Local Real Estate Market Remains In a Buyers Bubble

By John Voket

After an unusually long period of increasing sales, low inventories, and lightning fast turnovers — even in the million-dollar-plus category — the Newtown real estate market may be softening, providing better opportunities for buyers. According to several real estate professionals and town officials, the only clients who are still paying premium prices for existing new or dated homes are individuals who are literally buying time.

“These are corporate types who have transferred into the area from elsewhere in the country, and they usually are looking for $500,000 to $750,000 newly built homes, and they have to have them now,” said JoAnn Maurer of William Pitt Realtors.

Ms Maurer, who will be recognized as the Connecticut Association of Realtors’ Realtor of the Year later this month, said she has seen cycles like this come and go five or six times since she came into the business in 1987.

Most of the local real estate agents who spoke to The Bee in recent weeks about the current state of the regional housing market agree that if you are a buyer, and you have the luxury of time on your side, you have the ability to wear down a seller and in all likelihood, get closer the price you want to pay for a home in Newtown.

According to Newtown Town Clerk Cynthia Simon, as of October 21, 2004, there were about 8,800 total real estate transactions accounted for in Newtown so far in 2004. Those transactions included purchases and sales, liens, refinancing activities, quit claim deed transfers, and any other legal actions tied to properties in town.

It is a fair guess on her part that as the market goes into its traditional fall-winter seasonal slow down, that the numbers will not come near flirting with last year’s real estate activity volume, topping more than 12,000 transactions.

Assessor Tom DeNoto noted that the real estate boom in 2003 was the storm before the calm.

“Admittedly, 2003 was an unusually busy year,” Mr DeNoto said. “While the recession was peaking across the country the Newtown housing market was running at an all time high.”

He said that according to data posted in real estate publications, he noticed the typical 30- to 60-day turnaround for most Newtown real estate sales started creeping up in recent months to a 60- to 100-day holding period.

“And now the wait could be as much as nine to 12 months on high-end properties [over $750,000],” he said.

At Newtown’s largest independent realtor, Curtiss & Crandon, John Klopfenstein has been watching these regional trends with great interest. After a boom period that, by most accounts, began in the early 1990s, the slowdown seemed to sneak up on everyone while they were off at the beach earlier this past summer.

“In the springtime of 2004, Newtown was averaging about 175 homes in the regional multiple listing service,” said Mr Klopfenstein. “Today we are at 275. Back in the spring we were taking 50 to 60 deposits a month. Today we have 30 deposits.”

Ms Maurer believes that if the local market sees the inventory of homes being put up for sale continuing to grow, and deposits continue to drop, and then factors in the traditional fall-winter slowdown, the equation will continue to produce increasing opportunities for buyers.

“Earlier this year it seemed like there was no end in sight, home prices continued to edge up higher and higher,” she said. “Then we hit the summertime and houses that just a few weeks earlier that would sell in a week started taking a month, and more houses were coming on the market. Now, with the idea the market is softening, prices are coming down. If buyers are looking to hold the line and get their price on an existing home, especially in that half- to three-quarter-million range, we’re starting to see the seller blink first.”

But this trend is not exclusive to Newtown. On November 3, Ms Maurer attended a regional real estate brokers luncheon with her business partner and husband, Robert. Mr Maurer said he had the opportunity to chat with real estate professionals from across Fairfield County, as well as a number of agents from Westchester County, N.Y.

“In the last three to four years sales were so strong and inventory was down,” he recalled. “But now even in the traditionally high-turnover markets in Westchester and Fairfield counties the houses are staying on the market longer. So were seeing a turnaround from a period where sellers were dominant for quite awhile, to this period where buyers are successfully negotiating lower [than listing] prices.”

Robert Tendler at Newtown’s Coldwell Banker franchise concurred with his local associates regarding the softening trend. Although his agency has seen a bit of an step-up in sales through October, he said a combination of factors still puts the ball in the buyer’s court.

“We’ve noticed that in October of 2004, we’ve had more deposits than this time last year,” he said. “But people are turning their attention toward Thanksgiving and the upcoming holidays, and mortgage rates are still at historic lows, so we should continue to see a buyers market for some time.”

While the million-dollar-plus homes that he is listing are still traditionally the slow sellers, Mr Tendler said he has taken a couple of deposits on properties in that exclusive range in recent weeks. And of course, the lower priced properties under $250,000, which are rare in the Newtown market, turn over almost immediately, he said.

Mr Klopfenstein noted that as the year-end approaches, younger and first-time buyers tend to shift away from buying mode, instead choosing to nest through the winter and waiting for the spring and summer to shop and purchase property.

“First-time buyers are settling in. Instead of rushing around trying to beat the weather, they’re staying in their condos down in Norwalk or their rentals in Danbury,” he said.

But in these uncertain financial times, when young and savvy investors are looking for long-term stability, they are still turning to the real estate market instead of the stock market, Mr Klopfenstein said.

“In recent months it has been the real estate market that keeps our economy moving,” he said. And when those investors look at neighboring markets compared to Newtown, “Buyers are seeing significant price advantages before you even factor in the seasonal slow-down and softening market. Newtown is a lot less expensive that any town south of here,” he said.

“Inevitably, the ripple effect of price increases from south to north will continue to trend up slowly. But with an average cost of a home up to around $450,000, we’re also seeing many buyers who are actively looking, being priced out of this market,” Mr Klopfenstein said.

As of November 4, 72 of the 275 available homes in Newtown were priced at or over $800,000, he said. But no matter the price, in the Newtown market, condition is still the primary driver.

“People in dual-income families are not looking for a handyman’s special,” he said. “If it’s affordable to them, everybody likes new construction. But if they can’t afford $700,000-plus, they won’t be able to find new construction here in Newtown.”

In terms of dated homes, however, Mr Klopfenstein is seeing a lot of action between sellers and potential buyers.

“We’re seeing lots of reductions. A seller will always look in their rear-view mirror after they price their home, and we find that even after a few weeks, we’re starting to see price reductions,” he concluded.