Hartford Courant ~ January 17, 2016
The Long Road Back For Connecticut’s Housing Market
Corey and Sarah Cusick outside their home on Park Road in West Hartford. They have had their home on the market since April and finally sold it just before Thanksgiving, after multiple price reductions and other costs.
The soaring number of Connecticut home sales in 2015 should be cause for celebration heading into the new year, but a critical component to the state’s housing recovery is late to the party: the selling price.
Corey and Sarah Cusick know that all too well.
The couple put their 1930s Tudor in West Hartford on the market last April for $384,900. Over the next seven months, the Cusicks cut their price six times and finally agreed to sell their home for $317,000 in November, kicking in another $10,000 to cover the buyer’s closing costs.
“We felt like we were giving the house away,” Sarah Cusick said.
As Connecticut enters the fifth year of a housing recovery, experts say sellers like the Cusicks — forced to drop their asking prices — are a part of the reason overall home sale prices are still slipping. But the circumstances are far more complex, cutting across demographic shifts — baby boomers looking to leave high taxes behind and millennials putting off home purchases — and the one thing that most drives the housing market: jobs.
“This is one of the most convoluted housing recoveries,” Donald L. Klepper-Smith, an economist at DataCore Partners Inc. in New Haven said. “It’s been a puzzle of sorts.”
Strong sales in 2015 show the market is moving in the right direction, Klepper-Smith said. Still, he said, there is not enough demand to lift prices and set in motion both elements of a true recovery: healthy sales and rising prices.
“This is an indication that we have an economy that is improving inch by inch and not yard by yard,” Klepper-Smith said.
A housing report last week drove the point home. In November, the median sale price of a single-family house in Connecticut — in which half the sales are above, half below — tumbled 8.4 percent, the sharpest monthly, year-over-year decline in 2015 and the deepest since September of 2013, according to the report from The Warren Group, which tracks real estate trends in New England. Sales for the same month jumped more than 16 percent.
Through the first 11 months of 2015, the median sale price of a single-family house slid 2.6 percent, to $247,000 from $253,625 for the same period in 2014. The statistic suggests the state will again end up with an annual decline in sale prices.
And for 2016, economists and real estate agents don’t foresee any major gains in prices, expecting them to remain flat or slightly up, in the low, single digits.
The median is just one indicator of price and can be influenced by the mix of houses sold. It does not mean all sale prices or home values, for that matter, are falling. But the median does suggest broad trends in the market across the state’s eight counties.
Real estate agents say buyers are benefiting from the affordable asking prices as well as mortgage rates that have yet to rise much above their historic lows. And even though buyers have the upper hand in negotiations, they too face obstacles, including tight financing requirements.
The Cusicks say they were under pressure to sell their home because they were building another house in Canton. Still, after interviewing three real estate agents, the couple expected their West Hartford house to sell in time so they could move into their new house, which would be ready for Thanksgiving.
Tudors are popular in West Hartford, they said, and the house was within easy walking distance of the town’s center.
“We were totally shocked it didn’t sell right away,” Sarah Cusick said.
A Slowly Stabilizing Market
The state’s housing market plunged into the recession in mid-2006, touched off by the collapse of subprime lending, loans extended to risky borrowers. A broad foreclosure crisis followed and is only now returning to normal levels. Statistics provided by The Warren Group suggest that home values in Connecticut generally took as much as a 20 percent hit in the downturn.
It wasn’t until 2012 and 2013 that the housing market appeared to stabilize, posting double-digit, year-over-year gains. Prices registered a surprising uptick in 2013.
But sales turned disappointing flat in 2014 and prices again lost ground compared with the previous year, with a slow spring market and tepid job growth cited as reasons. In 2015, the spring home-buying market, traditionally the strongest of the year, was healthier and gains in sales momentum continued into the fall. Even so, sale prices are languishing, especially for homes priced $650,000 and above and drops in asking prices are common.
“More often than not, you’re seeing some kind of reduction,” Paula Fahy Ostop, a real estate agent at William Raveis/Ellyn Marshall & Associates in West Hartford, said. “If it is not selling within 30 days, you’re seeing the price reduction.”
The inventory of houses for sale rose steadily in 2015, and while sales are up, the number of houses on the market is still growing — keeping much of the state in a buyer’s market. Even though the double-digit percentage gains are eye-catching, they are still far below where they were before the last recession. The volume of house purchases in 2014, for example, was 25,660, compared with 36,509 in 2006, according to data provided by The Warren Group.
