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Through the Roof
In defiance of sluggish state economy, houses new and old are flying off the shelves
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Business New Haven
4/15/2002
By: Nancy Barnes
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A petite woman with dark, upswept hair, Wallingford resident Amanda Papacoda describes some of the houses she has recently seen. The carriage house in Meriden, the townhouse close to the shore in West Haven and, oh, yes, the new townhouses in New Haven - one along the Quinnipiac River, one not.
“I was just tired of paying rent and covering somebody's else's mortgage,” Papacoda says, explaining why she decided to buy a property. “And the interest rates are very low right now as well.”
Although she first began looking for properties using local publications and the Internet, she now works with a Realtor because, she says, it seemed as if she were always too late when she called about a listing. “Properties,” she says, “were either on deposit or sold.”
Papacoda says she began seriously looking for a house in January - the same month that the seemingly recession-proof housing industry set a new record for existing-home sales. That month, existing units sold at a seasonally adjusted annual rate of 6.05 million nationwide, according to calculations by the National Association of Realtors. In the Northeast, sales of existing homes continued to swell in February.
By all accounts quite vigorous, the housing market in Connecticut has kept up with the country's strong pace. Low interest rates, low unemployment in the state and concern about the stock market as an investment vehicle are cited as the cause.
For the fourth quarter of 2001 - the last quarter for which figures are available - seasonally adjusted existing home sales in the state reached 51,000 units, up 2.6 percent from the fourth quarter of 2000.
In Hartford, the one Connecticut metropolitan area for which the National Association of Realtors compiles price statistics, the median price for an existing house was $169,000, up 6.2 percent from a year before.
Although the housing market is typically the sector of the economy hardest hit by recession, the sector has continued to confound naysayers who have said its resilience could not last. Even though the real estate market nationwide sputtered in February, most economists have concluded that the stammer was not evidence that the economy is about to experience a “double-dip” recession - that is, slide back into recession after experiencing a brief recovery.
Greg Scott is president of the Connecticut Association of Realtors in addition to his position as president of the Beazley Co., the largest independent residential real-estate firm in the state. Speaking from his New Haven office, he says, “I would say to you that people involved in real estate would say, 'What recession?'”
Scott says that the unemployment rate in Connecticut has remained low, so that the region has a fully employed labor force. He adds that the housing market still enjoys very low interest rates, and that there is a limited inventory of housing stock.
While many analysts point to the mild winter as a factor that helped the housing market sustain a record pace, Scott says, “We don't typically have really bad weather here. If we'd had a really bad winter with tons of snow, that would have been a deterrent [to sales].”
Scott says that if there is any trouble in the housing market, it is lack of inventory. “There is a dramatic shortage in the amount of available properties,” he says.
That's true of both existing homes and new construction. Connecticut has seen new housing permits, which include both rental complexes and single-family homes, lag just slightly behind the levels of one year ago, according to state Department of Labor reports. Yet, Scott attributes the decrease not only to the fact that rental complexes are just not being built but also to an increasingly restrictive approval process among the state's municipalities.
“Most of the towns have taken a much more aggressive posture in limiting the process of approval. With less approved land, there's not going to be a lot of permits,” Scott says.
“Connecticut is not an easy state to get approval in - but I'm not sure any state is,” says Greg Kamedulski from his Danbury office. Kamedulski is vice president in charge of Connecticut for Toll Brothers Inc., a company that builds luxury single-family homes in 21 states. Now 34 years old, the company, whose stock split 2-1 in March, entered the Connecticut market ten years ago. “The process is difficult, and the odds of approval depend on the kind of development,” Kamedulski explains.
Kamedulski says there is still plenty of open land in Connecticut. The question is, he says, whether or not the open space is developable land. The presence of wetlands on a property is often a determining factor. In Connecticut as elsewhere federal law protects wetlands.
Identifying “wetlands,” which originally encompassed only swamp and overflow land, is especially problematic in Connecticut because of the state's broad definition of the term.
According to Bill Ethier, a former wetlands biologist who now serves as executive vice president and general counsel of the Home Builders Association of Connecticut Inc., the area of land that is covered by the state definition is more than twice that described by federal guidelines.
Indeed, “Connecticut has the broadest definition [of wetlands] in the country,” Ethier says.
