last year, down from $1.9 million in 2011, a drop brokers attribute to the weakness in luxury properties. A similar story is playing out in Darien. In 2012, there were 280 single-family homes sold; that’s up from 2011, when 225 deals closed, according to a report prepared by Kelly Associates. But average sale prices declined in Darien as well, to $1.55 million from $1.7 million. The sales picture is a little brighter in Rowayton. In 2012, the town saw fifty-six homes sold, up from forty-seven in 2011, and the average price rose to $1.4 million from $1.38 million. “Volume has come back because prices have come down,” says Jeff Kelly, a vice president at Kelly Associates in Darien.
2. Updated Interiors in Demand
In New Canaan, Darien and Rowayton, what a home looks like on the outside is important but not a deal maker or breaker. It’s what’s inside that counts, say brokers, who argue that a brand-new interior, or a freshly renovated one, is what buyers seek. In general, fixer-uppers are passé, while turnkey properties are in demand and sell quickly. A five-bedroom Colonial in New Canaan, for instance, had an accepted offer in 2012 just one week after being listed at $3.9 million, in large part because its rooms (built a decade ago), were in great shape.
In general, there have been so few homes built in the last few years that buyers who want a fresh interior are sometimes willing to bid on relatively new houses. “We don’t have the choices we had a few years ago. There isn’t a lot of new construction,” says Rita Kirby of William Pitt Sotheby’s. And buyers are willing to pay a handsome price. They’ll spend more knowing that the extra cost will be folded into mortgage payments spread out over decades. By comparison, if a buyer were to purchase a place and launch an extensive renovation, the work might have to be paid for out of pocket, an expense that can be tougher to swallow in uncertain economic times. Besides, Kirby says, both husbands and wives often have full-time jobs now, which means the process of overseeing contractors on a daily basis can be difficult.
While the handyman special is out of favor, there appears to be an exception to the rule: New Canaan’s mid-century modern ranches, those single-story homes that channel Philip Johnson’s Glass House. To be updated for modern tastes, those residences typically need a lot of work, says Hugh Halsell of Brotherhood & Higley, “but there are purists out there who appreciate the architecture.” As it turns out, there may be more mid-century moderns for sale this spring. During the real estate boom, moderns were often razed by spec builders who wanted the land. Today, those builders are constrained by a conservative lending market, which means moderns are being preserved, almost by default.
3. Condos Make a Comeback
In the depths of the housing downturn, condos were the hardest hit, losing as much as 50 percent of their value in just a few short years. But a funny thing appears to have happened to the condo market. In 2012, while attention was focused elsewhere, there was a ripple of resurgence. Consider New Canaan. While the fifty-five condo sales in 2012 marked a slight dip from 2011 when sixty-two sold, the average price actually climbed, to $717,000 from $711,000, according to data prepared by Brotherhood & Higley. And while condos are a rarer bird in Darien, they’re showing strength there, too. There were eight condo sales in 2012 at an average price of $612,000. Compare those numbers with 2011, when four sold at an average price of $511,000, according to Kelly Associates. Empty nesters who are trading their mega-homes for something cozier are fueling some of the trend, brokers say, as most of the buyers are local. But condos, which generally are cheaper than single-family homes, continue to appeal to first-time buyers.
To meet the increased demand, Darien is adding new units, courtesy of Kensett Darien, a sixty-two home complex on a fifteen-acre parcel off Hoyt Street. Buckingham Partners and Sun Homes make up the development team: homes start at $1.3 million. Can the market support that steep pricing? Sellers appear to be hoping so. In Rowayton, for instance, a two-bedroom at Thomas Place on Wilson Cove was listed at $1.2 million in early January and a four-level townhouse at Oyster Wharf Condos on the Five Mile River was $3.3 million. “Condos go in and out of interest, and some can seem dated,” says Nancy Crosland, an agent with William Pitt Sotheby’s Realty in New Canaan. “But it does seem the market is coming back.”
