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Housing sales in southeast Connecticut indicate the region is slowly emerging from a decade-long slump, with the market for lower-priced homes showing the greatest activity, according to several area realtors.
“We continue to see the trend for the lower-priced properties, under $300,000 … starters to a little bit bigger, and those can fly off the shelves pretty quickly,” said Joel Grossman, new business development director of Calcagni Real Estate, which represents Middlesex County as well as New Haven County, among others. “It looks like the trend in terms of prices is in that 2 to 4 percent range, probably more on the lower side. Because the inventory is scarce, those prices can go up a little bit more.”
In a January 2 phone conversation with CT Examiner, Grossman said that even with historically low interest rates expected to remain stable through 2020, sales are little slower at the $400,000-and-up mark, with a three-to-five-month inventory, and above the half-million mark the market continues to lag.
“When it gets over $500,000 in our area, it starts to really slow down, and that’s what we’ve seen over the past few years, not too much difference,” he said.
Across Connecticut, the median price for home sales rose from $244,000 in December 2018 to $248,000 in December 2019, about a 1.6 percent increase according to multiple listings service (MLS) data provided by Jed Backus, owner of Backus Real Estate in Hamden and the 2020 president-elect of the Greater New Haven Middlesex Association of Realtors, in a January 2 phone conversation with CT Examiner.
“During that period, from December 2018 to December 2019, the average sale price in Connecticut decreased from $335,741 to $333,063, or a less than 1 percent decrease,” said Backus. “The average is higher than the median [because of] stronger sales at lower end of the market. The struggling upper end of the market is bringing the average down.”
A statewide data search in the $170,000 – $269,999 range showed a 5.4% increase in sales from December 2018 to December 2019, said Backus.
In the $434,000-and-above market showed no change from December 2018 to December 2019, while the $850,000-and-above market declined about 3.7 percent.
In a data search that included the towns of East Lyme, Old Lyme, Lyme, Essex and Old Saybrook, the median price of real estate rose from $320,000 in December 2018 to $335,000 in December 2019, or about a 4.7 percent, said Backus.
The average home price in these towns increased from $407,929 to $413,356 over the same period, a 1.3 percent increase.
In the 10 years since the 2008 recession, Backus said that the growth in values had been modest, but lately reflecting “a little bit of a breakout.”
“We’re seeing small increases but the trend line is probably good overall,” Backus said. “Moderate increases can be fine. It keeps affordability and for a seller, it’s predictable.”
Housing trends for the military
“The trend we’re seeing is a lot more military are not looking just for temporary homes, they’re looking for retirement homes,” said Carol Christiansen, owner of Remax in Gales Ferry in Ledyard and president-elect of the Connecticut Association of Realtors, by telephone on January 2.
“When I first started in real estate, they’d say, I’m going to be stationed in the area for three to five years and I’d rather live off-base because they can use their BAH (Basic Allowance for Housing) to buy a house and be in a home rather than be in military subsidized housing,” she said. “Now we’re finding they say they really like Connecticut and they’re going to buy a home and if we do get stationed elsewhere we’re going to rent our house rather than sell it because we want to come back here when we retire.”
She said, compared to civilians, members of the military have money and jobs so that they can return to Connecticut, reversing the trend of workers exiting from the state.
Christiansen said that she expects Electric Boat to hire between 5,000 and 8,000 workers in the next five years, which will provide a huge boost to the regional economy.
“They’re hiring engineers straight out of college and they’re coming in in their early 20s to work on these government contracts. We’ve been very fortunate that after lagging behind the rest of the country and even the rest of the state, southeastern Connecticut is starting to be revitalized because of the influx of jobs that are coming in, and they are also young too,” she said.
Millennials: To buy or rent?
“I think what I’m seeing is that people may have misinterpreted millennials owning homes and the pressures against that. In our job markets, it’s rare that someone works for one company for 30 years, it’s hard to find that kind of stability and people are waiting longer to get married and start families,” he said. “A lot of the draws to owning a home, those points in life are happening later for upcoming generations, but doesn’t mean you don’t want a place for your child to ride a bike.”
