In a tough year for real estate nationwide, local markets held their own.
Most years, the real estate markets of New Canaan, Darien and Rowayton can be counted on to behave in much the same way, rising and falling with passing tides like boats tethered to the same dock.
That changed in 2007.
“Last year was very, very interesting,” says Gino Kelly, founder of the realty firm Kelly Associates in Darien. “For the first time, the individual towns all performed differently. In the past they always acted as one entity. In the last couple of years, we’ve started to see various communities go in different directions.”
While average sales prices remained strong in all three communities, only Darien qualified as a truly hot market in 2007.
According to Bruce Baker at William Pitt Sotheby’s International in Darien, total market volume in his town rose by nearly 50 percent, from $423 million in 2006 to $627.6 million in 2007. The average sales price climbed from $1.597 million to $1.85 million, while the median sales price similarly spiked, from $1.218 million to $1.438 million. The story got even better when it came to the statistic Realtors like most: Total number of closings rose from 265 to 339, a 28 percent increase.
“This was a great market to be in,” Baker says. “In 2006 our total volume was off 21 percent, and price was off 4 percent. This year we made up a lot of our losses.”
What made life better in Darien? Debra McArthur of Country Living Associates in Darien tells of a former Darien couple who, after moving to Dallas seven years ago, recently visited Fairfield County in anticipation of a move back east this coming summer and made time for a Darien stopover.
“They were amazed at the way the town had changed,” Debra recalls. “When they were here previously, they liked the good schools and the proximity to Manhattan, but they always felt it was a little sleepy and stodgy. They were very impressed with its look now, the sidewalks full of people and more user-friendly, pedestrian-friendly places. That appealed to them.”
A couple of years ago, Darien undertook a major downtown renovation project. According to Debra, the results have been impressive. New restaurants like Ching’s Table and the Melting Pot have created an evening atmosphere along Main Street more vibrant than the shuttered lampshade stores of the past. “Ann Taylor Loft is here,” she notes. “We even have a Starbucks.”
Add to that a new high school and strong student test scores, and the story has been impressive. “If the town’s looking good, it’s easier to sell,” Debra concludes.
Carolyn Clark, who runs the New Canaan–based realty firm Carolyn Clark & Associates, sees another possibility for Darien’s strong 2007.
“Darien has more smaller properties,” she says. “There’s more density, and more of those smaller, more affordable Capes. Those are houses people are looking for in entry homes. I’d be interested to know if that has helped the market in Darien.”
It wasn’t that New Canaan had a bad year. It was just a bit slow. Maybe more than a bit. Skip Sisson of New Canaan–based Sisson Realty notes that total residential property sales were low for the second straight year, with just 288 closings, up 6 from 2006. The average number of days on market climbed from 135 in 2006 to 160 last year.
“I’m from the old school,” Sisson says. “I’m used to seeing 400 closings a year.”
Average sales price in New Canaan did rise substantially, from $1.93 million to $2.22 million, signaling a market that remains strong, especially in the high end. But the overall sluggishness in inventory flow annoys many. “I can’t say we’re hanging on by our fingernails, but I don’t want to see another year like this,” Sisson chuckles.
Rowayton had a similarly quiet year. Total number of closings fell from 117 in 2006 to 75, while average days on market rose from 95 to 121 days. “Things did sell, but it was generally a more difficult market for the brokers and the homeowners,” reports Gail Van Slyck of Prudential Connecticut in Rowayton.
But there was a strong silver lining stretching over Rowayton’s situation. Much like New Canaan, the average sales price on a Rowayton home rose. It was not as steep a climb, from $1.4 million to $1.47 million, but it was still impressive to those who remember just a few years ago, when Rowayton’s average first crossed the million-dollar barrier, and it triggered questions as to how long those prices would hold. They have held.
“Rowayton was growing in unit sales and prices so rapidly for the past seven years, that when it slows down or stays even, it’s perceived as a downturn,” says Kelly of Kelly Associates. “Actually it’s a positive, because it holds its value.”
In Darien, value was not just holding but appreciating, remarkably so, especially at the high end of the market. At William Pitt Sotheby’s, Baker recalls putting a house on at $6.25 million and seeing it sell just three days later — for $6.75 million.
“In that case, people made sealed bids,” Baker says. “It’s an example of the high end being crazy.”
He points to a statistical extract showing unit sales in the $3 million-and-over zone up more than 78 percent in 2007. “When you actually analyze average sales prices of homes on the lower end — $1 million and lower — the average sales price didn’t rise the way it did across the market as a whole.”
Marsha Charles, a Realtor with Preferred Properties in New Canaan, notes a similar phenomenon in her community. The average sales price rose, but in large part that was due to high demand at the uppermost end. “Last year eighteen houses sold for $5 million and up,” she says. “In 2006 we only had eight houses go in that price range. One house last year sold at $10.75 million. In 2006 the biggest buy was considerably lower.”
