Housing Slowdown ‘Taking Root’ In Connecticut
The Hartford Courant provides a rare report on Connecticuts housing bubble. “The number of houses for sale in Greater Hartford rose in February for the sixth month in a row, further evidence that a slowdown in the area’s housing market is taking root. The median sales price gained 4.1 percent, to $239,950, up from $230,500 for the same month a year earlier.”
“That increase compares with 5.8 percent in January of this year and 14.2 percent in February 2005.”
“Closed sales fell 20 percent, to 484, down from 605 a year earlier. Pending sales, an indicator for sales volume in the next two months, were also down by 6.32 percent, to 904, from 965 a year earlier. The inventory of homes for sale jumped 32.1 percent, to 4,228, up from 3,200 a year earlier. It represented the largest rise in the six-month run of increases.”
“Real estate agents said that having more homes on the market will benefit buyers, giving them more choice and breathing room to make decisions. There will be less pressure to jump at the first house they see or bid up the price, worried that they won’t be able to find another house. ‘Now they can go home, sleep on it and go back the next day,’ said John Zubretsky in Wethersfield.”
“Sellers will have to adjust their expectations, price their properties reasonably and make improvements that show their homes favorably to prospective buyers.”
“‘The days of the `as is’ sale are over,’ said Adorna Carroll in Berlin. ‘The seller may have lived with a deficiency. But a buyer won’t look at it that way.’”
Thanks to the reader who sent this in.
“Sellers will have to adjust their expectations, price their properties reasonably and make improvements that show their homes favorably to prospective buyers.”
“‘The days of the `as is’ sale are over,’ said Adorna Carroll
INNERESTING STUFF…
Why? Because these are BOILER PLATE responses heard all over the nation in recent weeks.
If we had a computer program that could detect the same phrases and quotes written in the press… we would see that these types of comments are quickly following the “soft landing” BOILER PLATE quotes from weeks and months past.
Talking points. Everybody gets on the conference call and coordinates what is going to be talked about this week and how it is going to be talked about from the Sunday news shows right on down to the local rag. Remember, the more people here the same thing no matter how preposterous, the more it is taken for fact.
Audet,
I agree with you… and the same “energy” that JACKED UP the prices nationwide- will most definitely be the “energy” that brings it back down to earth.
As discussed before, realtors + associates have used the PRESS to their advantage over the past several years… and now are trying to SUPRESS the media from spreading the news that IT’S OVER.
A google search on “housing ’soft landing’” returns 233,000 hits.
No wonder you’re Amazing Russ!
I never thought of simply googling it
And google doesnt have access to the thousands of standard newspapers, magazine and other old fashioned PRINTED media (that are not online) !
This is going to be the new realtor spin that the only correction in pricing is going to be that the seller bears the fix up costs .
How about “Hey Buyer you get a 2300 sq. ft. house for the same price you would of got a 1800 sq foot house for in mid 2005 “
There has to be more correction then dropping the price per sq. ft.. When 30 yr old houses are selling at the same per sq. ft. as new construction why would anyone buy a used home. Buy new, choose you color of carpeting, tile, paint, etc, new appliances, get a five year warrantee and after five years sell to someone else. Buy old and you have $10,000 to $20,000 of hard money fix ups that you can’t deduct and now you’ve added $10,000 to $20,000 dollars to your purchase price over the new construction. Until prices drop, used property drops more, and property drops or rises by virture of location, it is not a buyer’s market.
I agree with you on everything you say
Of course with all of the new houses, your backyard is the size of a postage stamp with the neighboring houses towering over and not to mention the shoddy construction done by the Home Depot day laborers.
Another big difference, at least in areas like around me, is that having mature shade trees for othe summer sun makes a huge difference. New developments typically have little or nothing in the way of shade. Long time to wait for the trees they plant to grow mature enough to provide shade.
Depends on construction. Newer construction seems to be slapped up quickly and with cheap materials. I prefer older construction - thicker beams and framing, plaster as opposed to 1/4 inch drywall, etc.
My experience with newer construction in California was that the walls had no sound insulation properties whatsoever!
The idea that older construction is better than newer construction is a “Wives Tale”…
Absolutely not a wives tale. Read consumer reports story called “housewrecked” — newer homes are often built on the cheap - with lousy warranties -that builders often can wiggle out of. There is something major to be said for standing the test of time. I don’t know where you got that idea, but it certainly wasn’t from a structural engineer…
“The idea that older construction is better than newer construction is a “Wives Tale”…”
When we were looking for a house 5 years ago I couldn’t believe how shoddy the houses that were about 2 years old looked already, even though they had clearly looked as good as the houses that were new when they were built. It was the cheap materials, such as the fake molding, that couldn’t stand up to normal wear and tear without looking like garbage. We ended up buying a house that was built in 1984 that still looked good even with wear and tear. I would much rather have a well built and maintained older home than a poorly built but shiny new one that will look shoddy in a couple of years
Looked at townhouses in NOVA in 2002. I was amazed at how shoddy some of these upscale townhouses were. I saw several that were no more than 2-5 years old that had rotting window frames on the outside. There is also the cheapass ($1 sq/ft) carpet that the builders put in — it completely wears out in two years. In contrast, my parents carpeting, except for some stains, was still going strong after 17 years, with very little visible wear.
