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With Labor Day in the rearview mirror, the prices of homes and a lack of inventory continue to plague the residential real estate market.

According to the latest year-to-date data from The Warren Group, publisher of The Commercial Record, the median sale price of a single-family home in Connecticut sat at $407,500 as of July 31. This is a 66 percent increase from the median price of $245,000 in July 2016 and a 11.6 percent increase from $365,000 in July 2023.

Hartford County, the state’s largest housing market, paints the same picture as the nutmeg states as a whole. The year to date median price in the county has risen 11.6 percent as well with the median price sitting at $355,000 according to data from The Warren Group.

While the prices of homes continue to increase, the number of sales dropped compared to last year. Through July 31, 13,695 single-family homes have been sold this year compared to 14,033 in 2023. Again, Hartford county follows the statewide trend as the number of sales dropped from 3,544 to 3,478.

Inventory Issue Remains

While the market is strong – especially for sellers – inventory remains to be an issue. According to Zillow, combined single-family and condominium for-sale inventory in Connecticut has grown 6 percent year-over-year. The United States as a whole has seen growth of 24.6 percent.

With the Federal Reserve signaling that at least one interest rate cut is coming in September, prospective homebuyers will gain some relief. Still, considering that the cuts are expected to be under 100 basis points, and could be as low as 25 basis points inventory will remain to be an issue. Many homeowners who might otherwise trade up or downsize still facing much higher monthly housing costs when they look for a new home.

Real estate agent Alex Chingas with the Bross Chingas Bross Team at Coldwell Banker Realty in Westport believes that the inventory issues is the biggest issue that the nationwide housing market is dealing with.

“That’s really the largest challenge that the housing market is facing, more so than interest rates that are higher than many buyers would prefer, more than any outside economic factors,” he said. “The biggest issue that continues to influence what we’re seeing [with home prices] is inventory.”

Chingas added that  homeowners are locked into rates below what is available right now, making it harder to free up inventory; even with incoming rate cuts.

“You know, many homeowners are locked in at very favorable financing rates now, so they feel like there’s no inventory,” he said. “There’s nowhere for me to go. If I moved, I’ll be giving up a great interest rate for another property that I’ll purchase where it’s higher. So I think if we can begin to take some of these objections off the table and see the interest rates trend in a pro consumer direction, that will definitely open up some inventory.”

While interest rates gain a lot of attention, Chingas said that time will continue to “soften” the effects of interest rates. He also added that working with homebuyers who weren’t looking for homes during the pandemic will help more homes be sold.

“What we were dealing with in recent history is one of the fastest accelerations of interest rates on record. So we had many buyers who were in the market, pre-approved, ready to purchase a home that had an entire scenario laid out under certain financial strictures and then during the process of their house hunting journey, interest rates accelerated so rapidly that it really changed their buying power and it resulted in the change in how they were approaching their search,” he said. “For many buyers, it sidelined them. Also some would be sellers, it just became one more obstacle, or one more hurdle, where they decided it made more sense for them to stay in place. So I think, though, that what we’re experiencing now is the historically low interest rates that we were seeing in sort of the core time of the pandemic, those are further in the rear-view mirror. Now we’re not working with as many clients that were also in the market then so they’re working with present day information, as opposed to that earlier group of home buyers I mentioned that were pre-approved with certain assumptions protections.”

According to new estimates from Redfin, 6 out of every 7 homeowners with mortgages have interest rates below 6 percent, but the average rate on a 30-year, fixed-rate home loan has settled at just below 6.5 percent according to Freddie Mac.

Looking ahead to the fall, Chingas expects that there won’t be much change due to low inventory, even with interest rate cuts on the way.

“So because nothing major has changed, I think heading into our autumn sales season, we’re going to continue to experience more of the same,” he said. “We’re dealing with such low inventory spaces now, across the board, in every community, that even if more product comes to market, I think we’re going to continue to face competitive situations where there are more buyers than there are properties.”