The One True Real Estate Market is the One You’re In
For some time now, we have been barraged with headlines heralding the country’s economic downturn: foreclosures at an all time high, falling prices, falling sales, declining consumer confidence and so on. While we are all aware that we are facing some difficult economic issues, the over-abundance of negativity in the media is tiring at best, and does little to stimulate consumer energy.
The more woeful the situation, the more attention it will get. Hence, we are inundated with stories about Arizona, Florida and Nevada experiencing falling prices and rising rates of foreclosures. We also saw a lot of attention recently paid to the Case-Schiller data index and the price declines that it showed. This index measures the real estate market for several major metropolitan areas (cities) and is not applicable to our markets in Connecticut.
Again it seems the media fail to state the obvious. There is no such thing as a national real estate market. There is really no such thing as a Connecticut real estate market. There are 169 communities within our state. There are 169 markets, and there are sub-markets within each of these communities. Real estate is and will continue to be a local happening, so what is going on in Florida may make for interesting reading, but it has very little to do with properties in Connecticut.
The primary reason that the vast majority of residential real estate buyers purchase a home or a condo is as a place to live. The fact that a single-family home or a condo also has tax benefits and appreciates in value over time are certainly added benefits. This has not changed.
Connecticut Real Estate Overview
We’ve included the usual large amount of market data through the end of the second quarter of 2008. This is the most current data available anywhere. Click on "complete report" for these charts.
What it shows: Sales for both single-family homes and condominium units are down about 30 percent from last year. Median sale prices adjusted slightly in response to sales and mortgage financing difficulties and price ranges that are selling most actively have also shifted. Sales prices in Connecticut are not in a free-fall, however. One month or one week of data cannot be used as a market indicator, because it rarely shows the longer-term patterns. We have seen articles that have done just this.
Marketing times are a bit longer than last year, but they are not a lot longer, and in some areas, are actually lower. This is really important, because it does show that correctly priced homes are selling within very reasonable times.
New homes permits continue to show reduced levels from last year with a 2008 projection of about 5,400 new residential permits, down about 30% from 2007. There is no over-supply of new homes on the market.
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Inventory levels have not shown any large spikes. This is another very important point and has been true for the past several months. There are approximately 21,000 single-family homes and 6,400 condominium units on the market now.
To put this into context, the number of sales, combined with active inventory and current deposit levels, provides a great snapshot of where we really are. One indicator, used alone, often does not tell the real story (even though it may be appealing).
Based on the 2008 rate of sales, level of inventory on market and rate of deposits, there is about an 8-month supply of single-family homes on the market and a very similar number (7.5-month supply) of condos on the market. We are conservative in calculating these numbers assuming that only 70% of the current deposits will actually make it to closing.
While these figures are higher than a year ago, neither indicates a dire situation.
Another point to consider is that certain price ranges are selling very well while other ranges have slowed. These price ranges vary by each community and demonstrate why overall generalizations of the market don’t make sense, so we will not make them here. Properly priced homes are selling well (we do keep repeating this).
What the Future Holds
The rate of sales (about 70% of last year) is likely to continue. Median sales prices are likely going to show modest decreases. Inventory levels have remained fairly constant with no major shifts up or down. Marketing and supply times are generally steady.
The issues that began to shake the market almost two years ago now still have to run their course -- mortgage and financial market difficulties, a weaker economy and high energy costs -- so we should expect that the unrest we are seeing now will continue a while longer. Expect it.
But, we also received some very good news the day that this was being written: The Connecticut Labor Department just reported that we added 3,600 jobs to the state’s economy in June! This follows the addition of 3,300 jobs in May. Do keep in mind that the national economy has lost over 120,000 jobs in this same time period.
We end this report with something that has been said several times throughout, because its significance cannot be understated: Properly priced residential real estate is going to sell. One more thing: It’s great to be in Connecticut, since we are performing so much better than other parts of the nation. Don’t let the national headlines distract us from our reality.
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The Connecticut Real Estate