It's the Best Time of the Year for Real Estate Buyers

 Every year, we post some version of the same message to buyers:  If you want to buy a house, the best time to make an offer--if you are serious and can move quickly--is between Halloween and Thanksgiving.  Sellers who really want to sell are beginning to come up against winter, and the end of the calendar and tax years.  They have begun to heat their homes, and sometimes plow their driveways.  There are fewer active buyers, and not all properties have as much curb appeal once leaves have fallen and flowers are gone.  

All of those factors taken together give buyers a last chance to buy in 2021.  The number of multiple offers have declined in most areas, yet mortgage rates are still attractive.  The choice of listings may be smaller, but more of them are actually going to be available for more than a day or two.  If house hunting has been discouraging this year, think about giving it another chance this fall.  

That means that you need to start now, at the beginning of October, so that you can be ready to go to contract in a month.  Buyers, make your lists, set your priorities, and make sure that you are prequalified.  Serious buyers are good buyers, and more likely to be decisive.  If you use that logic to your advantage, you may be spending the holidays in your new home!

Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Branford you can say "If market conditions do not change and if no new listings come on the market it will take 2.0 months for the current inventory to sell at the current pace of the market. A balanced market's absorption rate is typically between 5-7 months".

Exposing Your LIsting to the Market Before Selling

 One of the country's large real estate boards recently did a study of the prices obtained for so-called "pocket" listings.  Those are properties that are really sold before they are listed, but that often go onto the MLS and immediately flip to pending status.  In all likelihood, they were sold to a client of the listing agent or agency before anyone else saw them, and were then put onto the MLS for the purposes of market share for that agency.  Buyers are seeking these types of opportunities, since there is such a short supply of new homes for sale.  It has some appeal for sellers as well, since it shortens the amount of time that their home has to be ready for showing. It also gives them an early indication of value, if an offer is made, that won't be able to be inferred by number of days on the market.

But what are the downsides?  One of the basic principles of behavioral economics is called the wisdom of crowds. That refers to the fact that large groups of people weighing in on almost any forecast produces a better result than one or two people can produce alone.  Therefore, a house that is bid on, or even seen, by the general public will result in a sales price closer to the true value, than a bid by one buyer.  In fact, this study of pricing mentioned above, for homes sold with pocket listings, resulted in prices which were 6 to 20% below what those homes were estimated to have gotten if broadly exposed to the market.  One could certainly assume that the same thing would happen, perhaps even to a greater extent, if owners simply sold the home themselves. Real estate agents should be, and generally are, much more familiar with current pricing in the area, and have an incentive to sell a property for more, since commissions are usually a percentage of the sales price.

There is one countervailing argument, however. If someone feels that they are getting an early look, with a chance to buy before others can bid, shouldn't they want to make sure that they are paying a fair price?  Maybe, and perhaps for that reason, they may come in high. Odds are, however, that they will want to pay as little as they can, and that time will work for them.  That is particularly true without a broker involved, since buyers will expect to save the amount that the seller won't have to pay in commission, and will aim to pay his or her net price. (This doesn't usually go well, because the seller also expects to save the amount of the commission, but that's a topic for another day).

So, in an ideally fair world, all buyers would have the chance to put in an offer equal to what the house is worth to them, and sellers would be able to tell what it's worth, by looking at the average of the offers, maybe throwing out the highest and lowest.  The only way to do that is to make sure all potential bidders know that the property is available, which is how the MLS came to be in the first place.  It still works pretty well, after all these years, and all these real estate cycles.

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Guilford you can say “If market conditions do not change and if no new listings come on the market it will take 2.8 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5-7 months”.

 

Don't Discard the First Offer

 In this current market of low inventory and motivated buyers, many properties have been going on deposit quickly.  The national average, I read recently, is 22 days from listing to contract. In that kind of environment, even in the traditional "off" season of the late fall, people can wonder about whether to take the first offer they get.  They often think that they either listed the property for too little, didn't get enough exposure to the market to turn up the most avid bidders, or should wait for more offers, to stimulate a bidding war.

