Home Builder Not Swayed By Connecticut Housing Market Slide
According to the Connecticut Post, Bridgeport-based Primrose Cos. Inc. is again planning a 283-lot subdivision in Naugatuck, betting middle- class workers are ready to buy homes they can now afford after years of the real estate market in Connecticut outstripping their means.
“My feeling has been there is not a slump in the market,” said Primrose CEO and President John N. Guedes on Monday.
Guedes said he concentrates on building homes that cost between $200,000 and $450,000 because it makes good business sense. He said it is also because he feels building affordable homes for the middle-class is a worthwhile endeavor because they are the lifeblood of the state.
When the average house is selling for more than $650,000, there’s not much available for a husband and wife making $100,000 a year and worrying about college costs for kids.
That’s why, within the next month or so, the home builders will re-submit the application to build more than 250 homes in Naugatuck.
The homes will cost between $350,000 and $450,000, Guedes said, and would be built in stages over the next eight years on 400 acres.
The Naugatuck Planning and Zoning Commission rejected the plan last time and Primrose has had to retool the designs to meet those objections.
The company’s attitude flies in the face of statistics that indicate the housing market is slowing in spite of low home mortgage rates. Experts agreed, though, that Primrose is tapping into a market that needs more attention.
Terry Egan, editor-in-chief of The Warren Group’s publications division, said it sounds like Primrose has a good grip on the market.
He agreed that building affordable and working class housing hasn’t been a priority in Connecticut, especially in Fairfield County and bordering towns. As such, there’s not a large available supply.
Egan and Donald Klepper-Smith, chief economist of New Haven-based DataCorps Partners, said the Connecticut housing market appears to be headed toward a correction, but not a collapse. That would mean prices evening out or falling slowly.
Klepper-Smith cited the relatively low mortgage rates of less than 6.5 percent as one reason for market stability.
With prices moderating and mortgage rates remaining low, there appears to be less pressure to sell middle-class families risky home loan products, according to experts at Bridgeport-based People’s Bank.
Christopher Dannen, People’s retail sales manager in mortgage lending, said when demand and prices were high, some lenders encouraged customers to take exotic loans, which included extremely low initial payments followed by extremely high payments later as the interest rate ratcheted up.
He said some people took these home loans believing when the time for the high interest payments came they would have more money available because they would get promotions and raises. But if that doesn’t happen, those people can find themselves in real trouble, he said.
Egan said interest-only mortgage and other exotic loans like this work well for young professionals, such as lawyers, who are fairly certain that their incomes will rise in the next three years.
When the market is strong, people can get out of these loans by selling the house for more than they paid when they bought it. But when the market is weak and prices are falling, mortgage refinancing may not be an option.
The trick is to not get into this situation in the first place, says Daniel Resto, People’s home buying education manager, who added that first-time home buyers can take classes to help them navigate the process.
These classes also allow people to qualify for federal and state assistance programs that can sometimes provide low-interest Connecticut mortgage loans to help cover down payments.
SOURCE: Connecticut Post