Why National Forecasts Don't Always Help Local Sellers and Buyers

It can be very difficult to tell what the market for your own property or potential property might be, if you are reading national news about real estate and the economy.  When you turn to the local news, it can be jarring, to say the least.  Even within a market area, one part or one town can be outperforming or underperforming the others.  What can I tell you?  It confuses us also.

For the past 25 years, the Connecticut market has not matched the national market more often than not.  However, there are two Connecticut markets--all of Connecticut, which includes Fairfield County, which is heavily influenced by metro NYC; and the "real" Connecticut, which is the rest of the state.  Of the top 100 metro markets in the country, only 4 have declined in prices in the past 12 months, and two are here:  Hartford and New Haven.  You may read statistics that don't mirror what you are seeing only in your area, because Fairfield prices did not decline, and this year's Wall Street performance meant that serious money was available to throw at real estate in that region.  The state as a whole was 50th out of 50 states and the District of Columbia in price appreciation (we beat Mississippi) for the prior year, but the entire state was positive for price growth, albeit slightly.

Although mortgage rates, which have a big influence on prices, are largely national, energy prices vary, because of tax rates, and tax rates vary a lot. In addition, we have tax policies here (especially our estate tax and our highly inclusive income tax) which put us at a disadvantage to other states, when people are choosing.  Property taxes directly affect real estate prices, and we are more dependent upon them than are some other states.

 Another factor is our legal system, requiring court involvement in foreclosures.  Connecticut is not alone in being like this, but the states that have lengthy legal foreclosure processes are lagging behind in price appreciation, because those properties have not yet all turned over, and that is holding prices down.  There can be real differences between average prices counting foreclosed properties and short sales, and those which only measure MLS sales, for instance.

Is there an upside, you might ask?  In addition to the recent news that Greater New Haven will be the first part of the state to regain all the jobs lost in the recessions (another factor in the state's lagging performance), there is the obvious:  Since we  haven't seen the rise in prices yet, or the end of short sales and foreclosures, the big bump up that is likely to come is still ahead of us.  That means that, if you are buying now, you will be buying somewhere else at likely a higher price point than you will be buying in Connecticut.  Unless you believe that there will be permanent stagnation in prices here, and we know that all markets in the past have been cyclical, the next part of our cycle is statistically likely to outperform the areas that have already recovered fully.

You are not alone if all of this seems confusing, or complicated. The advice for sellers is to be cautious, and not be greedy about asking price. And, at the end of the day, if you live here, and you like it here, lifestyle would suggest that you should buy.  And soon, before rates rise.

Are you ready for 2015?

I know it sounds ridiculous, in the waning days of summer (hot and humid, to boot!), to be talking about the beginning of a new year.  But we in the real estate industry know the time cycles of our profession, and we know that someone who wants to be in a new home by the end of the year needs to get on the stick right now. 

Labor Day is the traditional start of the fall market--that brief two months when people rush to do what they didn't do in the spring--and we're ready for it.  Buyers suddenly wake up from the dog days of summer to rush into action, and sellers get serious about getting to closing on properties that they want to sell, especially if there are tax reasons for finishing the transaction this year.

Although these two groups can be a very motivated lot, there still needs to be some urgency in the process, since financing issues seem to take an ever-increasing amount of time, and the very end of the year can be tricky for inspections, closings, and other things.  While the first snow may seem very far away, it's just around the corner, and will throw a wrench into dates seemingly fixed in stone. 

So don't be left out in the cold--act now to achieve your 2014 goals!

Connecticut Blues

My accountant just told me that real estate sales are depressed because everyone wants to move out of high-tax Connecticut.  He's not the only person who's told me that this week.  Estate taxes, sales taxes, income taxes, and real estate taxes are higher here than in many other places.  Since we have an aging population compared to other states, those things affect us more, especially the estate tax piece.

That's why you may be reading that real estate is booming elsewhere, but not seeing those "SOLD" signs in your neighborhood.  You are experiencing the results of a long-term State anti-business climate.  Even though there may be good and sufficient reason for us to be proposing the highest minimum wage in the country, businesses who can choose where to expand see that bill as a proxy for other mandates and regulations that will make it hard to do business in Connecticut.  I've actually had people in other states point to our legislature as the reason our real estate market is slower than theirs.  Housing goes with jobs.  We need to create more of the latter in our State.