The answers to those potential strategies would be no, no, and no.  The first offer is often the best one.  That's because people are very well versed in the inventory available when they are looking.  They know when the right property comes along, and they frequently jump at the chance to take it off the block with a good offer out of the box.  Secondly, the information flow now, between search parameter feeds and instant posting of new listings, means that the time to get something fully exposed to potential buyers has dropped dramatically.  Those most interested in buying soon are watching closely.  Sometimes, I'm surprised that they may tell me about a new listing Pearce has!  Finally, bidding wars are great, but we should always remember what people say about the stock market:  Bears do well.  Bulls do well.  Pigs get slaughtered.  Don't be greedy.  If an early offer meets or exceeds what you expected to get for your property, grab it.  It's time to sell and move on.  Bidding wars may, in fact, result in a higher price if they occur.  However, they can also turn buyers off, who can feel they are being used, and drop out. The chance of losing everyone isn't worth the chance of finding someone who will overpay to beat out others.  

At this time of year especially, time is fleeting, and taking an early offer means that sellers can turn around and buy something else before the end of the year.  Supply gets thinner as the holidays approach, for many reasons--weather, time, difficulty of showings, and the inevitable decisions to wait until spring.  The sooner you buy, the more choice you have.

This is not an equivocal message.  If you have a number in mind, and it's a rational one, don't ignore an offer that comes close to meeting it, or meets it.  Moving forward when interest rates are this low makes more difference than the last couple of thousand in the price could ever do.  

Homes Across the Country Are Selling Fast

Some Highlights

Buyers are actively searching for and purchasing homes at a record-breaking pace. According to the latest report from the National Association of Realtors (NAR), in July, 68% of homes were on the market for less than a month.

With homes moving from listing day to pending sale in an average of just 22 days, it’s a great time to sell a house.

Reach out to a local real estate professional today so you can make your move while buyers are scooping homes up faster than they’re coming to market.

Your New Neighbor May Be from New York

 My new next-door neighbors are from New York.  They just moved in, and they are planning to telecommute from the shoreline. They have high-level jobs that can be done remotely, for the most part. They have little children, and no idea what schooling will be like in the near future.  They have bicycles, a boat, a pool, and a new second car.

My husband and I also have one adult child (accompanied by a boyfriend) sheltering with us.  They are also telecommuting from New York, with good jobs, now being performed remotely.  They aren't sure when their offices will reopen, nor whether they will soon--or ever--have to be physically present in those locations.  They have new exercise routines, new athleisure wear, new cooking accessories, and new disposable income from no rents, no bars and restaurants, and no travel.  They have started looking at houses online, and near us.  Many people we know have similar stories.

Our friends, many of whom are retired or working remotely, are planning ahead to spend time in another part of the country this winter, if they haven't already decamped to a vacation home.  They are renting for months at a time, and testing out possible retirement locations. Rather than use hotels, or try to travel, they are opting for staying put elsewhere, to have a change of venue safely.

You may have relatives, friends, and neighbors like this as well.  Over 10,000 New Yorkers changed their addresses to Connecticut in the second quarter of this year alone.  Anecdotally, we are seeing lots of real estate activity from out of state, and many NY license plates on the roads.  We all know that the pandemic is current, but it's somewhat of a surprise that more permanent choices are being made so quickly.  It's been great for our business, and it will be good for Greater New Haven as well. New Haven proper, although a city, is low in density compared to other places, and remains very attractive for those who want both proximity and outdoor space. After long years of population decline, it's nice to be trendy again!

What does this mean for the real estate market in our region?  Supply, which was already slim, is even tighter.  Prices, which were inching up, are moving more quickly in that direction.  Time on the market is declining.  All of this puts sellers in the driver's seat, and advocates for selling--or even renting for a season or a year--soon.  

The Housing Scene: In odd lots, bargain pricing and fraud abounds

The Housing Scene: In odd lots, bargain pricing and fraud abounds

 

By Lew Sichelman, Hartford Courant (Click here to read article at the Hartford Courant)

 

An opportunity for first-time buyers to find houses priced below market value is presenting itself in a number of places across the country.