To me, a 20 or 30-year-old house still sounds like basically a new house. I figure if a house is still standing after 75 or 100 years or more, it’s probably fairly solid. I’ve spent most of my adult life living in buildings that were at least that old. Most post-war construction lacks character, and tends to be in more outlying areas anyway.
Sorry scdave. I’ve said this in other posts and I’ll say it again here….I bought a house in 1979 in Berkeley, CA built in 1907 and it was the BEST house I’ve ever had or lived in.
….redwood panels in the dining room, 5-6″ baseboards, redwood pocket doors between the living and dining room (with fireplace), built-in china cabinet with pass-through door to kitchen…..a great house. We took 2 years to repair and remodel (window replacement, new roof, foundation, added carpeting, updated the wiring and some of the plumbing…and other stuff), with the help of a 3% Berkeley redevelopment loan. Much of the repair was what was expected for a house that old and which had gone through a few owner hands. A LOT of work was done on that house. The back yard was HUGE…sufficient for a garden, fruit trees, kid’s portable swimming pool.
The character in that house was outstanding. I still drive by on occasion to see how its being taken care of.
BayQT~
Not so…
One of the myriad problems faced by appraisers, is that for around a decade now, the el-junko build quality and crappy workmanship of today’s home have barely allowed them to meet the required 30 Year Remaining Economic Life measurement (or the required time a house can meet the utility for which it is intended) necessary to qualify it for a 30 year mortgage.
If you say less than 30, all hell breaks loose in underwriting.
Another one of those strong-arm situations so prevalent with mortgage lenders.
And offering 40/50 year mortgage instruments on allot of this new construction garbage should be regarded as lender fraud.
These are all generalizations. Retro construction using recycled materials from older buildings is becoming popular now, and in many ways that by its nature closely mirrors the older construction both in materials and in method. Most modern builders prefer to get rid of all trees and put in new ones because that frees the lot during construction, but building “up against the trees” is happening a lot more nowadays. Oddly enough, there are some problems that come with homes being very close to and under the canopies of large old trees. It is also very difficult to manage urban tree cover. Some older subdivisions look great because of all of the fifty year old trees, but are in fact doom to soon start thinning out or going bare as the old trees die out or are killed and are not getting replaced.
This is all really important stuff to discuss because much of what is most critical are all design decisions that might not cost money, or in the case of recycled materials might even save it. Even tree huggers when looking at all the facts might prefer new appropriate trees be planted to replace sick old trees with longstanding conflicts.
Oh sure, there are things to look out for, like a root system too close to the house that can crack a foundation, branches that could come off in a storm, and so on.
One of me recent housing fantasies has been to do a barn conversion–old barns can be purchased fairly cheap and turned into houses. You still have to get land, utility hookups, and interior amenities, so it may not on the whole be cheaper than new construction, but a lot more fun.
My point is realtors are claiming “brisk sales” in some areas without
stating that the brisk sales came about by buyer getting so much more sq footage etc. for the price . This is a form of price reduction . Sellers bearing fix up costs ,paying points , HOA fees for a year etc . is another form of price reduction .
Well said Housing Wizard-
In my opinion, these are the “soft” ways of reducing prices. Definitely trying to FLY UNDER THE RADAR.
But as most of us agree, these are the EARLY DAYS of a full blown MELT DOWN.
Someone on the blog used the analogy of trying to turn an aircraft carrier, once the decision has beem made to go in a different direction…
YUP, it takes awhile for the housing market to change course, as well. We’re having the STARE DOWN stage right now, where sellers don’t have a clue, and the buyers have a clue… but are waiting on the sidelines to “see what happens”
Sort of like the LULL BEFORE THE STORM.
Question: what is an unoccupied home’s requisite annual appreciation which would allow a speculator to break-even?
In Hartford, for example, the median home apparently appreciated 4.1 percent. At the same time, a speculator would presumably have had to pay some percentage in taxes, insurance, maintenance and interest. My suspicion is that a 4.1 percent annual appreciation results in a net loss to a speculator.
So… what level of annual appreciation will leave homeowners happy and yet cause speculators to flee?
Most short term speculators arent going to hang around for 4.1 %annual appreciation .
yeah, you can get 4% in a savings account
just saw a special 8 month CD with 5.00% apy with the local bank here.
Most short-term speculators will flee at 4% appreciation but I think most long-term homeowners would be happy with 4%. Plus, 4% means there is some normalcy to the market which is good for both buyers and sellers.
check out this website:
http://www.itulip.com/
Brad,
Thanks for the tip. Ben- this article would be great to post. Here are some excerpts:
“One thing can be said for the housing mania: It’s kept the economy afloat since the bursting of the stock market bubble in 2000. (Wall Street economists estimate that 40 to 50 percent of the growth in GDP and employment over the last several years has been driven by the housing boom.) When the dot-coms went up in smoke, Alan Greenspan’s Federal Reserve drove interest rates down to 1 percent to contain the economic fallout. But that “cure” is what got the housing mania going; low interest rates made borrowing irresistible, and the nation’s speculative spirits were diverted away from Wall Street and toward home sweet home.
