Despite strong sales in 2013, New London County home values remain stagnant
A strong year for local home sales failed to lift real estate values in 2013, according to new statistics released Monday, which revealed the winners and losers among New London County municipalities.
Numbers released by Stonington-based Sound Investment Consultants showed single-family home prices increased substantially last year in Lyme, Old Lyme, Lebanon and Voluntown, while Lisbon, Stonington, North Stonington, New London, Norwich and Salem lagged.
Overall, New London County saw a 12.4 percent increase in sales last year compared with a year ago. But the median price of a home fell from $215,000 to $210,000.
"It wasn't a bad year at all," said Sue Barnhouser, a real estate agent for REMAX Home Team in Waterford and former president of the Eastern Connecticut Association of Realtors. "I just think people are trying to get a good deal."
Deals were easier to find in inland communities, where sales soared by double figures in 2013 compared with the previous year but prices also fell by double figures in many of these towns.
Cities and towns on the shoreline saw only a 5 percent increase in sales for the year, but prices were more stable, down less than 2 percent.
"We're undervalued right now, which makes it a good time to buy," said John Bolduc, chief executive of the local Realtors association, which covers New London and Windham counties. "It will eventually come back."
But with prices mired about 30 percent below peak values in 2007, the question becomes when the local real estate market can begin a sustainable recovery. In 2012, for the first time in eight years, the market showed boosts in both sales and prices, but real estate values couldn't sustain the trend in 2013.
Bolduc said it will be at least three to four years before the region starts to see prices anywhere near the 2007 local market peak. But Les Bray, principal of Sound Investment Consultants, said it is really impossible to make an educated guess about prices until any down trends are reversed.
"It used to be, when I started in real estate in the early '70s, you talked about five-year cycles from peak to trough," Bray said. "That is no longer something I could defend."
Bray said there are too many "X-factors" to consider because of government interventions to try to prop up real estate values and keep people in their homes. On top of that, he noted, Connecticut has a judicial process for reviewing foreclosures that has slowed the turnover of homes and delayed market forces that lead to recovery.
Bolduc said he doesn't closely follow foreclosure statistics, but he senses that communities such as Norwich were particularly hard hit by the subprime-lending fiascos that started unraveling a few years ago. Subprime loans to borrowers whose mortgage payments ballooned a few years after receiving initial low rates led to massive foreclosures nationwide, leading to a stock market crash and lengthy recession.
Long-term real estate trends uncovered by Bray show the devastating effect of the subprime scandal. Norwich is one of only two municipalities in the region — the other being the rural enclave of Lyme, where a typical home goes for a half million dollars — that saw lower median prices last year than in 2000.
Other towns with lagging prices over the past 13 years, which dates back long before the real estate recession, were Sprague, Lisbon and New London, but each managed to see at least some increase in values. New London, sometimes lumped with Norwich in statistics of municipalities hard hit by foreclosures, managed a 22 percent price gain since 2000, a trend that Bolduc ascribed to a sense that the city is making headway in efforts to improve its situation.
The best overall real estate performance among local towns since 2000 was seen in Stonington, Old Lyme and East Lyme, according to Bray's statistics. Bolduc said he suspected values in those towns were boosted by second-home sales as well as the strength of their school systems.
Bolduc pointed out that more homes sold in 2013 than in 2007, which was toward the tail end of the real-estate boom.
"The unit and sales activity isn't the issue," he said. "It's the median sales price."
"Prices are still trying to recover," agent Barhouser agreed.
In 2014, according to local real estate analysts, an expected gradual increase in the interest rates charged on mortgages might drive more sales. Rates have already started creeping up, and agents have noted that higher interest means more costs to the homeowner, but mortgages can still be found today in the low 4 percent range — still attractive by historic standards.
"Under 3 (percent) or in 3's — I think we're done with that," Barnhouser said. "There are going to be more people trying to get into a house before the rates go up."
Meanwhile, said Barnhouser, lower end homes are still driving the market, as they have for the past few years. And, said analysts, buyers are being more cautious, not wanting to overextend their budget or get into the bidding wars of headier times.
Bray said other factors, such as new regulations regarding flood zones and questions about the stability of employment in a region that has seen very little job growth since the Great Recession ended, also cloud people's commitment to home purchases.
"People are more realistic," Barnhouser said. "They don't want to get in over their head."
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