 

Over the 11-week period after March 11, when the World Health Organization declared the COVID-19 virus a pandemic, thousands of sellers listed their homes at a discount, according to Weiss Analytics. Not always by a huge discount — perhaps just a few thousand dollars — but significant enough that bargain hunters should perk up their antennae.

 

Even when sellers don’t drop their asking prices, nearly 7 in 10 would be willing to accept a lower offer just to get to the closing table, according to a LendingTree survey of nearly 1,000 people who currently have their homes on the market.

 

Just over half the sellers polled by LendingTree said they’re “seriously worried” about selling their homes because of the pandemic and resulting economic recession. An additional 36% are “somewhat concerned,” and nearly a third are “extremely anxious” about selling anytime this year.

 

New listings at or below the $200,000 range are the most likely to be discounted, Allan Weiss, a co-founder of the popular Case-Shiller price index, told me in a phone interview. And the lower the price range, the deeper the discount — up to 70% in some places.

 

More often, though, houses are being priced just $2,000-$3,000 below market, Weiss said. Not in every market, but in what he called “micro-clusters” of neighborhoods and communities where house values are no higher than $200,000. Even in spots where median prices are rising, discounted properties can be found.

 

Sellers offer their homes at below-market prices for any number of reasons. They may want to sell quickly. They may owe little or nothing on a property that has increased in value over the time they’ve owned it, so undercutting the market isn’t so painful. But they also may be unemployed and no longer able to handle their house payments.

 

Whatever the reason, many in the lower-price tiers seem to be lowering their expectations. “Every single metric — sales volume, median price — gets worse as you filter down from $200,000,” Weiss told me.

 

At least one-quarter of new listings in the nation’s Top 25 metro areas are discounted, according to Weiss’ analysis. Three small Texas metro areas — El Paso, San Antonio and Killeen — currently offer the largest percentage of properties priced below market. But bargains can also be found in major markets like Wichita, Kansas; New Haven, Connecticut; Akron, Ohio; Portland, Oregon; and Philadelphia, Pennsylvania.

 

Signs of the Apocalypse
Just before the pandemic struck, the co-founder and former CEO of Zillow listed his Los Angles manse for $24 million — nearly $8 million more than the site’s oft-maligned automated valuation Zestimate model says it’s worth. Some realty agents have complained that the popular tool is wildly inaccurate. Meanwhile, some people can never change their stripes. To wit, one of the first people charged with trying to scam the Small Business Administration’s Paycheck Protection Program is a convicted mortgage fraudster.

 

Kurt Sanborn, a former spokesman for the Lowell, Massachusetts, police superintendent, was convicted and sentenced to 27 months in prison in 2014 after pleading guilty to federal mortgage fraud charges. Now he’s been charged with conspiring to seek SBA-backed forgivable loans intended as COVID-19 relief.

 

Speaking of fraud, attempts to electronically intercept real estate transactions remain big business for swindlers.

According to the FBI, these thefts are part of a fraud category that tops the list of high-loss crimes, resulting in almost $1.8 billion in losses to businesses and consumers. By comparison, investment and real estate rental fraud ranked fourth and fifth on the FBI’s list of top crime losses, costing a “paltry” $222 million and $221 million, respectively.

Wire fraud occurs when thieves intercept emails, so real estate agents should never send instructions electronically. If you receive something via email from your real estate or settlement agent, check out its authenticity before doing anything else.

Telephone utility fraud is also on the uptick. In this type of ruse, a scammer calls saying you were overcharged by your (unnamed) energy supplier and are due a refund. In another version, the reprobate offers a big discount. But to verify your identity, they say, we need your account number.

If you are on the receiving end of one of these calls, hang up. The key is that they don’t know the name of your utility or supplier. Moreover, a utility will not call you about a refund or discount, and a licensed and reputable energy supplier is required by law to give you the company’s name and license number.