“You don't need water, and you don't need vegetation,” he says of Connecticut's requirements for wetlands as set by the state's Inland Wetland & Watercourses Act. Connecticut defines wetlands strictly by soil type. Ethier says that wetlands rules have become even more restrictive for developers because a number of municipalities (each Connecticut municipality has its own inland wetland commission) have added a buffer or “upland review area” to the state's broadly defined term.
“Suffice it to say it's an extremely wide, impacting law,” Ethier says. “Not all wetlands are created equal in terms of ecological functions. Yet a lot of towns treat these laws as sort of hands-off areas.”
Ethier observes that some towns have added 200 feet of buffer zone to a wetland area that is the size of an average living room, while others, with regard to the same wetland size, are talking about creating zones of 650 feet - or two football fields - of buffer.
“It gets very restrictive,” Ethier says of the municipal land-review process. “It's very difficult to find land in Connecticut that you can put a home on. The local land-use process is a primary factor why housing prices in Connecticut are so high.”
One property with pockets of wetlands that Toll Brothers is developing is the Orange Estates along Orange's Ridge Road. Kamedulski notes that the approval process there was especially rigorous not only because of the wetlands but also because the land was not served by the city's septic system. That meant that Toll Brothers had to install an in-ground system on each of the lots it is developing.
“The review by the regulatory body is far more rigorous for an in-ground septic system than when the city serves the lots itself,” Kamedulski says. He adds that the review process took just under a year.
Kamedulski says the single-family houses at Orange Estates will not be ready for occupancy for 18 months to two years. Yet, Toll Brothers sold 17 houses within the subdivision in five weeks. “The prices are in the vicinity of the high $500,000s and low $600,000s,” Kamedulski says. “We're just starting the house construction now.”
Even more expensive houses in a second Toll Brothers development in Woodbridge are also selling well, the developer adds.
In New Haven, Ray Baldelli can often be seen moving in and out of the H. Pearce Co., Real Estate office. He plies his profession as a Realtor of single-family houses and condominiums. The condo market, he says, remains brisk.
“Everything in the greater New Haven area is selling well, especially in the New Haven-Hamden corridor,” Baldelli says. He adds that the buyers range from first-time homebuyers using Federal Housing Authority subsidies to wealthier buyers who pay cash.
“On the higher end, they're a lot of retirees who are downscaling from single-family homes. And they don't want smaller homes. They want condos where they can turn the key and leave.”
Baldelli observes, “The biggest thing in the New Haven-Hamden corridor is the luxury condo, and we don't have them.”
Many Yale University alumni, Baldelli notes, want to retire to New Haven. However, many of them are looking for elevator buildings and, other than a small bank of buildings at Audubon Court, New Haven does not have them.
Baldelli terms the lack of elevator buildings in New Haven a “major deficiency. Maybe Yale's going to have to come and do it,” he says. “I don't know who else will.”
Baldelli says the lack of available properties have put buyers into bidding wars - and Realtors into competition with one another. “It's a frustrating situation at all levels,” he says.
Extremely desirable condominium properties that are also in short supply, are the industrial, brick buildings whose conversion to loft-like housing followed the demise of manufacturing years ago, Baldelli says.
Rounding out the portrait of a robust housing market is a limited number of foreclosures. Although foreclosures have soared dramatically in some parts of the country as homeowners who bought their homes when the economy surged now find themselves unable to make their mortgage payments, the housing market in Connecticut remains mainly untainted.
“There is some foreclosure, [but] I think it's minimal,” says Scott. And, he adds, those homeowners who do face foreclosure are typically able to get out from under by simply selling their properties.
“It's a factor of how much you can afford to borrow, and there's more people able to get into the market,” he observes of the housing market overall. Looking ahead to a time when mortgage rates may rise, he says, “I suspect that if rates go up, the market may soften a little bit.”
But Scott does not view a rise in interest rates as a bad thing. “It may balance the market. I don't think anyone is projecting any substantial movement in rates - maybe a little,” he concludes.
Scott says that people want to be invested in real estate in part because they have become cautious about the stock market. “Just overall, people are putting their money into housing rather than other investment vehicles.”
Such across-the-board optimism leaves potential buyers like Wallingford's Papacoda in a tight race. “I would like to be out by July 1,” she says, referring to the property she now rents. Then, voicing a prospective homebuyer's lament, she adds, “The competition is stiff.”
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