Is Madison, Wisconsin Leading the Way for Us?

As most of you know by now, I belong to a group of large independent real estate companies around the country. Some are in big cities, but most are in smaller cities (although bigger than New Haven or Hartford). For some reason, Madison, Wisconsin seems to be the most like our region. Dave Stark, the owner of Stark Real Estate there, and I have discussed this, and it's likely to have a lot to do with the employment base. They have both the state capitol in Madison, and the University of Wisconsin, and those are the two biggest employers. If you didn't know that before, you weren't watching the state workers picketing the Madison capitol!

Having a lot of non-profit and government workers in a region usually makes the employment situation steadier, as well as the use of commercial space. Universities and governmental bodies think in terms of decades, not months. Also, you don't often have the boom times that you would find in Silicon Valley, say, or Wall Street, or even a smaller place where a large manufacturer might open or expand a facility.

Therefore, I thought it was very good news last week when I received Stark's quarterly mailing. While they had the same horrible first quarter that seemed to prevail everywhere, the recent signs have been encouraging. They see lots of pending activity, and increased interest in real estate. I hope it gets here as fast as a big storm seems to do!

Statistics from the Region

It's tempting to make you all guess about market trends for 2010, but it would be hard for me to collect the responses in a timely way, so I guess I will just tell you. The latest Commercial Record shows that, for year over year sales from 2009 to 2010, New Haven County as a whole was down almost 8% in the number of sales. For the immediate towns, Guilford, Madison, North Haven, and Bethany had an increase from the prior year. Guilford and Madison were each up 9%, while the other two had smaller increases.

Surprisingly, the median prices were almost identical in 2009 and 2010, with 2010 coming in at 0.8% less. I expect that most of you would have guessed that prices fell about 10%, so the fact that they actually fell less than one percent is very good news. Of course, as I've often pointed out, this is not an apples-to-apples comparison, so it's probably true that only the best houses sold, meaning that most homes would have sold for less in 2010 than in the prior year. As I've discussed in earlier posts, East Rock and Spring Glen did go up in price, showing the "Yale" effect most strongly. North Branford, with 24% fewer sales, had an increase of 10%, and Milford, Wallingford, and Woodbridge had smaller increases. New Haven as a whole crept up 1%.

It is important to recognize, as the issue said in another article, that this is the sixth year in a row that sales have declined. Since prices have also been declining for most of that period, the total decline is larger than what is listed for last year. And, since most homeowners looking to sell haven't been in the market for some time, those yearly decreases can really add up.

However, the fact that we are not in freefall is very good news, and the spring is still ahead of us. Anything could happen, but we're hoping for recovery mode to kick in strongly!

Second Quarter Results

We just released second quarter statistics from the Greater New Haven region, which showed a major uptick from the same quarter of last year. Of course, the homebuyer tax credit was expiring, so there was a rush to close units while that was still in place. Also, however bad the economy still is, there is some national sense that things are better than in 2009, and the base of comparison was therefore low.

Within the region, Guilford and Woodbridge had the highest prices, with Madison coming in third. Prices generally went down from the second quarter of last year to the first quarter of this year, and then climbed in the second quarter of this year. Unit sales went up more sharply, rising 20% from last year's second quarter through this year at the same time.

It would be interesting to know how many of the sales were from properties which have been on the market for a long time, languishing at high prices, where a price reduction sparked an offer. Anecdotally, we know that many of the stories we hear involve sellers who are finally putting things on where they will sell. They are helped in their efforts by mortgage rates, which are so low that they allow for buyers to feel that they are getting a good deal, based on monthly payments. A recent article in a national paper suggested that buyers are trading up as a way to lock in cheap money. Let's hope so!

Waterfront Statistics

Since I've been blogging about prices and trends in New Haven compared with its suburbs, I was prompted to look at the shoreline statistics. Since we've been talking about the upper end of the city market, we checked sales of waterfront property since the beginning of the year. Taking Branford, Guilford, and Madison, a dozen homes on the water over $1 million (which we assumed meant all but an anomoly) sold in the first six months of 2010. They stayed on the market anywhere from one day to over 600 days, and none sold for the full listing price. The lowest listing to sales ratio was 62%, although most I calculated were in the 85% range, with only a couple selling at over 90% of the listed price. One was in Branford, three were in Guilford, and the rest were in Madison.

While this is an exceptionally low number of sales in that period of time, it does tend to confirm the idea expressed in earlier pieces that the City of New Haven is outperforming other high-end areas. The surprising thing about this particular comparison is that waterfront is the ultimate example of location, location, location. The most frequent comment on its primacy as an investment choice is that "they're not making any more of it". When even that theory fails to prompt sales, especially during a time when the traditional hoped-for investment bankers are doing well enough to buy waterfront summer homes, there's cause for real concern about the economy. Let's hope that the next quarter shows a different result.

Market Inventory

We recently received a market inventory study from Madison, Wisconsin, showing that higher-end properties were not selling and lower ones were. Not a big surprise, but we decided to look at our market. What we found was similar, and striking.

Properties over $700,000 are less than 3% of sales now, there are enough homes in that range on the market to represent more than a year's supply, and the sales have fallen almost in half from last year. At the lower end, under $300,000, there exists only a supply of two and a half months, sales have risen by a third, and they represent 41% of all sales. While we knew that first-time homebuyers were driving the current market, it's still fascinating to see that laid out in statistics.

Overall, in our region, prices have fallen 15% since the same time last year. If you put all these facts together, what it tells you is that you are more likely to sell your home quickly if it's in a lower price range and you price it aggressively. But you knew that already!

National Statistics

In trying to make sense of national statistics on real estate sales, I have been reading a number of different sources. One I received today was from a friend with a real estate company in Madison, Wisconsin. He sent a link to the Fannie Mae/Freddie Mac numbers, which include all resales with conforming loans, and are divided by state and by quarter. These are different from the Case-Shiller numbers, which only cover 20 metropolitan areas. The numbers for CT in the Fannie Mae index indicate that prices fell most sharply last year, and that overall prices have fallen about 15% in total. The numbers for the latest quarter indicate that prices have levelled off for now.

These figures agree pretty well with what the New York Times reported this morning. The article in the Times said that prices in the past month actually crept up from the month before. That could be because of the mix of properties sold, but it does indicate that some people who were on the fence have jumped back into the market.

The third source, the Commercial Record, shows town by town variations in what has sold this year versus last. Again, it shows increased activity lately, although the first quarter was pretty dismal.

Whichever measurement we use, it seems to corroborate that we have at least and at last hit bottom, and are looking forward to heading up!