New Canaan Real Estate Activity November 17, 2008 through November 23, 2008 (Residential Only)

Housing bright spot amid economic slump

The following article was published in The New Canaan Advertiser on Thursday, November 20, 2008 as part of a series on the local housing market and our economic situation.

Written by Andrew Kersey
Thursday, November 20, 2008

This is the third installment of a series of articles that has explored the effects of the current economic crisis on various aspects of life in New Canaan, and how the town is dealing with the crunch.

There’s rarely been a better time to buy a house in New Canaan. For those who are able, this may be the lone silver lining gleaming from the economic gray cloud which has hung over the town and, of course, the country for the last year.
“This is a Nirvana time” for buying a house, New Canaan Board of Realtors President Susan Engel told the Advertiser last Friday.
“We’ve never had a better selection, better pricing and more potential for someone to make money on what they buy and decide to do with it.”
Between May and August this year the number of New Canaan housing sales fell 37 percent, 211 to 133, from the same period last year, according to property transfers registered at the town clerk’s office. September, however, saw only a six percent drop, a difference of only one sale.
Some realtors in town were cautiously optimistic that this may suggest an approaching market recovery, though it is still too early to tell. Meanwhile, they’ve noticed a dip in the number of houses on the market (currently 248) and a lag in activity on the part of buyers and sellers, who seem to be carefully waiting and watching.
“They’re waiting for that sense of security they need,” said Barbara Cleary of Barbara Cleary’s Realty Guild.
“People are just nervous,” agreed Sales Vice President of William Raveis Real Estate Denise Gannalo.
Of course, banks and mortgage lenders are nervous, too.
The subprime mortgage crisis has led to a stiffening of requirements for would-be home buyers, with banks monitoring home construction as well as demanding higher credit scores and verifiable income.
“Wall Street bonuses to come are not considered verifiable income,” Gannalo recently wrote on her New Canaan Real Estate blog.
New Canaan residents, despite many of them having, or until recently having, jobs in the financial services industry, have less to worry about than less affluent towns. But, this very affluence can also be an impediment when it comes to improving the local market.
“It’s a nice conservative mindset” New Canaan residents possess, said Engel. “And they can afford to hold on” to a house they’re considering selling. “But, they’re going to lose more by waiting.”
Gannalo said that her firm’s numbers have slowed, especially within the last quarter, due to wider market volatility, and emphasized that “A little bit of good news will go a long way” with cautious buyers and sellers.
She is selling more houses in lower price ranges, the largest number, 26 percent, with a price tag between $1 million and $1.5 million.
Likewise, Engel, said her brokerage company, Brotherhood and Higley, sold 70 houses in the $1 million to $2 million range, 28 of which sold for a mimimum of $100,000 under the already reduced asking price. Another 39 properties sold and took in $300,000 to 500,000 less than asked.
While the numbers at first glance may worry local homeowners who are poised to sell, realtors were quick to point out the other side of the equation.
“The perception when you sell low is that it’s a big loss, but its not,” said Cleary. Most sellers are buyers, she explained, so once people sell lower than they expected, they turn around and buy from within the same low-priced market.
“We all think our house is worth more than the market is saying,” said Bob Caird, a recent client of Cleary’s who sold his residence on West Norwalk Road for less than he was anticipating.
But after “aggressively looking around to see what was available,” Caird said he and his wife Joan — who were downsizing due to an empty nest — “quickly found out that there’s a lot of value right now” for buyers.
“The minute we did put our house on the market, we said, ‘Wait, let’s reverse this thing,’” and look at the other side of the coin.
They found a house for much cheaper than they thought they would.
“They didn’t realize how far their money would go,” said Cleary.”
As a result, Caird said he and his wife are “quite at ease at the moment.”
Engel told of a couple who just sold their $1.375-million New Canaan home for $1.05 million, then turned around and bought an $895,000-valued property in New Hampshire for $525,000.
But, not everyone has “the guts to do that,” she said.
Engel has lately encouraged her clients who are selling to list their houses at up to $1 million below market value, in an effort to generate interest in the property and initiate bidding. When sellers express concern over whether that will lead to lowball offers and what their neighbors might think, Engel responds, “Well, who’s going to know? It doesn’t matter what you put it out for, you’re going to get what it’s worth. But you’re not going to get any interest in it if [the price] is too high.”
One problem, she said, is that many of her clients are beholden to their friends’ and neighbors’ perceptions and advice.
“If my neighbor knows I sold it for so little, they’ll think I lost my job or something,” Engel said she hears from people.
At the suggestion of a low starting price, “They say ‘Oh no, at our cocktail party yesterday everyone said this house is worth this many million.’ Well,[neighbors] are very reluctant to say what it’s really worth” because they don’t want the sale price to affect their own property value, she said.
They may also not be acknowledging recent market realities.
“If you bought before ’05 you’re still making money,” she said of property appreciation on homes purchased before the housing bubble. “If you bought after ’05, you’ve got to get real.”
Town Assessor Sebastian Caldarella — who addressed residents’ concerns at a library event on real estate yesterday — said the issue of property value can also be misleading.
A few local home owners have called him to ask about the sagging housing market and how it will affect their home value. Property assessments for the town — which are assigned every five years for a period ending October 1 — won’t be available until the end of December or early January.
“My response to them is, yes, the market is down but it’s not capturing appreciation” that occurred during the 2005 and 2006 bubble.
“When you add everything together you actually see an increase in property values because a six or seven percent decrease in assessment” is still not enough to offset the steep rise in values that occured over the previous five years.
He added that property taxes will go up regardless of property values, however, because of future budget reconciliations the town will need to make.
“There are built in increases to the budget,” said First Selectman Jeb Walker, “but it’s way too soon to think about that.”
He said the town has started the budget process, but the mill rate — the tax per dollar of assessed property value — will not be set until mid-March or the end of April 2009.
By then, Cleary said she expected a better indication of the market’s direction. “We’ll know better in the Spring as to how it’s going to look. We’ll have a new president and a new sense of security,” she said.
For her part, Engel said she agreed with an assessment made by resident and investment firm chair Mike Holland in a story from last week’s Advertiser. “In order for us to come back, people have to lose money,” he said.
“You’ve got to look in the mirror and say ‘How much am I willing to lose to make this work?’” echoed Engel.


New Listings

5 Deer Park Rd $1,095,000
66 Summit Ridge Rd $1,295,000
68 Orchard Dr $2,195,000
74 Mather Farm Rd $6,995,000

Back on the Market
44 Valley Rd $1,375,000

Homes Sold
71 Rocky Brook Rd $855,000