 

Multiple Offers

I just got off the phone with a disappointed buyer, who thought he had bought a property, and just learned that a higher offer came along before it was signed, and he lost out.  These situations vary, in that some sellers continue to work with the first offer, some let everyone rebid, and some set a firm deadline to decide and sign. What is the same is that there is always at least one unhappy person, who didn't get a property.  In this case, it had been less than 24 hours, but sometimes it can go on for several days or even more.  

There are ways to prevent disappointment.  First of all, don't hesitate.  If you see a great property, make an offer quickly.  Try to make the offer as clean as possible--assume that, in this market, there may be other contenders.  Don't put in contingencies that you can live without having.  Match the seller's dates where you can.  We see so often that people insist on things, and then don't get the property, after which they say that they would have given in.  

I always tell people to make the offer that they would be unhappy to hear that someone else got the property by making.  If you are going to say later that you would have gone higher, then do it upfront.  If you have other access to cash, to make a better offer, don't wait to pull that out.  Go all in.  When listings are in short supply, and they are in Connecticut, that's called a seller's market.  If you are the buyer, that means that you are not driving the bus.  Accept that and act accordingly.  You can even consider writing a letter about why you would be the perfect buyer, and how much you love the home.  It has been known to do the trick on occasion, and it can't hurt.

Don't offer what you can't afford, because you are wasting everyone's time, including your own, but be realistic.  Your parents, or other sources of advice, probably bought their first homes when interest rates were very high, and they may not be accurate on the cost of money now.  Be sure to get preapproved, so that you can react quickly if necessary.  If there is a counteroffer, be prepared to answer almost immediately.  You need to know your top price, just the way you would if you were bidding for art at an auction.

And, if you still don't get the property after following the advice above, don't waste time on regrets.  You did your best, and it is what it is.  Move on, and find the home of your dreams next time.

Reopening Connecticut Real Estate

We don't have to actually reopen Connecticut real estate.  Due to our protected status as an essential industry, we have been allowed to operate all along.  Although we have decided to reopen our offices slowly and carefully, with no walk-in clients for now, and limited office hours, we have kept selling throughout the pandemic period.  Our showings have lessened, there are no public open houses, and most of our activity is done remotely, but demand has been strong.

Especially in New Haven, where people who already had job offers for this summer and fall are looking, there is much more demand than supply.  Due in part to some of the neighborhoods and their open spaces and larger lots, density has not been the issue that it has been in larger cities.  Convenience and closeness are ruling the day, and we can sell whatever we can list in the parts of New Haven near Yale.  

The suburbs are also popular, especially with younger families, and buyers of second homes.  The latter group is driving up the average sales prices.  Again, we can sell what we can list.  It's hard to think about moving in the early stages of a lockdown, but people are figuring it out, and are ready to go when they can.  The mild winter also helped. Prices are strong, due to limited supply.

 Now that more restrictions are being lifted, we expect to see an added month (or two or three) added onto the spring market.  Closings can happen quickly, if everyone is motivated to do so. If you are one of the sellers who thought that no one would buy now, it's not too late to list!  

Coronavirus and Real Estate

With the announcement from the WHO that COVID-19 has reached pandemic status, we are all thinking about safety, prudence, and how to conduct business.  While advice and information is changing day by day, there are certain things that we can all do, and on which we can all agree:

--We all want to keep ourselves, our families, our associates, and our clients safe;
--No real estate transaction is worth risking the above goal;
--While we want to be safe, most of us also want to avoid panic;
--Washing hands frequently with soap and water is probably the best way to prevent infection;
--Staying home when you are sick is very important;
--Practicing "social distancing" is something that can't hurt;and
--No action is guaranteed to help or hurt, so we need to use judgment and courtesy.

