Hartford's Buyers' Market

Hartford is currently listed number 9 in the list of the best markets in the country for buyers.  To put that in perspective, Phoenix is listed as one of the hottest sellers' markets.  So what do they really mean?

The people who compile these lists rate as a buyers' market anywhere where prices are not rising, where homes sell below the asking price, and where the median home in on the market longer before selling.  Now think about what that could mean.  In Phoenix, where everyone knows that there are tons of short sales and there was a huge oversupply of homes built, with declining values and high rates of foreclosure, sellers are very realistic.  They may even expect to lose money.  Also, many people have seasonal homes there, in which they are less emotionally invested, and may just be willing to dump them to be done with things.  They may rate outside advice more strongly, since they may not be Phoenix natives.  And they know that they are competing with banks and corporations as non-emotional sellers.

Now compare that to the Hartford area.  Most homes are primary homes, with owners living in them and feeling strongly about their value.  There was not a great deal of building down in the prior decade, nor were there daily articles in national news media about the poor market and the high foreclosure rate.  Most foreclosures, since Connecticut is a law state (meaning that you must go through the legal system to foreclose), are still in the works.  Finally, prices went up in the past decade and a half, but not like they did in the Sunbelt, where jobs were growing and the economy was expanding.

Then, add in the factor that every home is different, so its value is subjective, and it is not a commodity (although it may have gotten close in the Southwest).  It's not like buying a Honda here versus in Arizona; you are not comparing apples to apples.

However, numbers don't lie.  Sellers here have not been as willing to drop prices or make concessions, so their homes have not sold.  Buyers have chosen to rent and wait for values to bottom out.  Also, they have probably been less inclined to put their homes on the market for what they are truly worth, since they are still hoping to get out whole, and, often, to buy another home.

When will things change?  Either the market will get much better, and, like a rising tide, raise all boats, or prices will come down until those homes that have rusty For Sale signs out front are all gone.  But it does seem like a stretch to say that sellers are better off in Phoenix than in Hartford, overall.  Like much of life, it's just not black and white.

Commercial Update

The national news about the state of commercial real estate really could not be much worse. I've heard it described as the "first or second inning of a long game", meaning that the decline in prices and activity is only going to get worse over the next couple of years. Financing is probably the biggest issue; many people are on loans referred to as "extend and pretend", meaning that they are not loans that would be made today. Owners are paying fees to keep those loans in place, in the hopes that they can make it through this period with bank financing in place. Some cities have lots of foreclosures. Others have lots of empty space--Phoenix alone has 80 million square feet of empty space.

Surprisingly, however, what we're seeing in our two offices, in North Haven and in Rocky Hill, is an increase in calls and potential clients. Our listings have more showings than they've had in a long time. Our ads are bringing in inquiries. Agents are busier.

This doesn't translate right away into sales and leases, and certainly not into commissions. We have two very large transactions where the deals are done, but we have not been paid, or paid in full. There are lots of other incidences of agreements in the pipeline, but not signed. It's very common for a tenant or buyer to find exactly the space they want, yet not make up their minds to pull the trigger. Other deals fall through on financing snags, so the picture is not all rosy.

Even still, there are some types of property that we could sell much more of, if we had the inventory. That includes first and foremost small free-standing buildings of 6 to 12,000 square feet. We have one such listing that just went under contract after a furious bidding war, and will sell for over the asking price. There is also significant interest in medical space. Doctors, and it seems most other professions, all want to own rather than rent. So we're hopeful about 2010, and that seemed highly unlikely even a couple of months ago.

Vacation post

Just a quick update from Scottsdale. It feels mean to say that it's 77 degrees and sunny here every day, when there is so much cold and snow in Connecticut! But everybody needs a break, and this is mine. I run a lot, read a lot, and just generally chill out. We've played golf, shopped, and fiddled around.

Phoenix has been very badly hit by the economic downturn, and it shows how lucky we are in our region not to have the tremendous overbuilding that exists here. There are shopping centers and restaurants on every corner; it's hard to imagine where all the business can come from to keep them afloat. They've had phenomenal job growth here as well, but now they're just ahead of Detroit in new job growth, so the party's over. Our education and health care-based economy looks pretty good in comparison.