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
Posted by Richard Barber on Feb 22 2007 under Connecticut
When completed, the 310,000-square-foot structure along Interstate 91 in Wallingford, Conn., will be a striking blend of arched rooflines, cubic office blocks and glass.
But its occupants won’t be who was originally supposed to take over the building. Earlier this month, signs trumpeting the would-be owner of the building - Mortgage Lenders Network (MLN) - were taken down.
Even as hardhats braved freezing temperatures to install the structure’s environmentally friendly elements, the Connecticut mortgage company filed for bankruptcy, then revealed its intentions to liquidate.
A home loan lender once touted as one of the state’s brightest hopes for job growth is now facing complete disintegration, with customers, creditors and employees alike threatening legal action.
How did a company that drew Gov. M. Jodi Rell to the groundbreaking of its new headquarters less than a year ago fall so far, so fast?
One clue can be found on a website illustrated with big red letters and an image of an explosion: “The Mortgage Lender Implode-O-Meter.”
The site, run by a self-described “scientist, mathematician, entrepreneur and activist,” devotes itself to tracking the fate of the 20 mortgage loan providers that have “gone kaput” just since December of last year.
Many of the casualties specialized in so-called subprime lending, or bad credit mortgage loans to those with poor credit. Subprime lending took off in the recent housing boom as a high-risk, high-profit niche in a business with traditionally low margins.
But home loan lenders who leapt into the subprime lending field now find themselves suffering as those homeowners fall behind in a tough housing market and job market.
Fueling the crisis is a clampdown by those who keep the money flowing behind the scenes. Big commercial and investment banks keep smaller firms afloat with sa o-called “warehouse” line of credit until they can sell their loans to investors.
But when mortgage payments flag, those banks can pull back, threatening the smaller lender’s viability. In addition, inferior underwriting and risky financial moves have added to the woes of many mortgage lenders, according to Allen Puwalski, financial analyst at the Center for Financial Research & Analysis in Maryland.
“It’s a combination of a lot of competition in the sub-prime lending space during 2005 and ‘06. They started loosening their underwriting standards - the kinds of loans they were underwriting became dependent on home prices appreciating at a pretty rapid pace. When that stopped, the underwriting issues came back to haunt many of the players,” Puwalski said.
Despite its recent growth, Mortgage Lenders Network (MLN) suffered for its lack of financial heft, Puwalski says.
“They were vulnerable because of their size and their concentration in that kind of lending. You’re going to have a shakeout of weaker players,” Puwalski said.
MLN, which started with just seven employees in 1997, followed a trajectory similar to that of many of the recent failures: rising high with the housing market boom and then going into free fall with the downturn.
By early 2006 the mortgage lender had expanded to 1,300 workers in five U.S. states, and the 650-person Connecticut workforce was expected to balloon to 1,200 strong by the time MLN moved into the Wallingford headquarters at the end of this year.
The company’s high point was probably the groundbreaking of the Wallingford headquarters last May. Town and state officials praised the company and its promised $2 million contribution to the town’s grand list.
“MLN is a model for job growth in Connecticut,” Rell said at the event. “MLN’s decision to build their new headquarters in Connecticut speaks volumes about the state’s high-skilled workforce and diversified financial services industry, as well as our ever-improving business climate.”
By then the housing market had weakened and foreclosures nationwide were inching up. But MLN continued to add workers through the fall, to a total of 850 in the state at its peak, and was on track to make $3.3 billion worth of bad credit home loans in 2006.
Continue reading in the Connecticut Business News Journal …
Posted by Richard Barber on Feb 20 2007 under Connecticut
The number of single-family homes sold in Greater New Haven, Conn., fell nearly 11 percent in 2006, while median sales prices rose about 3 percent compared with 2005, according to the New Haven Register.
In the 29 Greater New Haven communities tracked by research firm and real estate brokerage H. Pearce, 6,565 homes sold in 2006, down from the 7,345 sold in 2005.
But as unit sales dropped, the median sales price continued to inch upward, to $353,334, 3 percent above 2005’s median price of $343,400. That increase was far lower than in recent years.
