I wrote the following article for The Advertiser. I studied all the MLS sales this year and tracked the rate of appreciation with each of these homes from the day they were last sold.
Written by Denise Gannalo for The New Canaan Advertiser Online
Wednesday, December 31, 2008
Much is being speculated as to what has happened to the dependable appreciation rates of resale homes in New Canaan and how much those rates have been affected this year in the economic downturn. I decided to take a look at the 163 sales of residential homes that have closed so far this year.
First of all, the number of transactions has decreased 36 percent from 254 sales during the same period in 2007 to the current date. This is the total amount of sales transactions, not the sales price. However, in analyzing appreciation, it is important to look at how long the seller owned the home before selling it this year.
In interpreting the data, I eliminated any sales that were previously bought as new construction, tear downs or land. The New Canaan numbers are skewed by new construction and I believe it is more informative to look at individual sales of resale homes to get a more accurate picture.
Sellers who sold this year who had previously purchased their homes in the 1980s received a total average of 226 percent appreciation or approximately 11 percent yearly. For those who originally bought their homes in the 1990s, the total appreciation was 121 percent or approximately 12 percent yearly. After those two stellar decades, it is no surprise that the appreciation rate became less spectacular. Sellers who purchased their New Canaan homes between the years 2000 through 2004 have realized approximately 34 percent appreciation after their sale this year or approximately 6.8 percent per year. However, if the home was purchased in the year 2005, 2006 or 2007, these resales gained an average of 2 percent.
Remembering that this is an average and that new construction was not considered, some sellers gained slightly more and some had to sell for slightly less. Although the New Canaan real estate market certainly prospered during earlier decades, the actual numbers of those who have only owned their homes for a few years are not as negative as the effects felt in other parts of our country.
To cite a specific example, 82 Canoe Hill Road sold in August 2005 for $2,950,000. It is a classic brick Colonial with a manicured 2 acre property, great curb appeal and a swimming pool. It was resold again this year in August and the seller received $3,095,000, after making some improvements of new appliances, countertops, new interior painting and floor refinishing. The appreciation rate gained in this sale was 4.6 percent. In both these transactions, 2005 and 2008, this home sold at full asking price because in both of these sales, the home was in impeccable condition and more importantly, the home was priced right, not overpriced. In both these instances, this home also sold within days of listing.
While we face uncertain economic times as we head into 2009, one consistent principle is key to selling. This market is driven by price and the competitive advantage is to pinpoint a listing price that is consistent with the current New Canaan market not the New Canaan market of decades past.
