The housing market recovery that never quite got off the ground may at last be gaining traction
It’s common knowledge that the past few years have seen a stalled residential real estate market, a leading victim of the down economy.
So, how is the industry faring now?
Well, it’s coming around — sort of.
“The national real estate market is clearly in a period of recovery, with increasing demand and rising prices in most parts of the country,” says Barbara Pearce, president and CEO of H. Pearce Co. Realtors. The 55-year-old, North Haven-headquartered company has more than 140 real estate agents in the greater New Haven and Shoreline areas.
What they and Pearce are seeing is that while the national climate is improving, Connecticut is “lagging behind,” as Pearce notes. She points out that the Nutmeg State ranks No. 46 out of 50 for the indicators on which the national ranking is based.
The numbers support this poor performance, with the average list price dropping for most municipalities in the region between 2011 to 2012, according to figures compiled by Pearce. In Bethany, for example, the average list price for residential homes, condominiums and multi-family units dropped from $397,603 in 2011 to $372,918 in 2012. In Guilford the decline was from $581,100 to $519,863. West Haven’s drop was from $191,843 to $175,413.
Overall, the average sale price in Connecticut dropped from $326,818 in 2011 to $324,001 in 2012.
However, these figures are tempered by the difference between average sale price in 2011 compared with 2012 in a number of municipalities. In Bethany, the average sale price in 2011 was $315,271. That rose to $347,371 in 2012, an increase of 10.2 percent. Westbrook also experienced a positive change, from $322,151 in 2011 to $359,184 in 2012, or 11.5 percent. And the average sale price in Deep River jumped an impressive 21.1 percent between 2011 and 2012, from $258,755 to $313,278. The figures for Essex are even more impressive, with the $425,174 average sale price in 2011 increasing to $540,314 in 2012 — a 27.1-percent boost.
The original sales-to-listing-price ratio increased slightly from 2011 to 2012, from 89.1 percent to 89.3 percent. And the market speed picked up. In 2011 2,772 units were sold within 90 days. That rose to 3,328 units sold within 90 days in 2012.
Such action, while Connecticut falls behind the nation as a whole regarding its real estate transactions, leads Pearce to observe, “But it is also changing.”
Pearce, who practiced law before starting to work for the company her father started, is well positioned to assess and summarize market trends. She notes, for example, that buying bidding has picked up, an sign of market improvement.
“While prices in greater New Haven are still falling slightly, we have seen the beginnings of a seller’s market even here, with multiple offers becoming commonplace on new and well-priced listings,” says Pearce.
There’s also somewhat of a silver lining in the latest figures, Pearce states in her Market Watch report for the fourth quarter of 2012.
In Connecticut, she says, “Things never got as bad, prices never went down as far, and therefore they are not popping back up as quickly. We still have spots where listings are hard to come by, but by and large there is a good choice for buyers in most areas.”
Realtor Michael Barbaro, of New Haven-based Huntsman, Meade & Partners Compass Realty, says the market is excellent for buyers now.
“I’m actually perplexed as to why it’s taken so long to improve. It’s a very unique phenomenon,” he says. “You have historically low interest rates and lower-than-average housing prices.”
Barbaro, who serves on the executive committee of the Connecticut Association of Realtors and serves as spokesperson for the Greater New Haven Association of Realtors, says more people should take advantage of what he views as optimal conditions for homebuyers.
“There’s never been a greater time to buy a home than there is right now,” he says.
In the above-mentioned market report, Pearce pinpoints interest rates and other variables that could affect the market as 2013 progresses.
“Interest rates are still low — very low — and prices are more flexible than usual,” she writes. “People who are moving have been able to sell their homes where they came from, and, with the lowest apartment vacancy rate in the country, the New Haven area is a tough place to land a good rental. All those things cause sales.
“In addition, the uncertainty in Washington has not gone away, but the immediate crisis has been averted,” adds Pearce. “Some nervousness still exists, which makes the stock market dicier than usual, and that also helps real estate as an alternative investment. We are between two strong markets — Boston and New York — so that should help us as well.”
