Connecticut issued over 11,000 housing permits last year, including one for this five-bedroom, 8,400-square-foot home in Avon that sold for $1.97 million.

The last time Connecticut communities issued permits for this many new houses, the Berlin Wall was coming down and “Baywatch” was making its television debut. After years of ups and downs, the state surpassed 11,000 housing permits last year, a number seen only once – in 1998 – since 1989.

Cities and towns issued 11,958 housing permits in 2004, a 19.8 percent increase from the 9,985 issued in 2003, according to the state Department of Economic & Community Development. Municipalities issued 1,002 new housing units in December 2004, a 20.9 increase compared to December 2003, when they issued permits for 829 units.

“[Last year] was a remarkably strong year for Connecticut’s housing market,” said DECD Commissioner James F. Abromaitis in a prepared statement. “The 11,958 permit total for 2004 was the highest since 1989 and marked the fourth consecutive year of growth.”

The numbers were about where real estate agents expected they would be, said Barry Rosa, Prudential Connecticut’s new homes and land director.

“It’s nice to see,” he said.

Several counties saw significant increases in permits issued during 2004. The number increased by 40.6 percent in Fairfield County, with 2,512 permits issued in 2004 and 1,786 issued in 2003. Hartford County had the highest number of permits issued and also saw a slight increase from 2003. Its cities and towns issued 2,595 permits in 2004, up 6.2 percent from the 2,443 they issued in 2003. Although the increase was small, it was significant, according to Rosa.

“Even Hartford County has had an increase, which was no small feat,” he said. The county had a very busy year in 2003, Rosa noted, so the increase in permits issued in 2004 was somewhat unexpected.

New London County also had a good year. The permits issued increased by 28.4 percent, from 1,109 in 2003 to 1,424 in 2004.

“The New London and Norwich area is really redeveloping,” Rosa said.

The county will be one to watch in 2005, with new developments in Groton and Mystic. There is also a 100-home subdivision in Niantic and several apartment complexes in the area. The rental market in New London County is strong, Rosa said, and housing there is priced relatively well when compared with the area south of there. The county also houses some casino employees who commute and, with a new expansion of Foxwoods Resort Casino recently announced, could see some new residents.

“It’s becoming a destination,” Rosa said.

‘A Niche Market’

New starts were also up in New Haven County by 27.6 percent, from 1,844 in 2003 to 2,353 in 2004. But new homes have been hot for years on the Shoreline, according to Cash Mitchell, vice president at H. Pearce Real Estate Co.’s Guilford office.

“It’s kind of ‘same old, same old,'” he said.

There are always customers for both custom and spec houses along the Shoreline, he said. Many people there either move from new house to new house or have the ultimate dream of owning one.

“There’s definitely a niche market that always wants new construction,” Mitchell said.

The only county to see a decrease in activity was Tolland County, where the number of permits issued fell by 5.7 percent, from 743 in 2003 to 701 in 2004. But that county, along with Windham County, typically doesn’t see many housing starts, Rosa said.

Other than Tolland County, the new permits were spread fairly evenly across the state, he said.

“It’s all over the place. It’s about time,” Rosa said.

The market, overall, could handle from 14,000 to 15,000 new housing starts in a year, according to Rosa. But that is not likely to happen soon, he said. He predicted that 2005 would see similar, or slightly lower, numbers than those in 2004.

Mitchell also said he expects the market to remain where it is. It is fairly balanced now, neither favoring the seller nor the buyer, he said. But H. Pearce had a good January, despite the Blizzard of 2005.

“It didn’t seem to slow people down,” Mitchell said.

Building moratoriums imposed by some communities have made building slow down or stop in some instances, and Rosa expects some moratoriums to continue in 2005. Also, Connecticut is a small state.

“There’s only so much land,” Rosa said.

Large subdivisions usually have 80 to 200 homes.

The scarcity of land creates more value, Mitchell said.

“Consequently, the cost of a base lot is very expensive,” he noted.

Because the land is so expensive, builders typically construct large houses to make it worth their while. Connecticut homebuyers often can’t expect to buy a new home for less than $400,000.

“You’re probably dreaming [if you expect that],” Mitchell said.

Several years ago, the rule of thumb was that land represents 25 percent of the overall cost of a property. But now it can represent much more.

“That ratio has really changed,” Mitchell said.

And although the supply of land is tight, demand is still strong.

“It’s gotten precious, it’s gotten very scarce and it’s gotten more expensive,” he said.

That can mean the first couple of classes of homebuyers are shut out of the new-homes market, Mitchell added.