As the fall approaches, Realtors are predicting the same steady trend of gradually increasing prices and slowly decreasing sales for homes in Connecticut. Industry insiders say the only thing that appears to be able to snap that trend – which they don’t see as unhealthy – is a rise in interest rates.
“The most typical thing we see in the fall is interest rates going down before Election Day,” said Barbara Pearce, president of H. Pearce Company Realtors in North Haven. “It’s more true in a national election, or midyear election, but there’s always a lot of politicians who want to look good, and want their constituents to feel good about the economy. I’m not saying that [Federal Reserve Chairman] Alan Greenspan is adjusting the rates to make some politician look good, but I think that if you track it over it time, you’ll see that’s generally true.”
Pearce noted that this year is somewhat different, as the historically low interest rates are climbing slightly higher, saying the trend may offset the generally predictable trend of lower rates around election time.
“There’s also a general tendency for prices to come down on houses at the end of the fall. Usually we have a boom of showings after Labor Day. People take the summer off and don’t worry about selling their house, but then we see a spate of activity followed by a last gasp before the holidays,” she said. “People who don’t sell their house before Thanksgiving keep it during the winter. People don’t want to show their house during the holidays, so there tends to be a hiatus through the worst of the winter.”
In order to avoid holding onto their house any longer, Pearce added, “It’s often true that people will take the lowest offer between Halloween and Thanksgiving.”
‘Flat and Steady’
While the housing market remains strong and steady, Pearce said, the weakest segment seems to be the higher end, which, as The Commercial Record previously reported, is in part due to property revaluation along Connecticut’s coastline.
“We still see a strong demand for investment properties, and people wanting to buy multifamily homes,” she said.
Due to zoning restrictions and not-in-my-backyard proponents, few rental properties were built in the 1990s in many Connecticut towns. Therefore, there is a dearth of places for people to rent, which in turn causes rising rents and rental properties to become more attractive to investors.
While Pearce acknowledged that is definitely the case in New Haven, she said the situation appears to be widespread.
“People have been talking about how real estate has repeatedly outperformed the stock market, and it’s made real estate a more attractive investment and a viable way to diversify investment portfolios,” she said.
Steve Richards, regional vice president at Prudential Connecticut Realty in Rocky Hill, said, “One phrase that sums up the market this year is ‘more of the same.’ For about the last 24 consecutive months, the market has been either flat and steady, or shown a slight decline in unit sales, which is the actual number of houses we sell.”
However, Richards noted that the sales price of those same homes is increasing while the number of transfers remains stagnant.
“Our current deposits, our year-to-date single family sales, are off about 1 percent. Some regions are a little more off, while some are a little ahead, and you see differences when you break it into submarkets,” he said. “For example, in Farmington Valley, which is a traditionally strong market, we have pockets that are ahead in a growth mode, while other sections are in decline.”
Richards explained that the average sales price, over about two-thirds of the state, has gone up 11.88 percent, according to numbers tallied by the Greater Hartford Association of Realtors.
“That’s [nearly] 12 percent up from last year,” he said. “Some pockets of the state have gone up only 5 percent, while others have gone up 14 percent or more, but generally this means that sales have been very strong.”
Currently, Richards said that the “only thing you can point your finger to and have it affect the market would be if interest rates were to continue to go up.”
He noted that interest rates have risen only slightly less than 50 basis points over the last five weeks.
“The truth is that the market is moving very well right now. I wouldn’t say it’s stagnant; it’s more of a flat line. There has been growth in the price and decline in the sales, so we’ve stayed at the same rate continually. Last year was the biggest year ever in real estate, so when we have a similar year to that year, it’s still a really good year,” said Richards.
As for why houses aren’t selling so well, Richards offered that it could be due largely to “big-picture” issues.
“I think the fact that the number of unit sales is down probably goes to larger demographic issues, and probably has more to do with us having moved to the other side of the curve of the baby boom cycle,” he said. “This is a national issue with major blocks of buyers and where they are in the buying cycle.”
Another trend that Richard has noticed is the fact that people are keeping their homes longer these days. Several years ago, the average time for a homeowner to stay in one house was five to seven years. Today it’s growing to between nine and 12 years, with more improvements done to the homes during that time. Homes are worth more when they turn them around, resulting in higher sales prices, he said.
That trend also has led to a dearth of homes on the market. Homes are spending less and less on the market, he said, because there are buyers out there but not homes.
“This has been a fast market,” he said.
Candace Adams, regional vice president at Prudential Connecticut Realty, agreed with her colleague. She covers Fairfield County, while Richards deals primarily with the northeastern portion of the state.
“In Fairfield County we’re seeing that the very high end of the market is softening, and these houses are spending a slightly higher number of days on the market. But if they’re priced well, they sell,” she said. “With the right price, houses are getting multiple bids, so there are many buyers out there.”
Adams also noted that the average sales price continues to increase as sales decrease, something that she believes is reflective of the lack of inventory.
“We’re still in a low-inventory mode, and we’ve been in one for a while,” she said. “Across the board in Fairfield County, we’re still seeing inventory lower than in past years. But there are definitely buyers out there, so it’s currently a seller’s market.”
She added, “We’d love to see an increase in inventory. New construction is selling very nicely, and interest rates are stable. Basically the market seems to be very healthy, and our summer market has been a better market than we normally expect. That’s probably due to the fact that the first part of the year was slower than normal, and things quickly picked up.”