Rising sales, falling foreclosures buoy area real estate outlook
Published 9:31 pm, Wednesday, October 23, 2013
Southwestern Connecticut's residential real estate market is going through an up-and-down period, but it isn't as iffy as it sounds. Real estate professionals are optimistic as foreclosures decline and home sales rise.
Foreclosures among outstanding mortgage loans in the region fell to 3.97 percent in August form 4.84 percent during the same period of 2012, according to CoreLogic, a California-based provider of real estate data.
That's still higher than the national rate of 2.36 percent. The five states with the highest foreclosure inventory as a percentage of all mortgaged homes were Florida, 7.9 percent; New Jersey, 6.2 percent; New York, 4.9 percent; Maine, 4 percent, and Connecticut, 3.97 percent.
There were 48,000 completed foreclosures in the United States in August, down from 72,000 in August 2012, according to CoreLogic, which reported that the overall residential "shadow" inventory as of July was 1.9 million homes, accounting for a value of $293 billion and representing a supply of 3.7 months. The most-recent inventory figure is down 22 percent from a year ago when it was at 2.4 million and town 38 percent from its peak in 2010 when it reached 3 million homes.
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"The foreclosure inventory continues to improve, as exhibited by these recent numbers," said Mark Fleming, Ph.D., chief economist for CoreLogic. "A surge in completed foreclosures and a rise in the foreclosure inventory is unlikely, given continued house price improvements and shortages of supply in many markets."
CoreLogic also reported that the mortgage delinquency rate decreased in Fairfield County in August when 6.57 percent of mortgage loans were 90 days or more delinquent, compared with 7.69 percent for the same period last year.
The improvement in the foreclosure rates, comes as housing permits across the state rise.
Housing permits issued in Connecticut are ahead of last year through August by 11.1 percent, averaging about 340 units per month, according to Berkshire Hathaway New England Properties HomeServices.
"This is significant because last year's total permits -- 4,140 -- was Connecticut's best year since 2008 when 4,910 permits were issued," said Berkshire Hathaway in its third quarter report. "We are projecting a year-end total of 4,085 this year, which would be on par with last year."
The company said 58 percent of those permits were for single-family homes, while 40 percent were for multi-family homes or apartments.
Down-county sales, prices
Halstead Property, meanwhile, reported a marked year-over-year improvement in several important facets of the residential real estate market in the region.
Among some of the highlights, Fairfield saw a 49 percent jump in sales in the third quarter compared with a year ago, as well as a 4 percent rise in median prices. In Westport, sales jumped 33 percent, as the median price rose 11 percent to $1.26 million. Homes there spent 17 percent less time on the market.
New Canaan experienced a 27 percent increase in sales in the third quarter, and a decline in the time on the market from 172 days to 169. Darien had a 20 percent rise in sales.
Prices were also up in most towns, according to Halstead.
Wilton saw the highest increase in prices across the region, as the median price rose 16 percent to $845,000. Norwalk also recorded a gain in prices, with the median cost of a house climbing 7 percent to $465,000. There also was 19 percent increase in closings.
Stamford had a 24 percent increase in sales and a 12 percent decrease in time on the market, but there were only modest changes in prices, according to Halstead.
"This has been another upbeat quarter as far as real estate goes," said Diane Ramirez, CEO of New York City-based Halstead Property, with offices in Connecticut, New Jersey and New York state. "Though prices increased only modestly, it is still a positive trend overall. We were pleased to see the huge upswing in sales in some of the markets and in the decline in days on the market in many of the towns that reported."
In Greenwich, known for its high-end, manicured properties, single-family home sales increased 11 percent year to date, compared with 2012, with the median sale price up 2.6 percent to $1.67 million, according to the Greenwich office of Houlihan Lawrence, which reported that the market there is on pace to exceed 600 single family home sales in 2013 -- the highest level since 2007.
The firm also reported that the condominium market is hot in Greenwich with sales up 73 percent year-to-date, compared with 2012, and the median price is up 7.7 percent to $700,000.
"In the classic pattern seen at the end of a housing bear market -- one which has been playing out across the U.S. over the past several years -- prices fall until buyers perceive value and return to the market in enough numbers to halt further price declines," said Chris Meyers, managing principal of Houlihan Lawrence, in prepared comments. "This marks the proverbial bottom. "Eventually, continued sales growth and declining inventories lead to price appreciation as a new bull market cycle begins."
