January’s statewide median price for single-family homes fell by the largest month-over-month decline in 10 years. Despite a declining number of sales since 2005, the median price for single-family homes had managed to inch upward the past couple of years. In January, however, the statewide median price fell to $267,000, representing a 5.32 percent drop compared to the same month last year, according to The Warren Group, The Commercial Record’s parent company. Signs of market weakness, such as dwindling sales and new-home permits, have been around for a couple of years, said Edward J. Deak, professor of economics at Fairfield University and Connecticut’s forecast manager for the New England Economic Partnership. “[Connecticut’s housing market] hasn’t been as weak as it has been nationally, but there was no reason to believe that Connecticut was going to be able to swim against the tide,” Deak said. Continuing the trend of the past few years, the number of sales dropped in January, falling 28.58 percent to 1,644. All eight counties posted double-digit declines in sales, ranging from a 13.10 percent drop in Tolland County to a 33.33 percent fall in New Haven County. Seven of the eight counties recorded lower median prices, with Fairfield County suffering the most, with an 11.82 percent decline. The state’s priciest county had a median home price of $485,000 in January, with median price declines recorded in municipalities from Bridgeport to Greenwich, according to The Warren Group. Some of the drops include Bridgeport, falling from $271,000 to $215,000; Stamford, declining from $729,000 to $660,000; Darien, dropping from $1.5 million to $950,000; and Greenwich, going from $1.9 million to $1.73 million. New Canaan and Fairfield resisted the trend, with New Canaan’s median price growing from $2 million to $2.18 million and Fairfield’s climbing from $575,000 to $648,000. “The money that was flowing into lower Fairfield County out of the financial services industry allowed them to keep their heads above water a lot longer than perhaps people in the New Haven or Hartford areas,” Deak said. “My feeling is that the bonus income is down, and that’s undermining the ability of the housing market to show the modest price strength that it has up to this point.” Lawrence Yun, chief economist for the National Association of Realtors, said the declines in housing prices must be kept in perspective. “It is certainly true that it is probably the first nationwide price decline since the Great Depression, but the proper perspective is that we had an unprecedented run-up in home prices – better than a 50 percent increase during the housing market boom,” said Yun, speaking Monday at the New England Realtors Conference in Cambridge, Mass. “And now it has given way [to a] 1 percent or 2 percent [decline] on a nationwide median price basis.” For New England, the run-up in pricing was particularly steep. “Between 1995 and 2006, prices increased by 86 percent in New England, compared to only 64 percent nationwide,” said Alicia Sasser, senior economist at the Federal Reserve Bank of Boston’s New England Public Policy Center, who was another presenter at the New England Realtors Conference. The impact of the recent declines on homeowners likely depends on when they entered the market. “People who bought at the peak of the market – one to two years ago, depending on the local market – some [of those] people are losing equity,” Yun said. “[But] people who are in it for the long term, they are doing fine.” ‘An Irreducible Minimum’
In Connecticut, January’s statewide median price of $267,000 is essentially flat with the price of $265,000 from January 2005. The current mark is up 14 percent from January 2004’s price of $235,000, and up 58 percent from January 2000’s price of $169,000, according to The Warren Group. Deak pointed to a couple of factors that may have influenced the recent price decline, such as falling sales, the big leaps in property values from a few years ago and sellers pulling their homes off the market. “I would suspect that there are fewer sales up at the top end,” Deak said. “I have a feeling that a lot of people pulled houses off the market for the period from Thanksgiving through Christmas, and then were probably advised to wait in putting the house back on the market until the stronger buying season arrives, and that’s usually in late February or the beginning of March – where we are right now. So the inventory might be shooting up, and that might encourage more buyers into those marketplaces.” Whether that projected new inventory helps or hurts the median price remains to be seen. “It’s a just a matter of what the sellers are willing to let a house go for. If you’ve got a house that you bought 20 years ago, [even if] you can’t get $40,000 more like you could 18 months ago, you’re still making a nice pile of dough,” Deak said. “And if you’re relocating to Florida, you say, ‘Well, I got the best deal that I can and I’ll make it up on the other end.’ But if you bought the house three or four years ago, you might be underwater in terms of the transaction.” For Yun, the level of inventory is something that should make New Englanders feel optimistic. “One good thing about the New England region, in relation to the rest of the country, is that the New England region has been experiencing a more notable drop in inventory,” Yun said. “So I think the New England region will be one of the first regions that has been slumping to come out of the recession.” Deak said a turnaround is coming in the housing market, but not right away. “Connecticut is going to be in a weaker position in 2008 than it was in 2007. And [January’s price decline] is just part of it,” he noted. “[But] I don’t think that if you look at the national level that the bottom of the market is too far off – both in terms of sales and in terms of price reductions.” The number of sales and new-home permits could begin to recover by the end of the year, he said, adding that prices could bottom out in early 2009. “There is an end to this. We’re not going to zero on this one,” Deak said. “There’s an irreducible minimum of housing transactions, home construction and value that’s associated with the houses.”