Buying

The Real Estate Market Shows Signs of Recovery

Third Quarter 2009
By Candace Adams, President, Prudential Connecticut Realty

Slowly But Surely, The Connecticut Real Estate Market is Showing Signs of Recovery.

For the past seven months, the NAR pending home sale index has shown increases in activity (the longest in the history of this index). Existing home sales are now back up to levels in excess of 5 million, annualized. Housing inventory levels are stable, there has been an increase in deposits and mortgage rates remain at historical lows. “All of these factors indicate an improving market,” said Candace Adams, president of Prudential Connecticut Realty.

Does this mean the real estate market is fully recovered? Not yet. She added that unemployment and consumer confidence are clearly going to continue to impact the housing market. But it is clear that we have turned a corner.

A Snapshot of Today’s Market
“Sales are still lagging behind last year and median prices are lower now than 2008,” said Barry Rosa, vice president at Prudential Connecticut Realty and director of Specialty Services. “The lower to mid point price ranges make up most of the sales, which lowers the median home price.”

There is some really good news in the data as well. Inventory levels are not increasing much this year. In fact, they are just about the same now as they were four months ago.

He added that, “deposit activity has shown consistent increases, especially in the past several months. The number of deposits is about 40 percent higher now than it was in March.”

Supply times, one of the most important barometers of market performance have been showing decreases this year. Single-family supply times have decreased from 15 months to 10 months this quarter and condo supply times have decreased from 17 months to 12 months. This means homes are selling more quickly, which is also good news.

Some of the increase in activity can be attributed to the first time home buyer tax credit. As of September, the IRS had reported that more than 12,000 Connecticut taxpayers have claimed the credit, which expires at midnight on November 30. Other factors influencing the increase in activity are low mortgage rates (still in the 4 percent range) and more reasonable home prices.

New residential housing starts continue to show low activity levels this year with approximately 3,300 new housing permits projected by year end compared with 4,900 permits last year, 6,600 in 2007 and 8,100 in 2006. This shows that very little new product is being added to inventory.

Defining The “New” Normal
Consumers are still wondering what the new real estate market will look like when it stabilizes. “We may have to re-think what we all define as normal,” said Candace Adams, president of Prudential Connecticut Realty. “The new normal will most likely be fewer sales than we experienced early in this decade. The new normal will also have very modestly increasing prices.”

She added that prices probably will begin to recover in the coming months, but it’s not very likely that they will increase at the same percentage in all price ranges.

“The new ‘normal’ will be defined by the new consumer,” Ms. Adams said. “We expect value to be the top priority and that buyers will focus on the home purchase as a lifestyle decision rather than a financial investment. Perhaps that paradigm reversal will be enough to stabilize the market.”