He said he is seeing a wide variability in millennials’ interests and how they want to live.
“Millennials do not want just one thing, so the housing stock that they’re going to look to will be diverse. There is not one story here,” he said.
Grossman, however, said he saw more millennials renting than buying.
“What we see is an interesting trend where a lot of millenials aren’t willing to put down roots as quickly as they used to, so they might want to be a little more mobile with their jobs, they may stay for a couple of years and pick up and go someplace else. They don’t want to be tied to a home, they can easily get out of a rental, be there for a year and they can move on,” said Grossman. “As quickly as these new [rental] communities are being built, they’re getting scarfed up, pretty quick. There’s definitely a continuing thirst for rental housing.”
The rentals being built today offer club houses and fitness centers, and some have theaters, club rooms, dog-walking and dog-washing areas, he said. “They’re feature-laden, so they’re very attractive.”
Backus and Grossman agreed they are seeing far more construction in apartments than in condominiums.
“I’m seeing more development of apartments than condo and more apartments targeting walkable neighborhoods — that’s a reflection of convenience and economies of scale. It’s where the developer can build more densely,” said Backus.
The market for condominiums
Backus said that Connecticut’s market for condominiums had suffered more than for single family homes. Financing became more difficult to find due to industry benchmarks including a bank requirement of an 80-20 percent renter-to-owner ratio.
“Otherwise, the only market you’re going to sell to is to investors, so there was downward pressure on price that didn’t impact single family the same way,” he said.
Christiansen said she saw that impact in Ledyard where the single family home market is comparatively stronger.
“Our condo market in our area has been bad for 10 years — condo sales were down 17 percent. This year I’ve only sold three condos and two were for downsizing,” she said. “I also think that the resale on condos from 10 years ago, people can’t recoup the money and the value is not there.”
Condominiums attract a certain type of buyer, she said.
“If you’re a professional person and you don’t want to work on your lawn and you don’t care about having a swingset or a garden then that’s the place to be, but I think in our area we’re a little more suburban and people want to have a yard and that type of thing.”
Backus said his current observation is that one size does not fit all when it comes to millennial real estate buyers.
Cautious optimism
“We’re starting to see more move-up buyers and for a very long time we didn’t see too many move-up buyers because I think people who already owned a home were worried about the economy so they were just kind of willing to stay where they were,” said Christiansen. “Now they’re selling and then buying a more expensive house. That went away for a very long time when the market crashed, everyone was just kind of nervous and they just stayed where they were.”
The lower end of the market is strong but the high end still hasn’t recovered, she said.
“If you list your house for under $250,000 in this area, and it’s in decent condition, it’s going very quickly. [The area in southeast Connecticut] with the most inventory right now … is Stonington and most of that is for properties over $500,000,” she said. “There was a time I remember when we had five years of inventory over $500,000, I don’t think it’s that bad now but that is where the market is sitting.”
Grossman, who specializes in new homes, said he’s seeing slow growth, which he said showed consumer confidence in the housing sector.
“I don’t like to look in the rearview mirror. This is our new normal. I believe we’re coming out of that slump, the only direction is up as long as we can continue with good economics out there and continue to 2021 with good markets,” he said. “Most new builders would love to see one to two units per month. The trend is we should be able to get one new sale a month with the new construction — that tells me a lot about people’s comfort with the economics and wanting to buy new.”
Backus said real estate is particularly local in Connecticut — town by town, sector by sector, neighborhood by neighborhood — and it was important to analyze local data.
“In Connecticut we can get pretty down on ourselves. We’re not San Francisco, we’re not Denver, but it’s not doom and gloom either. We’re a fairly stable, predictable market,” he said. “With the differences between the median and average sales, the high end is struggling more than the low end and shows how local real estate is. You’ve got to dive into the data with a local expert to understand how big picture trends relate to bigger picture — call your realtor.”