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Homes in the region have become dramatically more affordable over the past few years, according to a report released Wednesday by a Stonington-based real estate analyst.
Les Bray, owner of Sound Investment Consultants, said reduced median sales prices of single-family homes since the peak years of 2005-2007 account for at least some of the increased activity in the local real estate market, which saw a spike in both single-family home sales and prices last year.
"Properties have declined to a price point where houses are more affordable than they were," he said in a phone interview.
Some towns, such as Lyme, Sprague and Voluntown, have seen price reductions of more than 40 percent over the past few years, while others, such as East Lyme and Groton, have experienced less than a 20 percent decline. But all are more affordable today than they were at the local real estate peak based on a classic scale that takes the median sales price and divides by the median household income of a town.
The scale was a barometer that traditionally cautioned homebuyers not to make offers on properties higher than three times a family's household wages. Now, a typical community in eastern Connecticut is selling houses at only about two and half times above median wages.
"The affordability index means you can buy a house for less money," Bray said.
The most affordable homes locally on this scale are Voluntown and Sprague, where the typical home is being sold for less than two times the town's median household income. The least affordable areas, according to the scale, are Stonington and Groton, where houses are typically selling around four times household income.
But Bray said the scale can be deceiving in towns like Groton and Stonington where a significant percentage of homes sold are expensive vacation properties whose owners' high household incomes are not factored in because they are not permanent residents.
Also not factored into this scale are the historically low interest rates today. A scale that took interest rates into account would likely make the home prices today even more attractive, Bray said.
"We have good news to report," he said.
But Bray's latest real estate statistics for February showed that more affordable homes did not translate into higher sales last month, bucking a recent trend. Single-family sales declined by 16.8 percent in February compared to the same month last year, while condo sales fell by a similar percentage.
But Bray pointed out that February had one more day last year than in 2013, and last month's major snowstorm delayed many deals.
"It's a month that's difficult to draw conclusions," Bray said.
Bray added that the region continues to deal with a variety of curveballs, including job declines at the casinos and the effect on the local economy of cost-cutting related to the sequestration issue being debated in Washington.
For that reason, Bray wasn't predicting any major real estate turnaround this year.
"I think it's going to be more of the same - bumping along," he said.
Town Median Price Median Income Affordability Index
1. Voluntown $146,950 $78,257 1.88
2. Sprague $133,500 $70,499 1.89
3. Colchester $221,000 $94,577 2.34
4. Griswold $155,000 $65,634 2.36
5. Montville $170,000 $71,693 2.37
6. Norwich $123,200 $51,436 2.40
7. Bozrah $180,000 $75,062 2.40
8. Lisbon $185,000 $76,568 2.43
9. Franklin $182,450 $74,828 2.44
10. Ledyard $206,000 $84,938 2.46
11. Lebanon $190,000 $77,241 2.46
12. Salem $274,000 $101,933 2.69
13. Waterford $206,500 $71,612 2.88
14. Preston $225,500 $78,103 2.89
15. N. Stoning $257,000 $86.683 2.96
16. New London $138,000 $44.619 3.09
17. Old Lyme $313,775 $93,611 3.35
18. Lyme $330,000 $98,067 3.37
19. East Lyme $286,000 $84,420 3.39
20. Groton $228,750 $61,709 3.71
21. Stonington $312,000 $77,199 4.04