iStock illustration

The super-sellers market in Greater Hartford is putting homes out of reach for an increasing number of potential buyers, a new study has found.

The region suffered the fourth-biggest drop in affordability between June and October according to First American Financial Corp., with the firm’s Real House Price Index for Hartford falling by 4 percent. That puts it behind only Kansas City, Missouri and Cleveland (4.6 percent drops) and Las Vegas (4.9 percent decline).

The index measures the price changes of single-family properties throughout the U.S. adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state and metropolitan area levels. Because the index adjusts for house-buying power, it also serves as a measure of housing affordability.

“The [national] housing market prior to the pandemic could have been characterized as a sellers’ market, with a shortage of supply relative to demand. With the current supply of homes for sale even tighter relative to demand, it can only be characterized as a super-sellers’ market today. The pandemic has intensified a sense of home as refuge and falling mortgage rates have made financing a home purchase historically inexpensive,” First American Chief Economist Mark Fleming said in a statement. “As a result, demand for homes has surged while the supply of homes for sale has fallen to near record lows, resulting in rapid house price appreciation. Nominal house price appreciation was 7.9 percent higher in October than in March of this year, a precipitous rise in just seven months that has pushed back against the 10.7 percent increase in house-buying power over the same period.”

As with many metro areas, the dramatic drop in mortgage interest rates over 2020 helped fuel a buying frenzy, sending inventory to record lows in the Hartford area.

“Mortgage rates are fairly consistent across the country, so when mortgage rates fall, they boost house-buying power and increase affordability in every city. However, the other components of the RHPI, household income levels and nominal house prices, vary market by market, so they do not have a uniform impact on affordability. During the initial months of the recession, from March through June, affordability improved because falling rates and rising incomes were enough to offset house price appreciation gains,” First American Chief Economist Mark Fleming said in a statement. “However, as potential homebuyers emerged from the stay-at-home orders implemented early in the pandemic, the housing market began to heat up once more. Comparing the RHPI levels in October relative to the resurgence of home buyer interest in June, affordability declined in 24 of the top 50 markets we track.”

The median single-family home sale price jumped 18 percent in Hartford county in October on a year-over-year basis to $262,797 according to The Warren Group, publisher of Banker & Tradesman. At the same time, the number of single-family homes sold year-to-date through Oct. 31 is up 7 percent to 7,574, the firm reported.

Not all communities saw decreases in their affordability on a year-over-year basis. Cleveland and Pittsburgh both saw their Real House Price Index figures grow by 4.8 percent and 4 percent respectively, with Kansas City, Missouri (2 percent growth), New Orleans (1.8 percent growth) and Nashville, Tennessee (0.8 percent growth) rounding out the top five.

“In 2021, mortgage rates are anticipated to remain near historic lows and the economy should improve as vaccinations become more widespread. Both of these conditions will keep house-buying power strong in 2021,” Fleming said. “Yet, housing supply constraints will likely remain and continue to fuel a sellers’ market. The question is, will robust house-buying power be enough to offset strong nominal house price appreciation, or will the trend of declining affordability continue?”