But now that all looks like it’s coming to an end, thanks in part to the Fed’s round of interest-rate increases. Sales volumes are slowing, prices are flattening or even declining, mortgage demand is easing and the inventory of unsold houses is rising.
So what’s next? Deflating the housing bubble is likely to take some time. The housing market isn’t like the stock market; it’s a lot slower, and its harder to dump one’s house in a panic than 1,000 shares of Pets.com. But removing the stimulus responsible for about half the economy’s recent growth has to have an effect. That effect could be anything from a mild drag on an already limp economy to a real financial crisis.”
“… things could get quite unpleasant. So many households have taken on so much mortgage debt that if prices merely stop rising, they’re going to find themselves under water. And the broad economy has become so dependent on home-equity credit that its withdrawal could come as a terrible shock. Maybe the economy will finally have to face the consequences of the collapse of the 1990s stock-driven boom that it managed to avoid by speculating on housing instead. In fact, the main thing arguing against that possibility is the economy’s stunning ability to evade its dates with destiny time after time.”
Well said my friend
Brad,
Thank you very much for the link to the itulip.com site. For anyone who did not check it out, I HIGHLY recommend it. They started up the forums again…check it out!
(Newer construction seems to be slapped up quickly and with cheap materials. I prefer older construction - thicker beams and framing, plaster as opposed to 1/4 inch drywall, etc.)
I was told, in a graduate school housing market class, to try to buy houses built in down years for construction. These days, even the cheapest materials get used, and even the worst workers get hired. When Toll Brothers is doing 1/2 the volume, it will be using the best half of both.
It’s interesting that you mention that. When I was looking to purchase my condo a few years back the realtor I used steered me towards some slightly older ones as he said they were better built. Our condo tract was built in 1994, when the r/e market was dead here in SoCal. Since no one was touching condos then, the builders had to make these extra appealing for buyers.
In future decades, it is possible that homes built in the early 2000’s will have a stigma about them in the marketplace.
Let’s talk about the phrase “soft landing.” The mere mention of the word “landing” means descent or decline. How can you land without descending?
Did you think they want the public to know what they mean ?
talk about a meaningless phrase. they fail to mention the drop in altitude before the soft landing occurs. i fly at 35,000 feet, and return to earth 6 miles below with a nice soft landing.
the market is flying at 35,000 feet right now. it’s 6 miles down.
That isn’t really true, though. The market is around 50% out of whack in various bubbly areas. Bring inflation up to 5-10% and in 5-10 years simple price stagnation will wipe that all out completely, utterly, fully, forever.
This is part of why the last bust was so insidious. Even at the worst most properties had valuations which uncorrected for inflation appeared to hover or loose only 1-2% per year. Only people who could do the math could really tell the difference and see that what had happened was a major wipeout. For years no owners wanted to talk about the value of their home.
Re: the superiority of older construction, I’m not so sure. Plenty of junk was built back in the day. Maybe a 100 year-old farmhouse is better than today’s cinstruction, but 50’s and 60’s tract houses were basically the McMansions of their day.
My in-laws live in a 50’s tract home, and it is absolute junk. Paper-thin walls, cheap fixtures, etc. There is nothing nice about it.
I think this has a lot to do with the part of the country you are in. Here in LA, builders have been slapping together junk for decades. Standards seem higher elsewhere, especially in the Midwest and out east.
I think in areas where you get real winters, the building standards need to be higher just to make houses habitable year-round. I would expect that builders in those areas would cut corners more on details and finishes.
The housing market in greater Hartford peaked pricewise in mid 2005- we are now at a ‘plateau’. Thanks Ben for posting.
Housing here is probably the ‘cheapest’ in the Northeastern corridor- except for Philly, and Springfield MA-however job growth is sluggish- and the region is really hanging on to the fortunes of the national economy- which is not good. The central CT area- as well as the Litchfield hills to the west- and the ‘quiet corne’ in the northeast has had an influx of X New Yorkers, X Bostonians, as well as burned out DC area escapees as well as Californians- which has driven up prices- the economy here really sucks.
The economy sucks in all of New England. Only thing keepin’ it alive are massive medical centers taking care of the WW II Greatest Generation, and the legions of public employees who feed off their property taxes.
CT sfh went down a solid 30 % from 1989 to 1993
WEEEEEEEEEEEE
My 1922 Craftsman (only 9XX Sq. Ft.) has floorboards that are as long as 21′ of continuous wood. There was no attic insulation, but when I put it in, I noticed that the redwood 2″ x 4″s actually measured 2″ x 4″. All doorframes remain perfectly square, even after all of the earthquakes. Wow!