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For the first time in eight years, the local real estate market showed year-over-year improvement in both single-family home sales and median prices, according to the latest statistics released by the Eastern Connecticut Association of Realtors.
"In 2011, things were getting better just by virtue of the fact they weren't getting any worse," said Paul K. Higgins, president of the Eastern Connecticut Association of Realtors. "2012 was really turning the corner."
Single-family home sales in New London and Windham counties rose 16.7 percent last year compared with 2011. And the $198,450 median sales price was a 3.4 increase over the previous year's typical sale.
While far from the performance seen in the local real estate market's halcyon days of 2003-2006, when prices rose at double-digit rates, a moderate increase in median sales was welcome news to John Bolduc, chief executive of the local Realtors association.
"Three to 5 percent is really good because it doesn't create a market that is going to bust later on," he said.
The last time the region saw increases in sales and prices over the previous year was in 2004. That year, sales of single-family homes rose 4.2 percent, and the median price was up 15 percent.
"2012 was a good recovery year for the real estate market in eastern Connecticut," Bolduc said. "It's improving, but it has a ways to go."
While 2,888 single-family homes were sold in the region last year, numbers are still lagging the typical sales years seen locally before the real estate boom of the mid-2000s, when soaring prices started cutting into sales numbers. In 2000, for instance, 3,459 single-family homes were sold in the combined Windham and New London counties, for which the local Realtors association keeps statistics.
Fourth-quarter statistics released this week showed single-family sales sizzling, up 25.6 percent from the same period a year ago. The median price of $190,000, however, showed no improvement from 2011's fourth-quarter median.
Higgins, the Realtors association president, said 2012 saw a tremendous increase in showings, demonstrating the interest among buyers in purchasing real estate. But agents often had to show 30 to 40 homes to a buyer before an offer would be made, he said.
"Buyers always wanted to know 'what else is out there?'" he said.
While sales last year in the $300,000 to $500,000 price range lagged in some markets, notably East Lyme, Higgins said he suspects the overhang from recent layoffs at Pfizer Inc. is in the past and that hirings at General Dynamics and elsewhere soon will take up the slack.
Les Bray, a market analyst who owns Stonington-based Sound Investment Consultants, said statistics he compiled show homes in the $300,000 to $399,000 range and the $400,000 to $499,000 range staging a comeback last year after several years of slowing sales. Both of these mid-range markets showed sales increases of 35 percent or more last year, according to his numbers.
"That's telling us there's a change in our market," Bray said.
Another change is the increase in single-family home rentals. Where there were practically none to be found in the region several years ago, there were about 300 single-family rentals last year, indicating that people who moved out of the area were choosing to lease their homes for a while in the hopes that they could sell them later at a higher price.
Bray's statistics also find that the resurgence of New London County's real estate market is not uniform. Shoreline-area communities such as East Lyme, Groton and Stonington recorded a 25.6 percent increase in sales and a 6.4 percent rise in prices, while municipalities in the north around Norwich saw a 9.4 percent sales surge but a 7.3 percent drop in prices.
Another interesting element in Bray's analysis is that the price-per-square-foot of new construction in the $400,000 to $500,000 range is becoming more competitive with existing homes in the same price range. In fact, the cost of new construction actually is slightly less these days than the price of existing homes, according to his numbers.
Bolduc said that overall, the improving market represents a combination of factors, including higher consumer confidence, a reduction in foreclosures, and banks lightening up on restrictive lending practices.
"Since 2007, the demand (for housing) hasn't gone away - it's just been delayed," Bolduc said. "People have to live somewhere."
Now, with prices rising, the problem of underwater real estate - with mortgages higher than the value of the property - is starting to diminish, Bolduc said. The possible result will be fewer short sales of real estate, in which owners sell their properties at much lower prices than what they originally had paid.
Still, other problems persist, including a condominium market slowed by new Federal Housing Administration rules that make it more difficult to buy a condo. Last year, local condo sales were off 8.6 percent, and prices declined 5.4 percent.
But Bolduc said new fixes to make FHA policies less cumbersome are expected to be implemented in the new year.
"A lot of buyers want condos," Bolduc said, "especially first-time buyers because they are less expensive."
Other possible changes in federal and state regulations are more worrisome to the real estate community, according to Bolduc, including the possible loss of the mortgage-interest deduction that has been bandied about in Washington.
"If they take away the mortgage interest deduction, there'd be an immediate fall in prices of 15 percent," Bolduc said. "We're going to fight that tooth and nail."
New London County Town-by-Town Real Estate sales, 2012
TOWN # Sales %+or- Median %increase
Bozrah 12 -66.7% $210,500 -12.1%
Colchester 128 +1.6% $223,500 -8.4%
East Lyme 175 +28.7% $284,000 -0.50%
Franklin 11 +120% $199,000 -14.9%
Griswold 96 +41.2% $161,000 +7.3%
Groton 252 +30.1% $239,250 +8.8%
Lebanon 63 +5% $189,900 -3.8%
Ledyard 179 +39.8% $224,900 +5.8%
Lisbon 24 -4% $188,000 -2.3%
Lyme 31 +10.7% $330,000 -47.4%
Montville 148 +18.4% $170,000 -2.3%
New London 107 -1.8% $145,000 +3.6%
North Stonington 36 -26.5% $266,500 +13.4%
Norwich 174 -3.9% $134,400 -2.7%
Old Lyme 125 +48.8% $312,550 -9.9%
Preston 36 +28.6% $233,950 +16.7%
Salem 55 +96.4% $280,000 +11.2%
Sprague 9 unch $133,500 -29.7%
Stonington 170 +23.7% $340,250 +21.5%
Voluntown 15 +25% $154,000 -18.3%
Waterford 207 +24% $215,000 unch