First-time buyers like Tim Driscoll, a Cromwell financial planner, are benefiting from a broad selection of houses on the market, and he feels under no pressure to make a quick decision.
“New houses come up every day,” Driscoll, 27, says. “I’m waiting for the one I love.”
Baby Boomers Selling, Millennials Hesitant
Some experts say the surge in homes for sale reflects broad demographic shifts.
Baby boomers, who have held back from selling, now are pulling the trigger. Their investments have recovered from the stock market crash in 2009, and they are ready to leave behind the state’s high property taxes. And it has become clear that home prices aren’t going to recover to pre-2006 levels any time soon.
“If it weren’t for the recession, some of these people would have retired sooner,” Ronald F. Van Winkle, an economist and town manager of West Hartford, said. “They worked longer and are now ready to sell.”
At the same time, the pool of buyers is not what it once was. A key segment, the millennials — the young professionals — are putting off buying homes, opting to rent or move out of Connecticut all together.
“It’s not the fear of losing a job that is holding them back,” John M. Zubretsky, president of Weichert, Realtors — The Zubretsky Group in Wethersfield, said. “It’s the uncertainty of where they are going to find their next opportunity. If you own a house, you have liability.”
Not everyone buys into the baby boomer-millennial scenario, however.
“That’s a bit overplayed at times,” said Donald J. Poland, senior vice president of urban planning at the commercial real estate service firm Goman + York in East Hartford. “The lack of jobs is the key driver in buying not being in the same numbers as in previous generations. Jobs are the primary driver in the growth in population and that directly drives home buying.”
Connecticut has now seen its population decline for two years in a row and it still has not recovered all of the jobs lost in the last recession. The state also is seeing an unsettling shift from high-paying jobs to service-oriented jobs that pay less.
As of Sept. 30, the state’s four metro areas are all ranked in the bottom quarter of 374 “Metropolitan Statistical Areas” for median sale prices for single-family houses tracked by the National Association of Realtors. In the Hartford-West Hartford-East Hartford metro area, the median price dropped 2 percent compared with a year earlier.
That compares with a 5.5-percent increase in the same period for the nation as a whole. Similar-sized metro areas as Hartford also are seeing growth. Denver-Aurora, Colo., surged nearly 12 percent; Jacksonville, Fla., jumped nearly 7 percent; and Memphis, Tenn., was up 4 percent.
“It’s the economy and job creation that bring people in that want to stay and buy a house,” Danielle Hale, the association’s managing director of housing research, said. “The primary thing that brings them in is jobs, but people also consider cost of living and taxes.”
Last week’s announcement that Connecticut will lose the corporate headquarters of General Electric to fast-growing Boston does little to help the “slow-to-no-growth” perception of the state.
But Ostop, the real estate agent, and others say there are still plenty of things to recommend Connecticut.
“Taxes aside, it still looks affordable for people coming from larger markets,” Ostop said. “The fact that the economy is bleaker than we’d like, there is still the strong social and cultural aspect and our education system.”
The Cusicks said they don’t consider themselves risk-takers. But encouraging feedback from agents on the sale potential for their West Hartford led them to break ground on a new home in Canton.
After they listed in April and the weeks wore on, the couple dug into learning about the competition.
“We knew every house in our price range, with the same bedrooms and baths,” Sarah Cusick, who coaches teachers who want to advocate for change in education policies, said. “We had driven by.”
At the same time, the competition was also checking them out. The couple would check the addresses of those attending open houses and find that some of the visitors also were trying to sell their homes. The Cusicks would react to any price reductions.
“It was like a domino effect,” Sarah Cusick said. “Other people would knock down their prices so you felt you had to knock down yours.”
In July, the Cusicks’ asking price fell below the $362,000 they had paid in 2011 for the 1,900-square-foot, 4 bedroom, 1.5 bath house. Price reductions kept coming into the fall, and the couple worried about losing their house in Canton if they couldn’t sell in West Hartford.
In October, the house went under contract for $317,000. Sarah Cusick declined to say how much the sale price was below what the couple owed on their mortgage. Family members stepped in to fill the gap.
“We lost a lot of money,” Cusick said. “We were pleased to get rid of it and move forward. But we were lucky. We could not have done this if our families had not stepped up. Most people don’t have that.”