4. Luxury Market in Limbo
Asked to explain the price declines in New Canaan and Darien, many brokers cite the weak demand for luxury properties, which has hung like an albatross around the real estate market’s neck. Indeed, many multimillion-dollar estates can’t seem to find buyers after years on the market and deep price cuts. In New Canaan, eight houses sold in 2012 for more than $4 million, which, according to brokers, is the unofficial border for the luxury market in that town. However, far more homes of this type went unsold. As of January 2013, there were twenty-two listings in the luxury price category, according to the town’s multiple listing service. An example of what has happened in this sector is 544 Oenoke Ridge Road, a 10,000-square-foot 1929 brick Tudor on six acres. When it came on the market in 2008, it was listed at $22 million; five years and three discounts later, it’s on at $8 million, and there are still no takers. At the same time, New Canaan is becoming a more attractive place for first-time buyers as prices adjust downward, reports Halsell of Brotherhood & Higley. “Sellers have adjusted their expectations,” he says, adding that the $500,000 to $2 million market was a sweet spot in 2012, and should continue to be going forward.
5. The Sandy Effect
While Connecticut didn’t feel the punch of superstorm Sandy quite like New York, waves still washed across waterfront sections of Darien and Rowayton, flooding basements and submerging roads. No one expects that the properties facing Long Island Sound will fall out of favor as a result of Sandy, but real estate brokers and other analysts say it could cost more to live on the coast going forward. The price of flood insurance, which is mostly issued by the federal government, had been climbing before Sandy came ashore. But now, because the National Flood Insurance Program is paying out much more than it takes in, the topic has become a flashpoint in Congress. Thus, many expect that homeowners will be forced to pay larger premiums in the coming years in an attempt to make the program solvent, says Robert Reade of William Raveis Real Estate, who is based in the company’s Shelton headquarters. In addition, the Federal Emergency Management Agency (FEMA) is expected to redraw its maps of the shoreline, expanding the most dangerous “A” zones, which could mean higher rates for a new crop of homeowners. Says Reade, “The Feds will probably raise the amount covered by insurance,” which currently tops out at $250,000. For those who own $2 million properties on the beach, the fact that they may get reimbursed for more of their waterlogged real estate may come as good news indeed.
6. Keep the Grass Greener
To prepare a home for sale, it helps to boost curb appeal. In this market, that entails basic cleanup and a few modest improvements. When it comes to landscaping, less is more. If you think an overhaul of your plantings is a good investment, think again, since the buyer may want to rip it all out. “Don’t go too crazy,” says Keith Simpson, a landscape architect in New Canaan with thirty-five years of experience. He does, however, recommend minor improvements, such as pruning dead tree branches and replacing cracked stones along paths that lead to the front door. Simpson also says it can pay to prep the yard for prospective buyers with children. Parents typically want a wide lawn in the back of the house where the family can gather.
An appealing lawn requires planning, though. Grass seeds need to be planted in March for a home that will be listed in May, says Simpson. If the seller misses that window, sod is a good back-up option, though it can cost as much as $10,000 to $15,000 for a half-acre yard. If there’s one landscape add-on with almost guaranteed resale value, it’s an outdoor kitchen, which has become ubiquitous in the past fifteen years in Darien and New Canaan.
7. Sensible Approach to Remodeling
A decade ago, many homeowners would hardly bat an eye at drop-ping a hefty $50,000 for a new master bath if they thought it would help them sell their home. In fact, those types of homeowners comprised about 75 percent of the remodeling business at the time, say industry sources. But today, as homeowners realize they might never see a return on that investment, they’re passing on major remodeling projects. Even so, though many sellers don’t feel pressure to spend big bucks, they are starting to loosen the purse strings. This could be a reflection of growing consumer confidence, reports Stephen Gidley, president of his own Darien-based remodeling firm. “There’s a sense of long-term stability returning,” says Gidley. “And these homeowners know that if they wait to remodel, lumber prices may go up.” After several major storms in the past two years, many also are eager to weather-proof and fortify their homes, improvements that are driving the market, says Gidley. On the subject of big-ticket renovations, Gillian De Palo of William Raveis Real Estate in New Canaan advises sellers to forget about keeping up with the Joneses.