Typically, a sustainable housing market recovery starts at the lower price levels, he said.
New foreclosures slow
Many of the foreclosure cases that enveloped the state's real estate market date back to mortgages originated between 2004 and 2008, said Katherine Pancak, professor of finance and real estate at the University of Connecticut.
New foreclosures are being added but at a slower rate because since 2008 there have been higher lending standards, she said, commenting that Connecticut added more than 25,000 foreclosure cases in 2008-2009 and almost another 27,000 in 2009-2010.
"That's compared to an average of about 10,000 cases in the earlier years of the decade," she said. "Since 2010, the number of new cases is decreasing, but it is still high compared to historic averages."
The fact that Connecticut was among the top five states in terms of foreclosure inventory as a percentage of mortgaged houses is not surprising, Pancak said, because Connecticut is one of about 22 states that requires a foreclosure to go through a judicial process.
She credited the state's foreclosure mediation program, for encouraging lenders to work with borrowers on loan modifications to keep home owners in their homes.
Pancak cited the state's judicial website, which reported that where foreclosure mediation has occurred, 67 percent of borrowers were able to stay in their homes, and 55 percent of borrowers received some type of loan modification.
The decline in foreclosures has been a boon to the real estate market, said Carlos Perez, an associate with Re/Max Right Choice Realty in Trumbull.
"Definitely foreclosures have come down. It helps because they aren't selling property at below-market value. You're seeing less short sales," Perez said, citing a house that sold in Bridgeport last year in a short sale for about $120,000. He represents the property, which is now being sold for $220,000.
Often a time-consuming process, a short sale occurs when a lien holder permits a home owner to sell the property for less than what is owed.
While foreclosures have seriously impacted real estate markets, when the properties are acquired and rehabilitated, neighborhoods improve, Perez said.
There is a demand for lower-priced homes, forcing buyers to act quickly, said Harry Stark, a veteran real estate agent with William Raveis in Danbury.
"Homes costing $500,000 or more are still the tough part of the market, but houses under $300,000 -- as soon as they go on the market there is a deposit," said Stark, who started in the business in 1973 and has been with Raveis since 1991. "Things have gotten a lot better. We're selling houses. I'm optimistic. It's getting better day by day."
The average sales price for single-family homes has zoomed in Danbury from $286,516 through September 2012 to $314,949 in the same period of 2013, according to Raveis. They have also jumped in Brookfield from $400,176 to $420,378; Ridgefield from $719,805 to $752,346; Bethel from $317,016 to $321,072; New Fairfield from $366,053 to $378,470; and Sherman from $442,448 to $506,087.
Only in Newtown and Redding did the average sale price fall -- from $433,898 to $410,801 in Newtown and from $605,520 to $545,924 in Redding.
The number of single-family homes sold has increased in every community in the Danbury area.
Like Perez, Stark has seen a decline in foreclosures, but he said he has seen properties being sold through the short sale process. Lenders seem to be more willing to work with home owners who want to sell their home through a short sale, he said.
Some properties are commanding multiple bids, as did one house on Haviland Road in Stamford.
There were four offers on the house, and two of them were the asking price, said Elayne Jassey, a real estate agent with the Stamford office of Berkshire Hathaway Home Services New England Properties.
"That house hit a chord with many people. It was well-priced, and it's in a wonderful neighborhood," said Jassey, who has seen a jump in sales this year. "We have more sales this year than in the last four or five years. Sales are up, but prices are not up. There are good values, and interest rates are still very attractive. This is a good year to have your house on the market."
While there seems to be a shortage of inventory in some area communities, she said home shoppers in Stamford should be able to find a property that fits their needs. And through their use of the Internet and interaction with their broker, they are more knowledgeable than ever about residential real estate.
Despite the budget and debt ceiling crises in Congress that this month jeopardized the nation's financial footing and its fragile economic growth, Jassey is optimistic about the future of the real estate market believing that elected officials in Washington will not repeat their performance as they address the issue over the next few months.
"I don't think we're going off the cliff," she said. "They're not that foolish."