Having said all that, I want to add a few points specific to real estate and real estate professionals:

--Use common sense, and know that you are not expected to put yourself or others at risk;
--Talk to sellers about what protective equipment they wish to provide for showings (gloves, booties, or other protective equipment), or whether they wish to suspend showings for the time being;
--Screen sellers and buyers the way health care and other agencies are doing, by asking about symptoms and recent travel to highly affected countries;
--Keep six feet between parties, and use separate cars when you are uncertain of risk factors;
--Talk to buyers about protective equipment they may wish to bring and use for viewing properties;
--Bring gloves for yourself, and spares for clients, and use them on surfaces where germs could congregate;
--Carefully and frequently disinfect your car, your phone, your laptop, and other equipment that you may share with others;
--Work from home if you have symptoms, and self-isolate if you are concerned about having contracted the virus;
--Contact your managers if you have questions about any specific request or situation;
--Practice self-care:  get enough sleep, exercise, healthy food, and relaxation to remain healthy and calm;and
--Put this all into perspective, and remember that buyers and sellers will emerge again when the risks have abated, and be glad that you are not an airline exec, a restaurant owner, or anyone else whose business cannot wait until healthier times return.

We all are hoping that this stressful time will pass quickly, and it's important to remember that we are all in this together.  Be kind to others, and practice the Golden Rule.

Deficit Forecasts, Economic Concerns Spark New Calls for Spending Reforms

Article is from CBIA, click here to read online

The OPM report says Connecticut's job growth since the recession ended in 2010 "has been skewed toward lower-wage industries, especially when compared to the jobs lost during the recession."

Connecticut lost 54,300 jobs in higher-wage industries-45% of all job losses-during the 2008-2010 economic downturn, recovering just 8,900 or 16% of those jobs through September of this year.

In comparison, Connecticut lost 39,400 jobs in lower­wage industries during the recession, recovering 49,300 (125%) of those positions.

"Average annual wages are growing at 1.9% per year in the post-recession period compared to 4.0%
per year before the recession," the OPM report says. "In FY 2019, employment grew 0.4 % while the average annual wage grew 2.8%."

The report also notes Connecticut trails the region and country in a number of key economic growth indicators, including jobs, population, home sales and prices, and gross domestic product.



Fixed Costs
Fixed costs-funding state employee pension and retirement benefits, teacher retirement and
health benefits, debt service, and Medicaid and other entitlements-continue to dominate any state budget discussion.

For instance, active and retired state employee wages and benefits represent 31.7% of fiscal 2020 spending, municipal aid (including teachers' retirement costs) accounts for 21.7%, and 11.6% of this year's expenditures are for debt service.

OPM projects the state's fixed costs will grow an average 4.8%-$2 billion-from fiscal 2020 through 2024 while revenues are forecast to increase an average 2.4%, a gap of $770 million.

While revenue growth is projected to exceed fixed cost growth in fiscal 2024, the state's long-term liabilities-now around $85 billion-continue to diminish Connecticut's ability to properly address essential state services such as education and transportation.

Mccaw told legislators that based on contribution changes made during the 2019 legislative session, the State Employees Retirement System should be fully funded by 2048, with the Teachers' Retirement System following two years later.

Debt service as a percentage of the state budget is also forecast to begin leveling out, growing from the current year 11.7% ($2.28 billion) to 12.7°/o ($2.83 billion) by fiscal 2024, based in part on the Lamont administration's self-imposed "debt diet."

Reserve Fund
The state's reserve fund now stands at a relatively robust $2.5 billion, although Mccaw cautioned that $1.3 billion of that was attributable to "one-time, non-repeatable factors," including the repatriation of deferred overseas hedge fund profits and the new pass-through entity tax.

The fund balance is expected to reach 15% of the annual state budget in fiscal 2021. Under state law, any reserves above that threshold are directed to the state employee and teacher retirement funds and paying down bonded debt.

Both Mccaw and OFA director Neil Ayers warned that the U.S. may be overdue for a recession, given the current economic expansion is now the longest since the end of World War II.
"We're not predicting a recession or predicting a lack of recession," Ayers said.

"We should continue to brace ourselves and be prepared," Mccaw said, adding that while the state
is relatively well-positioned to navigate a moderate economic downturn, it has "insufficient resources" to withstand a severe recession.