Instead, she encourages her customers to just try to attract offers. “We generally don’t recommend the financing of an expensive project just to sell a house,” she says, though a fresh coat of paint can always help. And then there’s the fact that a home equity loan, which was a popular way to pay for makeovers, may not go as far as it used to. Mike Daversa, president of Atlantic Residential Mortgage, says the banks that used to lend $500,000 are now willing to part with only $325,000. This too might explain some reluctance on the part of owners to renovate in a big way.
8. Bye-Bye Bad Loans
If the housing bust taught us anything, it’s that even the affluent can have trouble staying current on a home loan. Indeed, well-off communities like New Canaan, Darien and Rowayton saw foreclosures in the years following the collapse of Lehman Brothers, as did many middle-class communities around the country. Those bad loans had ripple effects far and wide. Bank-owned homes sold for less than market-rate properties, and, as a result, they threatened to depress the value of neighborhoods. But relief may be in sight, at least in Fairfield County. Through the first three-quarters of 2012 in Darien, thirteen foreclosure notices were filed, down from eighteen in 2011 and forty in 2008, according to data from RealtyTrac, a real estate research firm. New Canaan hasn’t healed as quickly, though it’s still in better shape now than before. In 2012, twenty-five foreclosure notices were filed, up slightly from twenty-one in 2011 but below the twenty-nine reported in the year 2008, RealtyTrac data shows.
And there’s more encouraging news.
Short sales—when a buyer sells a home for less than the amount owed on the mortgage—are in shorter supply, too. In New Canaan last year, there were seventeen short sales, reports De Palo of William Raveis Real Estate in New Canaan, but in early 2013, there were only eight on the market, suggesting the problem is easing up a bit. “We’ve worked through them, which is yet another good indicator that we will have a strong year,” says De Palo.
9. Sellers Get Serious on Pricing
While the sales data for 2012 can present a mixed picture, there is something to celebrate on a granular level, brokers say. One heartening data point is that the spread between the list and sale price is tightening up. Sellers appear to have come to grips with reality, and many are finally budging on prices. That’s good timing as buyers are now coming back into the market. In Darien in 2010, 248 single-family homes sold for 88.9 percent of their list price, according to data from the multiple listing service prepared by William Pitt Sotheby’s Realty. In 2012 that number was 89.1 percent. Similarly, in New Canaan in 2010, 210 homes sold for 88.7 percent of their list price. By 2012, that number had inched up to 91.1 percent. “I think sellers and buyers are really trying to work together,” says Kirby of William Pitt, who adds this was not always the case in the recent past. Daversa of Atlantic Residential Mortgage, agrees. He says the “wild, wild west” mentality that characterized so much of the boom has now eased. “Sellers are finally listening to their real estate agents.”
10. Short-Term Rentals on the Rise
For those who head to Nantucket in the summer, there might be a way for the plants in your Fairfield County home to stay watered while you generate a little extra cash. According to brokers, New Canaan does a fairly brisk business in seasonal rental properties, even if its role as a weekend getaway for city dwellers is ancient history. According to Halsell at Brotherhood & Higley, about twenty homes were on the rental market last year for up to $20,000 a month. Even though seasonal tenants can put wear and tear on a house, a few months of rental income usually covers the cost of repairs and upkeep, says Halsell. But not just any house can thrive in the rental market: pools and tennis courts are features that lure the best tenants. Due to the sluggishness of the sales market, there have been far fewer rentals available than in years past, according to Kirby at William Pitt Sotheby’s. “Inventory is really tight,” she says, which means the person who puts his Colonial up for rent might just find a taker in the near future.