How do we differentiate between moderately strong and strong in the town by town analysis on page 14 at left? Mostly we looked at price appreciation. Those towns which are still seeing price appreciation above 5% annually are characterized as strong. This is a better metric than days on market or percentage of asking price.

All price trend indicators rose to new records as listing inventory fell sharply. Sales fell year-over-year every quarter for the past two years. Dropping sales volume is occuring across the board, in every town. Why? For the last 15 years we have seen sales levels decline from the second to the third quarter around 15%. That's a seasonal norm. We have to ask ourselves in 2023 is slowing activity based on:

• a seasonal slowdown, typically a drop of 15% from second to third quarter

• buyer pullback from rising interest rates and decreased affordability

• seller optimism in the face of rising prices and continued bidding wars

• a tightening of lending standards from banks pulling back

We believe all four of these factors are at play and that the decrease in sales volume will persist into Spring. The difference between current interest rates and existing mortgages has never been greater, and the spread is widening. Labor and materials inflation is having an impact on speculative building. New product is not coming online in sufficient quantities further exacerbating the problem. Finally, sellers are optimistic that the Spring will be a better market, that there is no urgency to put a house on the market in the second half of the year. My advice to buyers is use the fourth quarter to make your best deal. New listings, price changes and re-listed properties are prime opportunities. This is the season where we see a great seller’s willingness to negotiate. Sellers, consider listing in January for a strategic advantage. Buyers will return after the holidays with the most limited choices maximizing your profits. Timing Matters.

What will it take to bring the Fairfield County market into balance with more inventory, fewer bidding wars, greater sales volume? A few possibilities:

• rising interest rates increases borrowing costs and could slow demand

• economic recession, job losses and decreased consumer confidence 

• declining interest rates could prompt sellers to give up existing mortgages 

• assessor revaluations are underway, raising taxes for some by 15%-20% in a single year, a shock that forces many sellers to reevaluate

• if the labor market loosens then builders might begin building. With tight labor builders are increasingly selective of the projects worth pursuing

• lower inflation, both in materials and labor,While most of us would like more balance

While most of us would like more balance in the real estate market, more choices for buyers, more choices for builders, we generally do not want balance when it is the result of a rapidly cooling economy. Throughout Fairfield County, in every town, at every price point, demand is strong. The volume of sales may be modest for the foreseeable future, but for those of us who own our homes, who have low interest rate mortgages, and for whom moving is not urgent, this period of imbalance is better than the alternative.

John Engel is the real estate editor of the New Canaan Sentinel, a Realtor, the son of a Realtor, the husband of a Realtor, and the father of a ballet dancer, a film editor, a college student and a clothing historian. You can find him in the Symington land trust property walking his golden retriever Callie most mornings, or seated on the right side during Planning & Zoning hearings. He graduated from New Canaan High School in 1985.

Check out John Engel’s Podcast, Boroughs & Burbs, the National Real Estate Conversation here.