Connecticut has not escaped its endless cycle of deficits, as shown by the state's post-recession job and economic growth numbers, an indication lawmakers should put greater emphasis on cutting costs and promoting pro-growth tax policies in the 2020 legislative session and beyond.

From the New Haven Register By Dan Haar : Connecticut’s lost decade — and how to avoid a repeat

By Dan Haar, New Haven Register, click to read online

 

 

 

Think back to the first week of 2010.

 

The reigning champion UConn women’s basketball team was steaming toward five more rings in the next seven years. A former Stamford mayor who lost the Democratic primary for governor four years earlier was about to win the seat and hold it for most of the decade.

 

Obamacare was adopted but not yet in place. The Sandy Hook tragedy was three years away. And the Great Recession had hammered Connecticut along with the rest of the nation.

 

As the decade opened, Wall Street had started back upward but Main Street still reeled at rock bottom, facing a tough slog. Exactly ten years later, the nation has recovered heartily and then some, under two presidents.

 

Connecticut? A lost decade by just about every economic measure.

 

A lost decade — and worst of all, we’re not in the clear yet. One more decade like the one that just ended and we are basically western New York, a place with some great assets that’s on the way to someplace else, looking to recapture its old glory.

 

The hopeful news is, we can still avoid another 10-year meltdown. We need some demographic breaks, a solid dose of attitude changes and an embrace of the elusive political middle.

 

Let’s look at the numbers first.

 

A lost chunk of the state

 

Connecticut’s jobs count, the most important measure of how we’re doing, grew by 4 percent in the decade, a total of 66,000 positions if we count annual averages including preliminary 2019 totals through November. By contrast, Massachusetts and the United States both added 15 percent.

 

Those are just numbers. Consider what it really means. If Connecticut had gained jobs at the same rate as the nation, we would have added another 179,000 — enough to support as many households as there are in New Haven, Hartford, Fairfield and Greenwich combined.

 

 

It’s as if we lopped off a hefty chunk of the state, heavily populated by young college graduates. And the housing market reflects that haircut.

 

When the decade started, a single-family house at the median among all sales — where half sold for more and half less — stood at $242,000, in shooting range of the Massachusetts median of $285,000, according to The Warren Group, which tracks house sales. As of 2019, Connecticut was up just 8 percent to $261,000.

 

In Massachusetts, that median house in 2019 fetched an even $400,000 — a 40 percent jump. And although there are no official figures for national median prices, one fastidious website calculates the U.S. gain at 44 percent for the decade.

 

 

What does that mean for the typical Connecticut homeowner? If you owned a house that was worth $350,000 in Connecticut a decade ago, you missed out on $112,000 of price gains that people in Massachusetts and most other states realized in just those ten years. Some parts of Connecticut, notably Fairfield County, fared even worse.

 

Shrinking in an expansion

 

If you’re counting income, we’re still the richest state in average income per person and we’re in the top ten in how much typical families earn. But we’re slipping there, too. That’s harder to measure because the reported numbers bounce around due to small Census sample sizes.

 

We do know this: The biggest picture of all — the total value of goods and services produced — shows Connecticut’s lost decade at its starkest. The total product for Connecticut actually shrank by 0.5 percent, adjusted for inflation, when we compare the average for all of 2009 with the average for the 12 months ending last June, the latest data we hav

 

That’s a shrinking economy after the U.S. recession ended, friends. One slice that meant thousands of livelihoods — the manufacturing of non-durable goods such as food, pharmaceuticals and household items — slipped by almost half, to $6.9 billion a year. The much larger, higher paying finance and insurance sector cratered by 23 percent.

 

Massachusetts, ignited by the allure of Boston and explosive gains in bio-sciences, shot ahead by 20 percent overall even as we shrank. And the nation as a whole, which grew slower than Connecticut from 2005 to the end of 2009, expanded by 19 percent in the decade that just ended.

