Weather or Not?

Spring was very late in coming this year, and it's been raining every morning this week when I went out to get my paper, so summer is late as well.  All around the country, real estate professionals were complaining about the effect weather was having on home sales.  We all expected that May and June would be crazy, and would make up for the lost winter, as happened last year after the blizzard in February. 

We're still waiting.  Yes, we're busy, but no more so than in the spring and early summer that follows a normal winter.  We are missing that catch-up phase, where buyers and sellers come out of the woodwork when the weather improves.  This part of the year has also been the same in many parts of the country, albeit the worst area has been the Northeast. 

In other places, it could be that anemic sales relate more to lack of supply than to lack of demand.  It could be that Connecticut, with its 50% recovery rate from the recession is lagging for economic reasons, while others tell a different tale.  We're not sure.  But we are waiting for more activity, and keeping our eyes and ears open for the cause of the delay. 

Action step for buyers and sellers:  Treat June as though it were April.  Make plans to list, which we see happening, and buy, which we're hoping will follow!

Slow and Steady Wins the Race?

Connecticut continues to wend its way toward the recovery levels now enjoyed by the rest of the country.  It's discouraging for sellers, in particular, to read about strong levels of demand in other places, while sales in Connecticut fell for the period from last year to this year.  The news is not all bleak, however.  The prices of properties sold has gone up in most towns, from 2012 to 2013.  In some towns, sales have also increased, sometimes substantially so.

  All indications are that Connecticut will continue to recover lost jobs and will see slow, but steady, increased demand for real estate over the next few years.  While the pace of growth will be somewhat anemic, in the view of most experts, it's headed in a positive direction.  And, arguably, slow growth is more sustainable.

 Furthermore, the stark contrast between the fortunes of this state and others has emphasized the need for the State, and municipalities, to court economic development, improve infrastructure, and train workers for the jobs of tomorrow.  All of these efforts will be required to make Connecticut competitive in upcoming years, and we should be glad about anything that makes that clear to State and local officials.

If at any point we lose heart, we should take comfort from the tale of the tortoise and the hare.  Doesn't slow and steady win the race?

Up or Down?

Don Klepper-Smith, our local economist, recently published a press release, quoting the Register, which was quoting the Commercial Record (yes, I know, therein most likely lies the problem).  Anyway, by the time Don repeated this chain of statistics, he reported that the health of the economy in Greater New Haven had gone drastically south in the month of March (of course, most people here wanted to go south last month, but I'm talking numbers now).  He picked out the trends in consumer confidence and job loss as being particularly problematic, and causing our region to buck the national positive trend line.  He went on to say that housing was the single bright spot in the figures, and that the median price for single-family homes had risen by $45,000 last month.  That seemed so improbable to me that I called the Commercial Record to check.

According to them, February's numbers showed a huge increase in the median sales price, combined with a steep decline in the number of sales, so the particular mix of the lesser number of sales seems to have affected the price for that month.  For the year so far, total sales are down, unlike most parts of the country.  When I had them check March, the median sales price had evened out, and was almost the same as it had been in 2012, but the number of sales was again way down. When I asked the reporter what she made of these numbers, she said that most places in the country are now reporting that sales are not increasing as rapidly as they had been, nor are prices rising as rapidly, but she said that Connecticut clearly is lagging behind other states.  She attributed that to state budget woes.

So, to recap this confusing report:  The recovery appears to be sputtering in our region, although it is not as robust in other places as it has been for the past few months.  Here, we are seeing prices that are flat to slightly down, which puts us behind everywhere else, with 2013 numbers that are far below 2012's.  I'm going with weather as the cause of that, although state problems and consumer confidence are quite possible alternative explanations.  Let's hope it gets better soon, and I'm betting that the weather improves before the State solves its fiscal issues!

Good News/Bad News

Within the last week, there have been many reports that have indicated that the recovery is far from over.  Unemployment nationally is still at 7.7%;  in Connecticut, it's 8.8%.  Jobs are being added, but at a faster rate in other states.  We added 300 jobs in November, but have only added back 25% of the jobs we lost during the recession; for the country as a whole, that percentage is more than double.