Across the market, she recalls much wariness from buyers and sellers alike. Discussion of the national real estate market in the media was dour and cast a pall over an already skittish public. The last big market in New Canaan, 2004-2005, still impacts expectations on the sell side, while buyers fixate just as persistently — and erroneously — on foreclosures in Florida.
Carolyn Clark recalls one buyer who knew he had an advantage. “He was a financial person, and as I was showing him around, he told me: ‘I’m looking at this as a good time to get a good buy.’ He was warning me that he wasn’t going to pay near anyone’s asking price. The last time we saw that was in the early 1990s.”
Did sellers actually lose money in New Canaan, the way they did back then?
“In their minds, maybe,” Marsha replies. “If they purchased ten to fifteen years ago, they didn’t lose money. But their expectations were greater. We saw reductions on houses that were on the market for six months or more. If people were motivated to sell, they lowered the price.”
She expects a sense of realism to permeate 2008. “This year buyers understand the market better and are looking to Realtors to price correctly.”
Pricing is the key word for Hugh Halsell of Brotherhood & Higley in New Canaan. “Things that are well priced are selling; things that are not well priced are sitting unsold. It’s a great time to buy. There’s a lot of inventory out there.”
Baker notes the importance of pricing in Darien, too. “It’s a desirable place to live, but the pricing of a home is extremely important. Also, higher-end homes today are more fitted out, state-of-the-art. It would appear there is a push for that from people who can afford it.”
One positive thing that Realtors see going into 2008 are interest rates on home equity loans — they are low and dropping in concert with the federal interest rate. It’s long been a truism that a high-end market like lower Fairfield County is less affected by such factors than the national market, but Gail Van Slyck at Prudential Connecticut says that’s not always the case.
“I would say 25 to 30 percent of people purchasing here are first-time buyers, in from Manhattan or from Brooklyn,” she observes. “They’re fairly young, sometimes with children. It’s a nice gift to have rates where they are. I was in this market in the late 1970s, when you saw rates of 18 to 19 percent.”
Gino Kelly has a more cautious take on the matter in Darien/Rowayton, where he has worked since 1974. “They can’t hurt,” he says. “Lower interest rates are always a benefit — modest in our marketplace, but a benefit nonetheless.”
What concerns Kelly is the subprime debacle, with banks writing off bad loans to the tune of billions of dollars. “The subprime market is not really in our marketplace, but we’re not immune,” he notes. “This has an effect on the economy and on real estate confidence.” This is especially true with the large number of financial- service professionals who locate in this area for its proximity to Wall Street.
Carolyn Clark sees the same sort of uneasiness in New Canaan. “Psychology has a huge effect,” she says. “The whole crisis with mortgages definitely messed with people’s heads. It didn’t mean qualified people couldn’t get a mortgage, but it made them think about it. Interest rates are not a single factor, but they will be if they get slashed, particularly in combination with the number of properties available.”
She expects the worm to turn in 2008. “There has to be an ‘a-ha’ moment coming,” she says. “I have a feeling there’s going to be a little more downturn, and then buyers will recognize interest rates are in their favor. That will turn it around.”
One sign of hidden strength in New Canaan is a burgeoning rental market. Marsha Charles points out a key reason for rental robustness. “People had the income, coming out of New York, but they didn’t have the equity. They had been renting instead.”
And there were homes to rent, with sellers waiting to find buyers. “I had a few listings like that that were pretty uncomfortable,” Marsha says. “It’s stressful for the sellers, stressful for the agents. There was a backlog from 2006, a carryover of inventory, then the new inventory in 2007. I can’t remember feeling as much stress as I did last year with listings.” It got to the point, she observes, where employers advised their relocated employees to rent in Fairfield County rather than buy.
“There’s pent-up demand,” claims Gail Van Slyck of Rowayton. “Buyers are not making a decision and are continuing to rent. They’re waiting it out.”
However, the “r”-word on Realtors’ minds heading into 2008 is not “rental” but “recession.”
“If it’s a capital R, it could be a problem,” says Debra McArthur of Darien. “Small r, not such a problem. If buyers look at statistics for Darien home buying, they’re going to see that value holds. It’s like a blue-chip stock.”
That’s the way Gino Kelly sees it, too, and why, despite his lingering uncertainty, he remains positive about what to expect in local real estate in 2008.
“We’re doing better than fine, relatively speaking,” he concludes. “Just look at the national figures. People here are lucky they own a house in one of the best markets in the country. In the last seventeen years, we’ve seen one little dip [in 1990]. The other years were all positive. If you look at the other high-priced markets in the country, some of the ones doing well in the past have been hit hard because they were the product of rapid development.
“We’re blessed to be in a good area where people want to live. The media are reporting prices going down all over, but prices here are resistant to that.”