Despite COVID – the Connecticut Real Estate Market is Active – but Inventory is a Concern
We are looking at the Connecticut Real Estate Market through April, 2020 and the effect of COVID. The Median Sales Price has increased across the nation and in Connecticut we saw a 5% increase in month-over-month median price compared to March, 2020. Bear in mind, due to the COVID crisis, this is when we shifted into the “stay home, stay safe” policy. In this video and the graphics below, we are looking at the current state of the market (Connecticut) and what we anticipate in the coming months.
Current Real Estate Market Activity
Right now, we are seeing an increase in the median home price. While an increase in home value isn’t uncommon, it’s contrary to popular belief due to the pandemic situation. But, what is driving up home prices? Part of the answer is in the third graphic showing the Connecticut real estate inventory. Since May, 2019 the inventory has steadily declined. Normally, there are peaks and valleys in housing supply that relates (partly) to seasonality but heavily to economics. A supply in excess of 6 or 9 months indicates a slowdown in home sales and puts a strain on interest rates. When the housing supply is below 6 months, it can be due to low interest rates (as we have been experiencing) but also a healthy economy. More people shift out of renting into home purchases. That said, when inventory gets down in the 3 month territory, it is a concern. Too little inventory changes the demand dynamic but it can also create a ‘detour’ sign of sorts for home buyers. Buyers may shift their focus to a market that has more opportunity (jobs), consistency in growth and strong housing options.
The Effect of COVID
With the COVID situation, sellers became increasingly reluctant (for obvious reason) to have possible buyers coming into their home. The industry swiftly acted to promote virtual showings, 3D tours, etc., but very few people will buy a house without walking through it. Sales have continued though. As is evidenced by the Days on Market (DOM). We are running at a median DOM that we normally don’t see until the late spring, early summer period. The buyers that are in the market – are more likely to be well qualified and prepared to complete a transaction. Note; one of the biggest reasons a house comes back on the market – buyer’s inability to secure a loan. What we are seeing with the current market is definitely a downshift in the size of the buyer pool, but those in the pool – are ready (and able) to buy.
Connecticut Real Estate Market (per SMARTMLS Matrix Data):
As we look into the coming months past the current COVID situation, and what is normally the most active time of the (real estate) season, we are likely to see a flattening or maybe a reduction in the Median Sales Price and/or the Months Supply. For Connecticut, the real estate market is active and buyers are aggressive – but the number of listings is well below what we would expect to see. As such, we may see a reduction. If listings come back on the market in June, there may be a bump in Summer sales before the Fall season. But the average home buyer takes 3-4 months to find and close on a home purchase. At this point, we would see a lot of closings in the early Fall. For home sales related to a family looking at school systems – that would not be ideal.
We’ll circle back in June to look at the May, 2020 data and see where this is all headed.
Questions? Comments? Thinking about selling your home? Feel free to reach out.