Conflicting News

When people ask us how the market is, it's very tempting just to say that it's great.  However, it's more complicated than that.  I usually respond with some variation of an answer that includes the problems of Connecticut, which cause our market to lag behind the rest of the country, the bifurcated distribution of listings into those that get multiple offers and those that don't even get shown, the lack of price appreciation in most parts of our region, and the beginnings of demand outstripping supply.  It's actually hard just to figure out whether we are in a buyer's market or a seller's market.

So, as with many things, it depends.  Yes, you could be in a state that has greater fiscal health, but we are not.  Given where we are, are conditions better than a few years ago?  Certainly.  Since very little has been built, and many properties have sold over the past few years, is supply lower?  Of course.  Does that increase the likelihood that there will be more demand for the choices currently on the market?  For sure.  Are mortgage rates helping?  Without a doubt. 

And on the other hand?  Connecticut is one of the few places where the recession has never entirely ended.  We haven't gained back all of the jobs we lost, we are losing population, and we have many properties that are still worth less than they were when they were purchased, particularly if they were purchased before the big decline in 2008 and the years following.  Does this mean that pricing is still an issue, since sellers feel that they "need" to get more than buyers are often willing to pay?  I think that question answers itself.  Realism is still in short supply in some areas, especially since the rise in prices has been spotty, with some towns and neighborhoods far outstripping others. 

My advice?  Consult a Realtor before making a judgment about your property, if you are a seller.  If you are a buyer, get qualified and get educated, and then buy while the prices still seem low to most of us. 

Recovery Doesn't Have To Be Perfect

While people seem to feel lately that we have avoided a "double dip" problem, there are various conflicting statistics and opinions about the actual health of the economy.  From our point of view, we can see that the real estate sales units and average prices in our region haven't gone up very much in some cases, and that prices have gone down in many areas. 

This doesn't necessarily mean that the price of a house is still declining.  Very few of the sales are repeat sales of the exact same house, so it's very hard to tell what is happening on a micro level.  Since the current market includes so many first-time homebuyers, the average and median prices are bound to be lower, as they are skewed to the lower end.  Also, there have been so few high-end sales in some towns that it's hard to have a meaningful average. 

What is true is what we're hearing.  We aren't hearing as many people say that they are waiting to see whether prices go down further.  We aren't hearing as many people say that they are renting because they can't sell the home they left behind when they relocated.  We aren't hearing as many people talking about another major decline.

While it is true that buyers still expect good "deals", often on homes that have already been priced to sell quickly, and while it is true that they want every detail of the home to be perfect, the conversation has shifted slightly.  The supply of houses on the market is declining around the country, and is notable in certain price ranges, at least for new listings.

The characterization I would use to describe the shift in mood and outlook is that we have switched from a "glass half empty" mode to a "glass half full" one.  That means that, while prices haven't risen, and while the market is a long way from roaring hot, people seem more balanced about the future of the economy, and their own futures.  Not exactly sanguine, but calmer.  Maybe it's the "new normal", or maybe it reflects a generation that barely remembers a skyrocketing real estate climate.  No matter the cause, we're glad to see it, and we're glad to be in a more positive selling environment at last.

Rent or Buy Decisions Now

The New York Times recently had a real estate section cover story about how both sales prices and rental rates were out of sight for many areas of NYC.  There didn't seem to be a good choice for someone looking to move to make.  Here, we see things as being different.  Rentals in our region are increasingly scarce.  New Haven has the lowest apartment vacancy rate in the country.  In addition, we haven't seen the wave of foreclosures that people think may be coming in our state.  If or when it does, that will mean that large numbers of people will go from being owners to being renters, for at least the seven years that they will need to wait before they can borrow again.  Where are they all going to go?

On the other side of the equation, prices for homes are low.  Very low.  And so are mortgage rates.  That makes it a good time to buy, if you believe that prices are going to rise.  In that regard, we got some help from a Trulia article, albeit a backhanded compliment.  Greater New Haven was listed among the ten cities where the number of people looking to move out most exceeds the number of people looking to move in.  It also predicted that prices would go down a couple of percent by the third quarter of this year.  BUT, it went on to say that price increases would average 5.3% per year through 2016, meaning that someone who buys a home and plans to hold onto it for five years, whether living in it or renting it out, will be likely to get quite a bit more for it when he or she goes to sell.

That seems to me to make the rent versus buy decision pretty simple around here.  It's the time to buy.