Sellers have begun to realize that in order to sell, they need to seek more realistic prices, said Paul Gradwell, president of the Greater New Haven Association of Realtors.
“It has started to sink in. It’s a reality check,” he said.
For homes priced appropriately, there’s no danger of disaster, as Connecticut mortgage rates are reasonable and the market remains favorable.
“If they’re listed right, they’re selling. Now home buyers have the right to be more choosy now because there’s more on the market,” said Nanette Sandini, manager of H. Pearce’s Wallingford regional office.
Houses took longer to sell in 2006 than the previous year, spending an average of 75 days on market, up 17.2 percent from 64 days in 2005.
Essex saw the largest drop in home sales last year. In 2006, 95 homes were sold there, down 29 percent from the 133 sold in 2005. Middlefield posted the biggest gain in sales, with 42 houses sold in 2006, up 27 percent.
Madison had the most expensive homes in this segment of the Connecticut housing market last year, with a median sales price of $549,900, up by 5 percent from $525,000 in 2005. Cheshire saw prices jump by the largest percentage, with a median price of $441,000, up 19 percent from 2005’s median price of $370,000.
“Our market is still seeing an increase in sales prices,” Sandini said, adding that she expects both sales prices and activity to increase this year starting in the spring.
With the peak spring buying season just a few months away, and mortgage loan applicants seizing the opportunity in this buyer’s market, experts predict a strong year in home sales in 2007.
Though unit sales have dropped by double-digit percentages in recent months, Sandini said that historically low mortgage rates “will be attractive enough to keep the market going.”
Posted by Richard Barber on Jan 25 2007 under Connecticut
In a continuing slowdown of the New England housing market, the number of single-family homes sold in Connecticut fell 14.5 percent in November compared with a year ago, according to the New Haven Register.
A total of 2,772 homes were sold statewide in November, down from 3,241 in November 2005, the Warren Group reported in its latest analysis.
Through the first 11 months of the year, 34,462 homes were sold throughout the Connecticut housing market, down 14.6 percent from the 40,336 sold during the same period in November 2005.
As Connecticut mortgage costs remain out of reach for many buyers after years of meteoric price growth, the market will continue to experience double-digit drops in the number of homes sold in the coming months. Home prices will remain relatively stable, however.
“Prices have held up pretty well,” said Warren Group CEO Tim Warren.
Statewide, the median price in November was $263,700, down 2.3 percent from a year earlier. The year-to-date median home price of $276,500 was 1.5 percent higher than a year ago.
New Haven County has fared better than other parts of the state in the current housing cycle due partly to its relatively strong employment rate, the Greater New Haven Association of Realtors said. Connecticut’s real estate fluctuations typically have less severe impacts on areas with higher employment.
- In New Haven County, the year-to-date median price of $254,800 came in 7.5 percent higher than the $237,000 year-to-date median of a year earlier in November.
- The monthly median price of $240,000 in November was 0.8 percent below the $242,000 median in November 2005.
Another factor helping New Haven County is that the area’s housing prices did not rise as rapidly as those in other parts of the state, so they will decrease less when returning to normal, leaving the door open for potential buyers to capitalize on favorable home mortgage loan rates.
“The ones hardest hit were the ones that went up the farthest the fastest,” he said.
After several years of rapidly rising activity and prices, sellers in the Constitution State have had to become a lot more realistic when pricing houses. People should be expecting a more normal price for their home, but at the same time, we’re not looking at gloom and doom.
Posted by Richard Barber on Jan 11 2007 under Connecticut
State banking regulators are investigating the viability of a Connecticut mortgage lender that brokered billions of dollars in mortgages to people with poor credit histories - after it stopped funding loans and accepting new applications.
As we reported yesterday, Mortgage Lenders Network USA has ceased issuing new loans, and has laid off at least some of its employees this week. Now investigators are looking into the mortgage company to see that it’s still viable for conducting its business.
Bank investigators acted after receiving tips, though they have not yet disclosed what information the tips conveyed. The firm, which has touted itself as one of the country’s top bad credit mortgage providers, said the recent problems have forced its hand and that it is “currently exploring strategic alternatives” for its wholesale business lines.
