Buying

Holding Steady - Looking Ahead to 2010

2009 - The Year in Review
By Candace Adams, President, Prudential Connecticut Realty

We are excited to report that the Connecticut real estate market showed significant improvement in the last half of 2009.

“While the past couple of years have been extremely difficult for consumers and the real estate market; there are indications that things are beginning to turn around,” said Candace Adams, President of Prudential Connecticut Realty. The following is our detailed, year-end look at the real estate market for each of Connecticut’s communities, counties, and the state itself.
Statewide there has been a significant improvement in the number of home sales.  In the first quarter of 2009, single family home sales were down by 25 percent and condo sales were down by almost 40 percent from the previous year. By the end of 2009, single family home sales were only off by one percent and condo sales were off by approximately nine percent from the prior year.  Six counties (Hartford, Middlesex, New Haven, Tolland, New London and Windham) had modest annual increases in single family sales. “It’s nice to actually talk about sales increases,” Ms. Adams said.

Ideal Conditions
One of the best ways to gauge the health of the real estate market is to look at inventory supply times. This is the relationship between the number of homes currently on the market and how long it will take to sell that inventory (based on current levels of sales activity).
  There has been a dramatic improvement in supply times, which have decreased on average 50% from nine months ago. This reflects the stronger market activity in the last half of 2009. There were also significant increases in deposit activity, another positive sign.

So what happened?

Several factors contributed to these positive changes. The first-time homebuyer tax credit was recently extended and expanded to include a trade-up buyer tax credit which has motivated buyers to purchase. According to NAR, 47 percent of homebuyers in 2009 were first-time buyers.
    Another factor is the mortgage interest rates. We have been very spoiled with rates averaging around five percent for a 30-year fixed rate which offers tremendous value in terms of low mortgage payments.
    With fewer homes for sale, buyers are also realizing there are fewer choices, especially within specific price ranges in any given town. This combination creates a sense of urgency that not only is it safe to buy again but that it’s time to buy before rates go up. This theory is not short sighted as prices have stabilized recently.
    One area of the market that unfortunately has not shown improvement is new residential housing permits (single-family and condominium). 
    Permits are at really low levels and this reflects little new construction inventory is being added to the market. This includes rental as well as for-sale product.  
    “There isn’t an oversaturation of new construction inventory here in Connecticut, a problem that has plagued the Southeast and the West,” said Barry Rosa, Vice President and Director of Prudential Connecticut Realty. “It’s conceivable that we could end up with an insufficient supply of new homes and condominiums to meet buyer demand.”
    So does all this mean that everything is back to normal?
“First, we have to redefine normal,” Mr. Rosa said. “The new normal will likely mean fewer home sales than we’re accustomed to and an annual appreciation closer to the typical four to six percent range.”
    “We also have to remember that we are still in a weak economy.” he added. “We’re beginning to see the signs of a recovery, but it is going to take time. The issues with ‘short sales’ and real estate owned properties have not yet fully worked their way through the system.”
    “We are anticipating a more stable market place this year when compared to the turmoil of the past two years,” Ms. Adams added. “With lower home prices, the opportunity for tax credits, modestly improving confidence levels and very reasonable mortgage interest rates, expect buyers to act in their own economic best interests and purchase homes within their comfort zone.”