Connecticut Housing Market: No Gains, But No Bubble
A lot of air came out of the Connecticut housing market in 2006. That much is certain. But the Hartford Courant says the declines didn’t resemble any bubble bursting.
After four strong years, sales of single-family houses in Connecticut fell by 14 percent in 2006, compared with the previous year, according to a new report Tuesday by the Warren Group, which tracks housing trends throughout New England.
The median sales price in the state rose by less than 1 percent - a stark contrast to the double-digit gains registered in recent years when low Connecticut mortgage costs boosted record sales, but nowhere near the sharp price declines seen in other overheated markets.
Despite the sobering statistics, economists believe the market is slowing in a contained, systematic way, and there is little fear that the bottom will fall out, as it did in the early 1990s when prices went into a tailspin.
Although sales of single-family houses in Connecticut reached their lowest level in a decade - coming in at 37,337 for 2006 - that’s still well above the 18,000 sales logged in 1990, when a devastating housing downturn hurt the state. By 1996, Connecticut mortgage demand picked back up and the real estate market was clicking again.
However, the hot market of the past four years has definitely slowed. While mortgage rates remain low, lenders are tightening underwriting standards amid soaring defaults among borrowers with tarnished credit.
Problems in the so-called sub-prime (or bad credit mortgage) market pushed Middletown-based Mortgage Lenders Network to file for bankruptcy, costing hundreds their jobs and health insurance benefits.
The tightening has the potential to further slow the housing market because lenders would be more selective about the kinds of home mortgage loans they make. And that process is only beginning.
The median price managed to eke out a slight gain for the year due to good monthly increases early in 2006. But the median price has fallen in four of the past five months, a trend that may continue in Connecticut through the first half of this year, economists say.
The deepest decline so far came in December, when the median price fell 3.6 percent, to $265,000, from $275,000 for the same month a year earlier. The decline indicates that sellers may be more willing to negotiate on price, but it also may signal a shift to the purchase of less expensive homes.
“Every market needs a breather,” said Timothy Warren Jr., chief executive of the Boston-based Warren Group. “That’s what I’d say we have here, a breather.”
Reflecting the statewide trend in December, the median price dropped in five of eight counties comprising the Connecticut housing market. Increases came in Hartford, Middlesex and Windham counties. The declines ranged from 10.4 percent in Tolland County - the highest - to 1.3 percent in New Haven County.
The percentage decline in sales in Connecticut in 2006 was about the same in Massachusetts for the same period. But Connecticut fared better when it came to prices, managing a modest increase while the nearby Massachusetts housing market saw a 5 percent decline.
Although prices rose heartily in Connecticut in recent years, the state did not see increases such as those in the Boston area or other parts of the country, where speculators were more active. So it is to be expected that declines in Connecticut would not be as severe.
SOURCE: Hartford Courant