First Quarter 2013
By Candace Adams, President/CEO, Prudential Connecticut Realty
and Terence Beaty, Director, New Homes & Land Division, Prudential Connecticut Realty
Strength in Home Sales Continues
at the Start of the Year
Connecticut’s real estate market ended very strong last year in both closed sales and new deposits. As a result, the first quarter shows continued strength in closed sales and even more new business activity. Pending sales of single family homes rose 17.1% over the first quarter of last year. Deposits on condominiums also rose 29% to 1,790 contracts, the highest number of new deposits in three years. This activity also helped stabilize median prices in our area.
As indicated, new contracts for condominium homes soared in the first quarter by 29% over the same period last year, and 54% over the fourth quarter of 2012. This represents renewed confidence in the condominium segment, which had suffered from a lack of available financing in recent years. The activity is good news for condominium owners who have been waiting for their homes to sell. New contracts for single family homes jumped 17.1% in the first quarter as well. Growth was strongest in New London, Middlesex and Fairfield Counties for single family homes and in Windham, Middlesex and New Haven Counties for condominiums. New deposits for rented properties rose 2.2%.
Closed sales typically fluctuate during the year with the last three quarters usually experiencing the most activity. The first quarter started off stronger this year with single family homes rising 8.8% over last year. Closings were strongest in Windham County, up 15%. Condominium sales jumped 12% over last year with New Haven County leading the way with a 29% increase. Closed leases fell 2.6% over the same period as more buyers entered the market.
At the end of 2012, Connecticut’s standing inventory of unsold homes was 4.6 months for single family homes and 5.5 months for condominiums. Today, the single family home segment has 5.4 months of inventory while condominiums have 7.4 months of inventory, indicative of a typical spring market. A balanced market represents approximately 6 months of inventory
Median prices in Connecticut have stabilized as a result of a full year of consistent growth in deposits and closings. However, with each quarter of the year comes a slight variation in prices. Median prices for single family homes were higher by 1.1% over last year’s first quarter, but lower by 9.1% when compared to the fourth quarter of 2012. Condominiums were 3.3% higher than last year’s first quarter, but 5.8% lower than the fourth quarter. It is likely that stable prices will continue through this year given our recent growth.
Days on Market
The number of days on the market for a single family home has been above average in the last few years. However, the current 163 days has started to fall to a shorter amount of time. By comparison, back in 2005, days on market for single family homes stood well below 100. In 2009, days on market for single family homes was 143. Days on market for condominium homes remains higher by 3.2% over last year, also 163. In a balanced market the average number of days on market is 120 days.
The rental market in Connecticut slipped slightly in the first quarter with 2.6% fewer leases signed. As more tenants become homeowners, our historically strong rental market comes more into balance. Prices of those leases grew a modest 3.7% this quarter and the number of days it took to lease a property dropped 6.6% to 71. Some counties, like Hartford, New Haven and Windham, have seen growth in closed leases as well as new rental deposits.
New Housing Permits
Last year was a big year for housing permits, with 4,140 residential permits issued in Connecticut, averaging 345 per month. In the first two months of this year, Connecticut towns issued 480 permits or just 240 monthly. In order to maintain a healthy contribution to the real estate market, the home building industry should be adding 300 to 500 permits per month. New home inventories are quite low relative to the resale market and are sought after by a large segment of home buyers. The home builder industry has recently been urging governments to ease some restrictions and speed up the permit process to help spur new home construction.
Connecticut’s luxury market remained virtually unchanged in the first quarter of this year from the same period last year. There were 62 homes valued over $2 million sold across the state with a median sales price of $3,037,500. Our most active town was Greenwich with 37 sales, an increase of 23.3%; however, Greenwich experienced a 4.5% decrease in median price to $3,497,419. For most of Connecticut, the luxury market continues to be a value-driven market. One standout town for growth in Fairfield County is Westport where 15 sales occurred with a median price of $2,975,000. Last year there were 58 high-end homes sold in Westport alone. Nine of the 15 sales so far this year in Westport were new construction, a trend shared by much of Fairfield County. High-end sales also occurred this quarter in Darien, New Milford, Guilford and Old Lyme.
Foreclosure activity in Connecticut has continued at an elevated pace. The state completed 3,930 foreclosures in the twelve months ending in February this year, according to CoreLogic, a California-based data research firm. The inventory of homes in some stage of foreclosure represents 4.2% of all housing units, which ranks Connecticut 7th in the United States and 2nd in New England, behind the state of Maine.
The ranking has improved slightly since the October report but still lags behind much of the country. The judicial process in Connecticut is often slower than other states and Connecticut is unique in the types of jobs lost and not recovered. Jobs in finance, defense and insurance lost were concentrated in specific regions of the state and are showing little sign of returning soon. Records show most of the activity is in pre-foreclosure, which could be resolved with either short sales or through improving market conditions.
The Connecticut real estate market will be influenced by many factors, including jobs and available inventory. It appears as though there is good momentum and with record low interest rates and stabilized prices, it is the best time to get into the housing market. Credit will continue to affect those who qualify to purchase homes as lending standards become more stringent. A sustained improvement in our real estate market has the potential to improve consumer and business confidence, which can spur corporate investment in our economy moving forward.