Then, this week, it was announced that New Haven was the number 1 buyers' market in the country, meaning that buyers can get a better deal here than anywhere else, because prices haven't risen.  There are reasons for that, though, that are far from negative.  We had a lower decline than in many other parts of the country, and we haven't seen the amount of foreclosure activity that has taken place in other states.  Therefore, our prices haven't gone down as much, and aren't then being pushed up as much now, because we still have a supply of properties on the market that exceeds what is available elsewhere.

So why is that good news?  Because Pearce had a great year anyway, and it means that the future is bright indeed!  With just a little bit of what is happening in other states, our revenues were up by a third over 2011. Some of that doubtless reflects an increase in market share, but it still bodes well for next year.  As the recovery pace, which is 46th here among the 50 states, increases, we will see further gains, price increases, and lower inventory.  All of that will be terrific, and that's before we factor in that we are finally doing something about job growth in the state, which will make it even better.

The message:  Buy now.  It will cost you more soon.  Give someone you love a property for the holidays!

The Mortgage Deduction Comes Under Attack Again

Every few years, the idea of eliminating the mortgage deduction rears its ugly head again.  Although I understand and can even accept some of the arguments for getting rid of it, this isn't the time, nor do I trust Congress to enact something that, in the end, makes sense.  Look at all the parts of the Dodd-Frank Act that were bolted on, and how they have changed an entire mortgage industry, and not for the better.

The mortgage deduction is simple, understood by almost everyone, and factored into many people's homebuying decisions.  They calculated the affordability of their current homes based on what they would pay for housing after tax, and they counted on being able to do that for the life of their loan.  Changing the rules now risks starting a whole new cycle of mortgage defaults, foreclosures, debt modifications, and housing declines.

We all know that the strength and health of the housing industry is crucial to a lasting economic recovery.  We've been waiting for it to improve, and it has lagged badly over the past couple of years.  Many homeowners still haven't gotten to where they are "in the black" on their homes--in fact, New Haven county, which is one of the worst places in the state and in the country, still has 26% of homes that are "under water", meaning that they are worth less than the debt on them.  Why would we fool around with making that number worse, when we are just emerging from five years of price declines and depressed sales?  I don't get it.

It is certainly possible to come up with many reasons for making changes in the tax code, and we can all list things that we don't think are fair that still exist in its voluminous pages.  However, we all also know that housing is a bedrock of our fragile economy, and that, as many politicians have said over the years, "you don't change horses in midstream".  Let's leave well enough alone, at least until people can actually pay their mortgages and/or sell their homes.

New Year, New Attitudes

Happy New Year! It is clear from watching the stock market that investors in that area have confidence about the future. In our business, we are looking forward to the same sort of sustained rise during 2010. I just returned from Arizona, where the number of sales has gone up quite a bit from the year before, although prices continue to lag and short sales are still very common. Since we are behind Arizona on the real estate curve, we can look there to see what's down the road for us.

What they are worried about is the glut of homes that could come up for sale if owners lose interest in trying to hold on to them while values are low. Moral suasion may not be enough to convince people to continue paying on mortgages that are underwater. There have recently been a number of articles about just that--homeowners moving into rentals and spending the difference in their monthly payments on trips and consumer goods. That's not good for real estate.

We will be somewhat protected from that phenomenon in Connecticut, I believe, since whatever happens on the West Coast and in Florida will most likely cause the government to take steps to prevent the spread of anything that might impede a general economic recovery, and before it gets to us. They took prompt action in the banking crisis, and the recent extension and expansion of the tax credit for homeowners is a good indication that real estate will be treated in much the same way. In addition, since we had nowhere near the amount of speculation and building as the South and Southwest, we are not in the position of having lots of empty houses and condos to fill. Sometimes it's not bad to suffer from slower growth!

In the meantime, we should take heart in the surge of interest in real estate in Arizona and other similar markets. Investors are buying, and there is activity. I talked to one agent who said that her experience there is bearing out what I've been preaching in this blog: Those properties that are priced correctly and are in good condition are hard to get, since they receive multiple bids early on. Although there is a great deal on the market, only homes and buildings considered to be good values are moving. So, if you want to sell, be sure that you are in that category. If you want to buy, get a jump on that trend and buy before the spring market and before the tax credit expires on April 30th.