A market correction in Fairfield CT? - Fairfield CT Real Estate Market Update | Moving to Fairfield

What is a market correction and are we experiencing it in Fairfield County Connecticut? With boots on the ground and the latest stats, here is the state of affairs with the real estate market locally.

It has been a wild ride these last few years in real estate with bidding wars, low interest rates and accelerated home prices. The market has seen a “correction” although mild in Fairfield County due to the increase in interest rates that is at its highest level in 20 years.

With that said, locally, we are still experiencing multiple offers for homes that are in sought after areas, move in condition and/or priced appropriately. While homes may not be taking offers within 3 days which was experienced during the pandemic, they do take offers within weeks. Days on market are still low (Fairfield 45 days, Westport 55 days, Easton 57 days, Weston 57 days, Wilton 48 days) showing that homes are selling quickly and under 2 months. Month Supply of inventory which is the amount of time it would take to sell all the current inventory in the market based on the current sales rate, is still running 3 months or lower. A balanced market is 5 to 6 months of inventory and here are the stats by town:
Fairfield 2.2 months
Westport 2.7 months
Weston 2.5 months
Easton 3.2 months
Wilton 1.9 months

The 3 factors are dictating the current market are interest rates, inventory and demand. All 3 factors affect home prices.
Interest rates have increased from 3% to 7% this year, the fastest rise in 50 years. The expectation is that interest rates will continue to rise into next year but the rapid rate of increase is likely behind us. Inflation is the driving force of the mortgage interest rates. The Fed influences the mortgage rate through their policy of raising the fed funds rate to control inflation. The Fed is still predicting to tighten its policy into next year until they have inflation in check.
Interest rates has affected the demand for homes in 2022. Home affordability has taken a hit with the rise in rates. With all that said, there are still people that want to buy a home, it’s just not the frenzy of 2021. The perspective of many buyers is that they can buy a home now, and refinance in the next few years when rates go down. They can build their home equity over time and guarantee a monthly housing cost through a set mortgage payment. Homeownership is the best defense against inflation.

Inventory is what continues to drive this market. All towns are still struggling for inventory. When a new home comes on the market, it tends to be absorbed quickly (assuming it’s priced appropriately). Inventory is down from last year: Fairfield 160 (-26.6%), Westport 115 (-37.2%), Weston 47 (-34.7%), Easton 34 (-29.2%), Wilton 50 (-45.1%).

By all markers, it is still a seller’s market. We are inching our way to a normalized market and we won’t get there until inventory increases. The forecast is that it will take a few years to get to that point.

The demand for home ownership is high with millennials taking up 36% of the market as first time homebuyers. The shift in work from home lifestyle has added to the increase demand in suburban areas. The activity is strong and that is proven through how quickly homes are continuing to sell.

Home prices are difficult to predict in 2023 due to the unstable economy and the expectation of a recession. Top economists from NAR (National Assoc of Realtors), Fannie Mae, Zelman, Mortgage Bankers Association vary in their predictions. The average of the forecasters is basically flat. That is a national number. If the towns in Fairfield County continues to struggle with inventory, prices will continue to rise modestly.

All towns had median home sale price increases year-to-date:
Fairfield $792,500 +7.1%
Westport. $2,000,000 +29.0%
Easton $875,000 +21.5%
Weston $1,167,500 +12.7%
Wilton $1,003,000 +7.2%

The market in Fairfield County is in a correction period. The market trends over the last 3 years when money was inexpensive to borrow flooded the market with buyers who absorbed the inventory. We couldn’t withstand that level of activity and home prices had to get to a point of maintaining. The rise in interest rates has slowed down the home price appreciation.
Understanding the local market will help manage your expectations. The best advice I have is to listen to the experts and examine market trends; all would benefit in making a decision to buy or sell.

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