(This is a guest post from Real Estate Channel.)
Fairfield County in Connecticut is sometimes called the “Gold Coast” because it has one of the highest median household income levels in the nation.
During the housing bubble years of 2004-2006, home prices soared throughout the county. While it has suffered from the housing collapse, the price declines have not been anywhere near as sharp as in California or Florida. Most analysts are fairly confident that the worst is over. Let’s see.
Take the town of Greenwich. Situated on a beautiful shoreline of Long Island Sound, it is the residence of many movie stars, TV personalities, Wall Street executives and business moguls. The town attracted hordes of buyers as median prices soared from $650,000 in early 2002 to a peak of $2.1 million in the spring of 2006. Home sales consistently averaged 150 per month from 2000 to 2007.
Although the average price per square foot of homes sold did not peak until July 2008, this masked the gradual weakening of the low and mid-range part of the Greenwich market. Sales finally collapsed after the spring of 2007, plunging to less than 40 a month one year later. They recovered somewhat in 2009, but have plummeted again this year. In January and February, a total of only 38 houses were sold. The tentative March sales figures showed the town on track for perhaps 20 closings.
Where does the market stand now? Since the 2008 peak, the average price per square foot has plunged from $924 to $580 – a drop of 37%. There are 614 homes listed for sale on Trulia.com and 36 foreclosures. That is a 30-month inventory at the current sales rate. Reatytrac.com, the original source for all foreclosure data, actually shows 68 foreclosed properties including those recently placed into default by lenders.
With sales so weak, 34% of all sellers have reduced their asking price since posting their house on trulia.com. But the average listing price on trulia.com is still $3.5 million. Most sellers clearly have not come to grips with what has happened to the housing market. Unless many of them drop their asking price considerably, their home will just sit.
The town of Trumbull is representative of the mid-range in the county. Its attraction is that it offers a more reasonably priced alternative to the very expensive western part of Fairfield County. The median price for homes sold climbed from $248,000 in early 2000 to a peak of $480,000 in the fall of 2005. Like Greenwich, sales averaged 150 a month from 2000 to 2005 and peaked at 200 in May 2005. That same month, the average price per square foot for homes sold also peaked at $310. Since then, the average price per square foot has fallen by 34%.
Similar to Greenwich, sales started plunging in the spring of 2007, recovered somewhat in early 2009 for six months, then plummeted again this year. In December and January, a total of only 39 homes were sold in Trumbull. Sales collapsed even further in February with only 8 closings. Currently, there are 235 homes listed for sale on trulia.com. Realtytrac reports 68 foreclosures, but most are in default and have not yet been taken over by the banks. Of the fourteen which are owned by the lender, not a single one is now for sale. Because the market in Trumbull is so thin, 38% of all home sellers have already reduced their asking price after having posted on trulia.com.
The town of Stratford on the eastern border of Fairfield County offers a buyer the best deals on the Long Island Sound shoreline. Sales averaged well over 200 per month from 2000 through 2005 and peaked around 350 in August of 2005. That kind of sales volume was undoubtedly due, in large part, to heavy speculative buying. Median prices climbed from $142,000 in early 2000 to $308,000 in June 2005.
After the peak, sales volume in Stratford followed the pattern of Greenwich and Trumbull. They collapsed at the end of last year and into 2010. From December through March, closings averaged only 32 per month. The average price per square foot has declined by 26% since its peak in the fall of 2005.
Right now, there are 392 homes listed for sale on trulia.com. A huge problem is the 211 foreclosures found on realtytrac.com. As with the other two towns, most were defaulted properties which had not yet been taken back by the lender. Only six were actually listed for sale by the banks.
What conclusions can we reasonably draw from this brief analysis? First, the buyers have disappeared at all price levels in Fairfield County. First-time buyers have been deserting the lower and medium priced towns even before the April 30 expiration of the $8,000 tax credit. Trade-up buyers have been prevented from purchasing because of the inability to sell their own homes.
Second, the vast majority of home sellers in Fairfield County are still unwilling to drop their asking price. That so many homes with price reductions still remain unsold is a solid indication that nearly all homes are still overpriced, some substantially so.
The collapse in sales volume throughout the county tells us that prices have a long way to fall before willing buyers reappear in substantial numbers. Serious sellers will have to bite the bullet and recognise the realities of today’s market. Otherwise, their homes will just sit … and sit … and sit.