Connecticut Mortgage Costs Price Out New Buyers

Anyone perusing the Connecticut real estate sections of late or visiting a Realtor’s Web site has seen the shocking prices, even for relatively modest dwellings.

Throughout the state, Connecticut mortgage costs have risen beyond what many can afford. But in the Southwest corner, nearest to New York City, that trend is the most disturbing.

In Greenwich, where hedge funds have become the rage, advertisements offer “starter homes” in the $950,000 range (true).

The housing situation isn’t much more encouraging in upscale New Canaan or Darien.

Real estate prices are somewhat lower in other sectors of this Connecticut housing market, such as Fairfield, Westport and Norwalk.

But still, except in rare instances, they’re still too steep for young professionals or seniors hoping to stay in a community they’ve called home for many years.

A young woman who grew up in Fairfield and now commutes to work in New York City says she can’t afford to buy a home - or even a condo - in her hometown. Although she earns a good salary, she still lives at home with her parents.

Teachers, police officers and firefighters are other productive members of society who can’t afford to live in the Fairfield County communities in which they work because of exorbitant housing costs.

What are the options for these mortgage loan aspirants?

Many of those who are priced out of buying a home in Greenwich, New Canaan, Darien, et al, have been forced to move “up the line” to purchase a house.

But a shift north to lower-priced towns among first-time buyers results in a longer commute. It also exposes these drivers to the high gas prices that are the bane of all of us - not to mention traffic.

Regrettably, there is little good news on the horizon.

Edward Deak, Ph.D., a professor at Fairfield University and a New England Economic Project (NEEP) model manager, was pessimistic about housing in his May 24 economic forecast for Connecticut.

Despite the level of wealth, low rate of unemployment and desirability of living in the state, he cited several negative economic forces:

“The share of non-prime and sub-prime (bad credit mortgage) loans for the state’s major metropolitan areas exceeded the national average as of the 2005 loan year. Many of these are adjustable-rate mortgages that will be resetting starting in mid-2007, with resets continuing through 2008.”

“Given the projected drop in home prices, borrowers who had expected to qualify for mortgage refinancing won’t be able to, leading to potential delinquencies, foreclosures and distressed sales.”

“Home loan lenders have tightened their standards, making it more difficult for borrowers with even good credit to secure mortgage loans on acceptable terms.”

“With home prices falling, inventories rising and sales declining in 2007 and into 2008,” Deak concluded.

“Potential purchasers may well become reluctant to acquire a home that could be worth 5-10 percent less in 12 to 18 months.”

SOURCE: Westport News