why are connecticut homes selling so high above asking price?
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By Nicole Funaro | Published on June 30, 2021
It’s no secret that the real estate market in Connecticut is competitive — first-time homebuyers are struggling to keep up, renters are facing rising rates and median home sales prices have set records throughout the first half of 2021.
Driving up these high home sale prices are those homes that sell for well over the listing price. According to data provided by Redfin, a national real estate brokerage, all eight Connecticut counties all report peak percentages of homes selling above the asking price. While the full data reports back to 2012, some of the biggest jumps in growth take place between 2020 and 2021.
In Fairfield County, for example, the percentage of homes selling above asking price jumped from 15.4 percent in May 2020 to 49.2 percent the following year.
Other counties in Connecticut show a similar trend. In Hartford County, the percentage of homes selling above asking price was reported at 32.7 percent in May 2020; that number reached 50.9 percent by October. Hartford County showed a slight decline in the trend in February 2021, recording 43.4 percent of homes in the area selling above asking, but by May 2021, that percentage increased to 66 percent. In one year, Hartford County alone experienced a 33 percent rise in homes selling over asking price.
In Middlesex County, the percentage of homes selling above asking in May 2020 was 19.7 percent, and by the following May, it rose to 53.6 percent. New Haven County recorded 30.3 percent of homes selling above asking price in May 2020, and a year later, it increased just under 59 percent. And in Litchfield County, 16.1 percent of homes in the area were selling over asking price in May 2020, but by May 2021, that number more than doubled to 41.3 percent.
Connecticut realtors and agencies are seeing this data play out in real time. According to Jody Peters, vice president of brand strategy and business development at The Riverside Realty Group in Westport, the boutique agency has seen steady growth in the percentage of list price received, or what percentage of the listing price a buyer paid.
In 2020, 97 percent of the list price was received in Fairfield County, Peters stated in an email; this means that buyers paid almost the full listing price for houses in 2020. In 2021, buyers paid 100.4 percent of the list price, which means that buyers are paying over asking prices for houses this year. Additionally, the number of available houses on the market has decreased year over year, according to Peters. In May 2020, Fairfield County had 4,332 single-family homes listed on the MLS, or multiple listings service, while May 2021 only had 2,847 homes listed on the platform.
According to Redfin, the sale-to-list ratio — or the final sale price divided by the last list price expressed as a percentage — across all counties in the state was reported at 97 percent or higher for the first five months of 2021. This means that homes in all counties are selling for almost the full listing price or higher (if expressed as a percent over 100); Hartford County has consistently sold over asking price since March 2021. By May 2021, only Litchfield County displayed a sale-to-list ratio of less than 100 percent — it was 99.9 percent.
The factors that motivate high-cost homes sales, according to Peters, are the competition for houses combined with lack of available homes for sale.
“With multiple bids coming in on properties (due to lack of inventory), buyers need to go in at or over ask price and oftentimes without mortgage restraints,” she said. “Cash offers, above list price with inspection for informational purposes only seem[s] to be consistently the winning combination in today's market.”
Amy Rio, owner and broker for Executive Real Estate in Glastonbury, said she has seen 90 percent of homes sell for over asking price, as long as the home is listed within the median pricing average. She’s also seen a particular kind of home sell for over the listing price.
“Flipped renovated homes especially are selling for approximately 10 percent over asking price,” she said in an email, noting that the sale is often accompanied by waiving an inspection or taking the home as is and paying for an appraisal gap even if the home is appraised below the purchase price.
The potential for an appraisal gap to exist in paying over the asking price for a home is present in the current market, as Rio noted. According to Realtor.com, an appraisal gap is “the disparity between the offer you put on a property and what the property is deemed to be worth by a lender.” If a buyer is willing to pay this difference in purchasing a house, Realtor.com says it can be written into the contract to show how much a buyer is prepared to pay — no matter how much above the asking price it is.
According to president-elect of the Connecticut Association of Realtors Tammy Felenstein, whether or not buyers will continue to offer and pay over asking price for homes is dependent on how much competition there will be in the market.
"There are other things to choose from," she said in reference to tactics used to make the most appealing offer on a house. "Cash offers are always considered to be the best option. But a lot of times when people make cash offers, they think they should get a discount because it's cash — but that isn't always the case now because it is so competitive out there."
And with some slight increases in inventory, Felenstein said sellers may need to start reconsidering their pricing.
"Sellers now are getting very aggressive on the pricing — they have very high expectations," she said. "The higher they go past what would have been fair market value a year ago, the less of a risk they will have in getting multiple offers. Buyers are starting to push back a little bit, saying 'Wait a second, these prices are going very high'...Couple that with inventory levels going up, and it all goes back to basic supply and demand."