Another positive harbinger is that sales in every pricing category from $300,000 up rose between 2011 and 2012, according to data collected by Pearce. In 2011 there were 1,781 sales of homes priced between $300,000 and $499,999 in Connecticut. In 2012 that went up to 1,827, and increase of 2.6 percent. Sales of homes in the $500,000 to 799,999 category rose 5.8 percent, from 466 in 2011 to 493 in 2012. There were 142 sales of houses costing between $800,000 and $999,999 in 2011, and in 2012 sales in this category numbered 150 – up 5.6 percent. Sixty-six homes in $1 million and above category soled in 2011, compared with 79 in 2012, a 19.7 percent increase.
Overall, there were 4,451 unit sales totaling $1.45 billon in Connecticut in 2011. That rose to 5,235 unit sales totaling $1.54 billion in 2012.
The demand in Connecticut is not so much for newly built homes, says Pearce. That could be a result of predetermined parameters.
While “New homes are big in many parts of the country,” she says, “we tend to be less focused on new construction here, because we have little to no population growth and even less open land.”
What buyers are looking for in the homes they purchase is quality.
“In existing homes, the demand is for good condition, good location and a good deal,” explains Pearce.
The real estate online monitoring site Trulia.com shows a range of average listing prices for homes in the New Haven area for the week ended March 13. Perhaps surprisingly, homes in the downtown area averaged $249,862, on the low end. Higher average listing prices for that week could be seen in sections such as Westville ($315,818), East Rock ($431,415) and Prospect Hill ($521,804). These, along with downtown and the East Shore area ($220, 766 average listing price) were among the more popular neighborhoods in which to purchase homes, according to Trulia.com.
In the past few years Yale University and Yale-New Haven Hospital have encouraged employees to purchase their first home within the region with the help of programs that offer financial assistance. This helps build stronger and more stable neighborhoods, enhancing communities, say advocates. It also helps push up sales near work places.
Barbaro has had buyers who have been greatly assisted by such programs.
“For some people we are definitely seeing that,” he says, adding, “I’m seeing younger couples out there in the market.”
And they’re able the purchase the kind of property they’re seeking, he adds.
“At this point, because interest rates are low, I don’t think people have to settle,” Barbaro says.
“First-time homebuyers are still driving the market, so the lower the price the higher the demand,” says Pearce. “While we have inventory for seven to nine months, which is three times most national markets, homes over $1 million pull that up, so turnover is obviously faster in the lesser price ranges.”
Homeowners are aided by low mortgage rates, Pearce agrees.
“Mortgage rates are still historically low, although 40 percent of people buying in Connecticut now pay cash,” she says. “First-time buyers rarely do, and down payments are an issue, as are appraisals. This always happens in improving markets, since appraisals are based on closings and therefore lag the market.”
State government has accelerated its push to make public transportation improvements a priority throughout the state, saying that it is among the elements that will draw and keep permanent residents and businesses. While access to public transportation is important to some homebuyers, it holds less significance for renters, says Pearce.
“Public transportation is a plus, but less important than with rentals,” says Pearce. “The rental market is still incredibly strong, and prices have gone up dramatically at the high end, during a period when home prices have declined.”
What’s generating inquiries in the New Haven area now? Condos, says Pearce, while Barbaro adds that “Condos are great starter homes.”
Currently, condominium properties are “seeing more activity and interest,” according to Pearce. “In downtown New Haven condos are very limited, and have always actually outperformed the single-home market, so Whitney Grove Square and Audubon Court are exceptions to the general rule.”
According to Pearce, the average final list price for condos in New Haven in 2012 was $194,826, while average sale price was $164,585. The average closing period was 58 days.
A notable observation is that in Orange, condos actually sold for more than the $373,848 average list price. The average sale price for the town in 2012 was $380,172, which was 104.5 percent of the final list, according to figures supplied by Pearce.