 

What Connecticut doesn’t have is an unemployment problem, as we track the nation in jobless rates. That’s partly because we don’t have vast tracts of poverty, another strength of Connecticut. And it’s partly that many people just leave if they’re out of work or under-employed. The Census numbers show an average of 24,000 people a year moving to other states over the last five years, making Connecticut the 4th worst in the continental United States, ahead of only Illinois, New York and New Jersey.

 

 

 

 

I’ve studied Connecticut prosperity full-time for four months shy of 25 years as an economics reporter, columnist and business editor. I knew these numbers intellectually. Seeing them all together, calculating them as a decade in the mirror, I feel a punch in the gut, a wistful tear for lost opportunity as a transplanted Connecticut homeowner by choice, an employee in a struggling industry and the father of a newly minted teacher in Boston who’s not coming back.

 

What happened?

 

We’ve argued the causes of Connecticut’s relentless recession from the very start. Tax increases, driven by decades-old debts and obligations, piled up even as former Gov. Dannel P. Malloy cut the size of government by eliminating more than 5,000 state jobs.

 

We’re in the hole by as much as $100 billion including pensions and future health care for public employees, despite restructuring the debts and benefits multiple times. The problem isn’t today’s benefits, though they’re too high for older state employees. It’s that for decades, Democrats and Republicans alike failed to set aside money.

 

Costs for utilities, education, entertainment and health care have climbed as they have in the rest of coastal America. But the perceived value of living in Connecticut didn’t keep pace in large part because we lacked, and still lack, a true magnet city with enough critical mass to attract millennial college graduates.

 

Leafy suburbs unconnected to major cities fell out of favor and the center-cities Connecticut does have are not able to compete with second-tier metros such as Minneapolis, Dallas and Pittsburgh, let alone the giants.

 

 

Manufacturers slowly moved operations to cheaper places. Corporate headquarters, facing profit pressures, retrenched. A few big events bled thousands of jobs, chiefly rising competition for the native American casinos and consolidation in financial services — especially the breakup of General Electric’s GE Capital. That breakup cost 2,700 lucrative jobs, nine times more than the more widely cited but less important exit of GE’s headquarters from Fairfield to Boston in 2016.

 

The Trump-led tax reform of late 2017 didn’t help. Although high-income earners have seen a nice break, the new limit of $10,000 on federal income tax deductions for state and local taxes hurts the entire Northeast, costing Connecticut residents an estimated $2 billion a year.

 

What we have, in short, is a vicious cycle in which people leave or stay away because costs are high in comparison to perceived value, or they leave or stay away because we don’t have any large cities in Connecticut. And that of course drives up costs further because it lowers the tax base. Warren Buffett, the multi-billionaire corporate investor, didn’t help matters by warning people to avoid states with high unfunded liabilities.

 

Rena Carreiro was among those who felt herself moving sideways during the decade. She had worked as an office manager for a manufacturer since 1993. Over the last ten years the business retrenched in Connecticut, moving work elsewhere.

 

Carreiro performed finance, human resources, production control and inventory tasks, taking on more work as people left. “It was wonderful to learn all those new things,” the Waterbury resident said.

 

But there were few opportunities for career advancement. The company — which Carreiro didn’t want to name — closed her plant at the end of 2019. She landed a job at Parker Medical in Bridgewater, a growing company where she has high hopes and new optimism.

 

Solutions

 

Like Rena Carreiro, we as a state can take measures to avoid another lost economic decade. Here’s a 6-point plan:

 

  TAKE A MIDDLE PATH ON POLICY— Democrats and Republicans need to meet in the middle. That means Republicans need to tone down the two-note chorus about taxes and state employee benefits, and help govern like they did briefly in 2017, when the Senate was split 18-18. And it means Democrats must pull back on the throttle for great programs we can’t afford. It’s no coincidence that Massachusetts does well with Republican governors and Democratic legislatures, and the nation does well under centrist presidents such as Bill Clinton. The middle path means Republicans need to stop trashing the unions and Democrats need to stop protecting every iota of their benefits. Modest givebacks on retiree health co-payments and cost-of-living adjustments won’t kill anyone and will help the state. And the middle path means pushing hard for efficiency gains in government at the state and especially in cities and towns, where property taxes are way too high.

