BARRY ROSA – State ‘doing well’
A lack of speculative investing may save Connecticut’s housing market from being as hard-hit as some others across the country as sales droop and prices flatten, but the state is still seeing signs of a transitional period that will end with a buyer’s market, according to housing experts.
Existing home sales nationwide dropped 4.1 percent to a seasonally adjusted annual rate of 6.33 million units in July from a pace of 6.6 million in June, according to data from the National Association of Realtors. The July numbers were also 11.2 percent below the 7.13 million-unit level of July 2005. Meanwhile, median prices rose 0.9 percent to $230,000 from the previous July.
Although statewide statistics were not available for Connecticut at press time, some local stats show a slightly sunnier picture. Statistics from the Greater Hartford Association of Realtors, which cover about 60 cities and towns in Greater Hartford, show increasing sales from May to July but also reflect a downward trend in the year-over-year data. Those statistics are not adjusted for the seasons.
Closed sales tracked by GHAR jumped to 6,014 in July from 4,974 in June and 3,741 in May. But the sales during all three months were lower than those from a year before. In July 2005, 6,694 sales closed – 680 more than in July 2006.
According to John Clapp, a professor of real estate and finance at the University of Connecticut, the numbers look fairly bleak when they are adjusted for the seasons. He adds values to raw data by accounting for past numbers and averages, as well as the seasons.
“For numbers of transactions, I show pretty substantial declines,” he said.
Realtors say the inventories are going up, which supports Clapp’s data.
“It’s, at best, a transitional market turning into a buyer’s market,” he said. Prices also look flat, he added.
Clapp’s numbers show that the transition probably started about 18 months ago.
“Things started to slow down a lot,” he said.
By late 2004, the volume of transactions was down in a lot of areas. A trend like that often precedes a price slowdown, Clapp said.
“Unlike newspapers and NAR numbers, I’ve been showing pretty flat numbers,” he said.
GHAR shows the median price of single-family homes increasing slightly from last year. The median sales price in July of this year was $255,000, up from $246,750 in 2005.
Increases have been about 3 percent to 3.5 percent, said Barry Rosa, new-homes and land director of Prudential Connecticut Real Estate. That range has been common over the last few years.
But he is seeing the same decrease of sales. They are at 85 percent to 88 percent of last year’s sales, according to Rosa.
“The number of sales has clearly gone down,” he said.
Condominium sales are a bit stronger, and prices have been going up by 7 percent to 7.5 percent, Rosa said.
‘Some Lift’ Possible
Connecticut’s housing market, overall, is doing better than those in the rest of the country. He attributed that to the fact that it is not a speculative market. There is not a lot of interest from investors in the state’s for-sale housing market, and when markets start to stumble, investors are usually the first to get out, Rosa said.
“Connecticut is doing quite well,” he said. “We fundamentally are an owner-occupied market.”
Some other states, like Florida, where speculation was popular, are seeing their housing markets being hit harder.
Rosa does not compare the latest downturn to the one the housing market experienced in the late 1980s and early 1990s, because that was driven by job loss.
“That’s certainly not the case this time,” Rosa said.
The future of the market still depends strongly on interest rates, Clapp said, and it looks like they will remain relatively stable.
“It’s hard to see a strong decline,” he said. But he does predict a slow, stagnant, slightly declining market that will feel the effects of high energy prices.
Across the country, higher interest rates left their mark, according to David Lereah, NAR’s chief economist. He said higher interest rates dampened sales, but noted that price softening is good news for the housing market because it is drawing buyers.
“Many potential homebuyers have been on the sidelines, some ‘kicking the tires,’ but mostly waiting for sellers to compromise on prices and terms,” he said in a prepared statement. “Now sellers in many areas of the country are pricing to reflect current market realities. As a result, there could be some lift to home sales, but it’ll likely take some months for price appreciation to rise.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.76 percent in July, up from 6.68 percent in June; the rate was 5.70 percent in July 2005. Last week, the 30-year rate declined to 6.52 percent.
“An unexpected quarter-point drop in mortgage interest rates over the last month also could help to stimulate the housing market,” Lereah said.
Total housing inventory levels rose 3.2 percent at the end of July to 3.86 million existing homes available for sale, which represents a 7.3-months’ supply at the current sales pace.
Single-family home sales dropped 5 percent to a seasonally adjusted annual rate of 5.51 million in July from 5.8 million in June, and were 11.4 percent below the 6.22 million-unit pace in July 2005. The median existing single-family home price was $231,200 in July, up 1.5 percent from a year earlier.