Opening in 1997, Mortgage Lenders Network USA rapidly grew to employ more than 1,300 people, and in May, it opened an enormous new headquarters in Wallingford, Conn. It stated its 2006 goal was to produce more than $12.1 billion in mortgage loans.
The Connecticut state Department of Economic and Community Development has halted a proposed $4 million state assistance package for MLN until state officials “understand the impact” of the recent layoffs, according to James Watson, a spokesman for the state agency.
The assistance package was to help MLN build the sprawling Wallingford complex that was projected to create 1,000 jobs. Agency officials have tried to contact MLN, but their calls have not been returned. No state money has been spent by the mortgage lender on the project.
Posted by Richard Barber on Jan 04 2007 under Connecticut
According to the Hartford Courant, the state of Connecticut got a long-anticipated whiff of the slowing housing market in 2006. But it could be a whole lot worse.
Figures show Connecticut home sales dipped through much of the year, with single-family homes experiencing the biggest decline. But prices remained steady until some modest declines rippled through the market in the fall.
Even so, through the first 10 months of the year, the median sales price - where half of the sales are above and half below - was up 1.8 percent, to $278,000, from $273,000 for the same period in 2005.
By year’s end, White House economists said the worst of the slump could be over. National stories painted a scary picture of deep price declines in some overheated markets around the country, even as mortgage rates remain at relatively low levels.
The Connecticut housing market remained healthy, just not at the robust levels of the past few years. As Connecticut mortgage costs grew more and more expensive from 2000-2005, demand tapered off in 2006. But it did not experience the kind of drop-off seen in other overheated markets.
Will the state avert the brunt of the real estate slowdown as 2007 begins? The coming months will tell. As the number of sales slowed in Connecticut, the classic pattern started to unfold, mildly:
There were more properties on the market, shifting the negotiating power toward buyers. Sensing the change, sellers appeared increasingly willing to lower their price if it would snare a buyer.
We’ll see if this pattern continues, or if the past trend of steady growth returns to the Constitution State sooner than many experts think.
Posted by Richard Barber on Jan 02 2007 under Connecticut
Housing sales in New London County fell nearly 19 percent during October and skidded more than 33 percent in nearby Windham County, according to figures from a Boston-based real estate firm.
The Warren Group, which publishes the Commercial Record real estate newspaper, said New London County’s 18.8 percent fall in sales during October compared to a statewide decline of 7.7 percent.
Despite the plunge in Connecticut mortgage demand across the county, prices for housing in New London County rose 6.25 percent. The median price rose from $240,000 in October 2005 to $255,000 in October 2006.
In Windham County, sales fell 33.1 percent and median housing prices fell 4.7 percent, the Warren Group said. The median price of housing dropped from $212,950 in October 2005 to $203,000 in October of this year.
Timothy Warren Jr., chief executive officer of the Warren Group, said the October declines reflect the continuing slowdown in the Connecticut housing market.
“As home sales continue to fall, we’re now seeing the impact in terms of price drops,” Warren said. “We’ll be watching the Connecticut numbers closely over the next few months to see signs of bottoming out as we head into spring.”
Warren also said the month of October marked the first time in nine years that both single-family housing and condominium prices fell in tandem in Connecticut.
On a statewide basis, the median price of a single-family house fell 2.4 percent, from $271,500 in October 2005 to $265,000 in October of this year. New London County’s condominium market also lost steam during October, with sales falling 55.4 percent.
Despite that drop, median condo prices rose by a modest 4 percent, from $182,750 to $190,140. But you can still see why they may be a more affordable purchase for those looking for a mortgage loan in the area.
The number of homes and condos sold in the Constitution State dropped at a steeper rate in October than the median sales prices, but the rates varied greatly across the counties, according to the Connecticut Post.
In Tuesday’s report, The Warren Group compared October 2005 figures to October 2006, as well as year-to-date numbers for each year. The Boston-based company’s workers make monthly trips to the state’s 169 city and town halls to diligently record single-family home and condo sale information.
