On eve of interest rate hikes, real estate sales still active

A strong summer for home sales in Connecticut continued into the fall, according to multiple new reports, ahead of an expected U.S. interest-rate hike in December and beyond that could spur buyers to the table while banks are still offering favorable terms.

October sales of single-family homes in Connecticut jumped 9.2 percent from a year earlier to 2,610 units, according to the Boston-based Warren Group. That would be the best October since 2006 and it supports observations by some local real estate agents of an active fall season.

Despite the increased transaction count, the median price of a home sold was $235,000, down 2.1 percent from October 2014 and a drop of 16.8 percent from nine years ago. Through the first 10 months of 2015, the median sale price in the state was 1.9 percent lower than the same period of last year.

“I don’t think these declines are any sign of trouble with the real estate market — the decreases are small and (agents) say that prices are stable and pending sales are up,” said Warren Group CEO Tim Warren Jr. “The markets are behaving rationally and home buyers are snapping up reasonably priced homes. The other silver lining … is it improves Connecticut’s competitive position with other states: on a national basis, median prices are actually increasing at about 6 percent annually. The national median price and Connecticut’s median price are coming closer together, making Connecticut more attractive to companies.”

The numbers vary from market to market, of course; in Greenwich, Houlihan Lawrence agent Barb McKee said October was comparatively flat, but sales nevertheless are up 3 percent for the year, with pending home sales lower than the same point in 2014. And William Raveis Real Estate CEO Bill Raveis said Connecticut continues to trail other Northeast markets where his firm has offices.

“In Connecticut because of the uncertainty of the business climate, we don’t see a lot of growth,” Raveis said. “But that’s not the case with the rest of the Northeast. I mean, Massachusetts is a pretty hot state right now.”

As of October, an index of pending home sales in the Northeast published by the National Association of Realtors was up 4.5 percent from September and up 6.8 percent from October 2014, with the figures adjusted for seasonal considerations and national numbers flat.

“Mortgage rates always have a big impact on home sales — we saw that two years ago when the rates rose … moving from about 3.5 percent to 4.5 percent,” Lawrence Yun, chief economist for the National Association of Realtors, said in a late-November interview posted on NAR’s website. “It actually brought home sales down … But this time around, at this phase of the housing market recovery, I believe that there is sufficient positive factors to neutralize the rising rates … There is a gradual easing in (mortgage) underwriting standards, so it will bring an additional trickle of buyers into the market as the credit fountain opens up.”

The Federal Open Market Committee, which sets the federal funds rate that institutional banks use to borrow and lend from each others’ reserves in the overnight market, will announce its decision Dec. 16.

Fewer foreclosures

The overall Connecticut market is also being helped by a continued decline in foreclosures. On Tuesday, CoreLogic reported that 1.8 percent of Connecticut homes with a mortgage were under foreclosure proceedings, down from 2.4 percent in October 2014 but still above the national foreclosure rate of 1.2 percent of qualifying properties, in line with the numbers of November 2007 before the collapse of the housing market the following year. While bank-owned properties — which tend to sell for artificially-low prices — are attractive to bargain hunters, they can drag down asking prices for other home sellers in a neighborhood.

Including distressed sales like foreclosures, CoreLogic is predicting Connecticut home prices will rise 5.6 percent next year. As of October, prices were 20.7 percent off their peak prior to the recession, making Connecticut the fifth-best bargain in the nation behind Nevada, Florida, Arizona and Rhode Island.

The question becomes whether Connecticut buyers will start bidding up values rather than waiting out discounts on the asking prices they are seeing.

“Homes are affordable now with prices well below their peaks of 2007 and with interest rates still low,” Warren said. “Consumers are smart to be shopping for homes now. We saw a good report of job growth last week and even more certain signs that the Federal Reserve will increase interest rates very soon.”

— Includes prior reporting by Dirk Perrefort.

Alex.Soule@scni.com; 203-964-2236; www.twitter.com/casoulman