 

  SHOW SOME CONNECTICUT PRIDE — Yeah, that was the name of a basketball team but it’s hard to find a place that trashes itself as much as we do in this state. Knock it off. You know who you are. Connecticut has great education, access to mountains, oceans and countryside and a lot of smart and innovative people. We have good cities, not great ones, with truly notable food and music, and access — there’s that word again — to two of the greatest cities in the world. Lack of growth has left us more open space and less sprawl. Enjoy it. Get psyched. Work hard, play hard and stop feeding the collective depression. It’s a small state, go make something happen.

 

  EMBRACE RISK — What do finance, insurance and defense manufacturing have in common? They’re all built around controlling risk. That’s what we do and it shows in the personality of the state. When it comes to business, we need the culture of put-it-out-there enterprise that seems to make no sense, like Amazon, Facebook, Tesla and Microsoft at their founding. We had it in the 19th and early 20th centuries and lost it.

 

  MARKET TO IMMIGRANTS AND YOUNG PARENTS - That’s our sweet spot because it’s more about education and family than urban lifestyle. Connecticut does welcome immigrants in contrast to Trump’s America and that can help us. We do have a good record of attracting people in their 30s. We need to reach those groups more actively with targeted campaigns.

 

  KEEP WORKING ON CITIES AND TRANSPORTATION - Connecticut will never compete on price with North Dakota and Mississippi, nor should we try. Building the place up matters even though it costs money. It’s working in Stamford.

 

  LET EQUILIBRIUM HAPPEN -- State Sen. Matt Lesser, D-Middletown, thinks it’s fine that houses are not overvalued. More opportunity for buyers, he says. It’s a matter of balance and equilibrium. At some point, millennial professionals might figure out that living in a great house in Milford or New Haven’s East Rock neighborhood, with a 15-minute commute, beats five to an apartment in Brooklyn and two hours a day on the subway. That may mean house prices have to fall even further, which sucks for us homeowners. But it’s a path that will work. Embracing equilibrium means understanding that bike lanes in and out of cities, and saving historic landmarks such as the Sanborn Library in Bridgeport, which was tragically demolished in August, will add up.

 

The cul-de-sac

 

Following a balanced path leaves plenty of room for debate over whether we more urgently need to cut taxes — the Republican solution — or, as Democrats insist, increase value by adding amenities to make the state more hospitable.

 

The same argument unfolds issue by issue: paid family and medical leave, a $15 minimum wage, housing subsidies for the poor, housing subsidies for the rich (yeah, apartments in Hartford at a cost of tens of millions for state taxpayers), corporate handouts, expanded Medicaid and on and on. In each one, there is a middle path of compromise that get too little attention. Paid family and medical leave, for example, is too rich a program, too soon, although it’s worthy.

 

All the while, we lost a decade.

 

Twenty-one years ago, a regional economic report warned that Connecticut was in danger of becoming a “cul-de-sac,” an economic dead-end, in part because it lacked “dynamism” in the coming century of urbanization and globalization. Hmmm.

 

“Right now investment is bypassing the state and we have become in many respects that cul-de-sac,” said Donald Klepper-Smith, a longtime economist who has, as of 2020, entered semi-retirement and moved to Massachusetts and South Carolina.

 

Klepper-Smith’s view: We need leadership and strategy to achieve fiscal discipline. “I don’t think it gets fixed in my lifetime because I don’t think we have the political will to fix it,” he said.

 

I’m more optimistic but only slightly. But there are many fronts in this war. Clearly, after the lost decade Connecticut just endured, there is no more wiggle room.

 

Rich Dupont, a manufacturing consultant, is helping the community college system, especially at Housatonic in Bridgeport, train machinists for the thousands of open jobs in advanced manufacturing that will disappear if qualified people don’t materialize. What he says about that battle also applies to the entire state economy.

 

“We are teetering on the edge.”