“You’re doing much better than Massachusetts,” CEO Tim Warren said of Connecticut’s figures.
This year, the median sale price in Connecticut is up 1.83 percent to $278,000; the Massachusetts real estate market, by comparison, is down 5 percent.
The Warren Group compiles results throughout Massachusetts, Rhode Island and Connecticut, and is beginning to compile figures from the northern New England states of New Hampshire, Vermont and Maine.
New England home prices are high relative to the rest of the country, but the percentage increases never approached the 30-50 percent price hikes of other states.
Overall, Connecticut mortgages are in decline and as a result, sales were down 7.7 percent in October, and more than 14.5 percent for the full year. October’s median price was down 2.39 percent, to $265,000, from October 2005, but the year-to-date price was up 1.8 percent, to $278,000.
- Fairfield County sales were off 19 percent in October, and 22 percent for the year, while the October median of $475,999 was essentially flat and the year-to-date median of $545,000 showed a 4 percent gain.
- October home sales in New Haven County dipped 1.7 percent, and nearly 15 percent for 2006 so far. The median price stayed at $250,000 for October, but edged up 8 percent to $255,000 for the first 10 months of 2006.
- Condo sales dropped 14.5 percent in October and 11 percent for the year to date; the median price was off 1 percent, to $190,000, for the month, but up 3 percent, to $190,500, for the first 10 months of the year.
- New London County saw a precipitous drop — more than 55 percent — in condo sales for the month, but that flattened out to a 4-percent decline for the year so far as Connecticut mortgage rates fell considerably.
- Condo sales in Fairfield County dropped nearly 29 percent in October, and were off 17 percent from 2005 sales. The median price dipped 11 percent in October, to $275,000, but edged up a half a percent, to $292,500, for the year to date.
- But an 18 percent sales drop in October in New Haven County, plus a nearly 14 percent drop for the year so far, doesn’t mean lower condo prices. The median price of $175,000 was up 10 percent from October 2005, and the year-to-date price of $167,500 was nearly 5 percent higher than 2005.
“I would probably agree with that, as far as the number of purchases we have done,” said Gina Mancuso, a paralegal with Residential Title & Escrow Services Inc. in Milford, a company specializing in real estate closings, title insurance and some contract negotiations.
“We’re seeing somewhat of a slowing in the marketplace,” said Don Hull, President and CEO of the Connecticut Multiple Listing Service.
He describes it as a market correction, not a bubble, and said inventory is about 15 percent higher than a year ago, when record low home loan costs bolstered record sales and price increases. This is partly because some sellers and agents are still holding out for higher prices.
The average time on the market is up 11 days, to 86 days, from a year ago.
He does expect the Connecticut housing market market to equalize — find a happy medium between a buyer’s market and a seller’s market — by the time the second or third quarter of 2007 hits.
Hull said he thinks the high end of the market is affected more than whole areas, and that this slowdown is not comparable to that of the late 1980s and early 1990s. That was a product of economic conditions — such as mortgage rates of around 18 percent, a slow job market and overbuilding.
“Those kind of things don’t exist in the market right now,” Hull said. “The market back then was similar to that found in Florida and other states today. We didn’t see that sort of excess this time around.”
Posted by Richard Barber on Dec 21 2006 under Connecticut
Homeowners across New England seemed to have it all in the first half of this decade: rapid jumps in price made homes stellar investments, and if they decided to sell, buyers eagerly paid top dollar.
But 2006 is shaping up to be the year the region turned into a buyer’s market, with a housing slump hitting New England harder than most of the rest of the country, and predicted to stay that way through decade’s end.
The downturn cuts across the housing spectrum, from Maine to Connecticut. Economists predict New England’s historically volatile market will recover more slowly than the nation’s even if home mortgage costs remain low.
The downturn has sellers going to unusual lengths to unload properties.
The Boston Globe reports that in suburban Somerville, just outside of Boston, an area condo developer trying to sell the last of 18 units slashed prices — to $599,000, nearly 17 percent below what a comparable unit sold for three years in the same project.
“In any other market, this would be gone,” said real estate agent John Schwagerl, who has two potential buyers holding off on placing offers until they can unload their current homes. “The phones are ringing less. But when they do ring, there’s more work involved with it.”
In downtown Boston, the developer of a 14-story condo project held a real estate auction — a sales tool rarely used since the housing downturn of the early 1990s.
Bidders at the Folio Boston project’s October auction snapped up 31 luxury units in less than two hours at an average price of $778,000 — about 20 percent below the average asking price before the auction. The head of the firm that ran the event expects the market slump will lead to more such sales in Boston and elsewhere.
New England saw home prices rise by 73 percent from 1995-2004 compared with 44 percent growth nationwide. Gains in some areas were sharper, with prices nearly doubling in Boston.
Now New England is seeing a return to what it experienced at the end of the last century: prices growing faster than the nation’s through most of the ’80s, only to take a dive when boom turned bust in the 1990s. The region is prone to bigger swings than areas such as the Midwest, making both the ups and downs of real estate far more pronounced.
“The downturn here is more severe because the upside was so big,” said Karl Case, an economics professor at Wellesley College.
New England and the Northeast in general are more prone to wide housing market swings because development is more dense, with less available land to build. There are more restrictions on development, so it takes longer for developers in built-up areas to put up new houses.
The New England Economic Partnership projects the region’s home prices will remain flat through 2010 — in part because of price declines across parts of the region this year — and fall short of the U.S. forecast of 2.1 percent growth per year through the decade’s end.
Among New England’s six states, only Connecticut and Vermont are expected to see housing prices rise at rates above national averages through 2010. Massachusetts mortgage demand is projected to drop by 1.8 percent as the Bay State — the region’s most populous — is hit the hardest.
Meanwhile, permits to build new homes are expected to decline in all New England states through 2010 by 6.2 percent. That compares with a slip of just 0.3 percent per year expected for the nation, which is experiencing faster population growth than New England.
Every state in the region except New Hampshire ranked among the nation’s bottom 10 in housing starts from 2000-2004, the Federal Reserve Bank of Boston reported.
Yet as those interested in buying and selling continue to jockey for position across the New England region, industry officials are reminding area customers that most homes will likely yield some healthy investment returns — provided the owner holds onto the property for a few years.
“People who buy now will come out just fine. People who have a little guts and act now can expect prices will eventually get better,” said Fred Meyer, of University Real Estate in Cambridge.
The Connecticut Department of Banking has adopted guidelines for state-licensed mortgage brokers intended to help educate consumers about non-traditional mortgage loans.
They pertain mainly to the marketing of interest-only and option ARM loans, the Constitution State’s Deputy Banking Commissioner, Alan Eicchetti, told the New Haven Register.
The guidelines detail various risks and qualifications, among other data, pertaining to the increasingly-popular high-risk mortgages, which present borrowers with the greatest likelihood of problems.
While non-traditional mortgage loans can be a smart investment for certain borrowers, people should be aware of all inherent risks and components before deciding on a mortgage. An interest-only mortgage, for instance, doesn’t build any equity for a set period of time.
Moreover, an option ARM can even result in negative amortization, as borrowers are given a set of choices as to how much they want to pay each month. Many elect to pay too little.
For the first time, the newly-enacted guidelines give all state-licensed brokers a set of uniform recommendations for marketing such Connecticut mortgages to the public.
“(They) give advice to people that underwrite these loans,” Eicchetti said. “The intended result is to better educate borrowers. “This is an effort to help consumers.”
The newly adopted state guidelines largely mirror federal ones adopted in October.
The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators introduced federal guidelines last month, but those pertain only to federally regulated financial institutions. The Connecticut state guidelines apply to any state-licensed mortgage broker at an insured financial institutions and their affiliates.
“These guidelines are designed to level the playing field in the mortgage market in order to protect consumers from taking on high-risk mortgages without having a full understanding of the terms of such loans,” state Banking Commissioner Howard F. Pitkin said in a written statement.
All states are being urged to adopt guidelines that mirror the federal ones already in place, ensuring consumers will be equally protected by all 50 U.S. states, and that mortgage underwriting everywhere will be subject to similar standards.
