If 2013 was a year of uncertainty for local real estate, 2014 is poised to be a little more stable but far from spectacular, according to industry analysts in eastern Connecticut.

"2013 was really a year of challenges," said Alvin Kinsall of Randall Realtors in Niantic, president of the Eastern Connecticut Association of Realtors, an industry group that covers New London and Windham counties. "There is a positive trend in the market. But it's still a slow process."

Local analysts say that increased consumer confidence, thanks to budget compromises on the federal level that promise to halt disruptions like last fall's partial government shutdown, may spur more home buying this year than in 2013. But a continued backlog of foreclosed properties will likely be a drag on prices, they say.

"I believe (2014) will still be fairly flat when it comes to prices," John Bolduc, chief executive of the local Realtors association, said in a phone interview. "But I expect an improvement in the number of sales."

Bolduc's predictions for New London and Windham counties are a counterpoint to national projections that see a flattening of sales, with price increases averaging 3 to 4 percent. Local real estate won't start seeing substantial price stability until a backlog of bank-owned properties is cleared from the scene, which won't occur for at least another year, Bolduc said.

The problem, according to Bolduc, is that Connecticut requires a judicial process to deal with foreclosed properties while other states, notably California, have expedited ways of moving forward with distressed-property sales.

"REOs (lender-owned properties) have the effect of reducing the average and median (price) because they have been neglected, and by the time they go on the market they are not in good condition," Bolduc said.

Les Bray, principal of Stonington-based Sound Investment Consultants, provided statistics through November showing that sales of single-family houses in New London County are up 11 percent on a one-year rolling average. But prices have dipped about 2 percent over the same period, with the median declining to $210,000.

This is in contrast to real-estate trends in 2012, when, for the first time in eight years, both single-family prices and sales posted increases. While the early part of 2013 saw renewed activity for houses selling above $300,000, Bray said in the past few months the trend was more muted.

"We have seen some erosion wrapping up the year on the high end," Bray said in a phone interview.

He added that new flood regulations going into effect next year will mean substantially higher insurance costs for many commercial and residential real estate owners of property anywhere near a body of water. It's too early to tell, however, what this will mean for owners of real estate when it comes time to sell, he said.

It's also hard to predict the vagaries of interest rates on loans. The Federal Reserve has indicated its intention to keep interest rates low, but Bolduc said extra costs imposed on banks by the Dodd-Frank Wall Street Reform and Consumer Protection Act likely will mean rising rates for consumer mortgages.

But, while rising interest costs might seem likely to lead to projections of fewer home sales, Bolduc said the opposite might be the case. People worried about higher rates might be motivated to jump into home buying while interest costs are still near record lows and before they rise further, he suggested.

"Interest rates are starting to tick up, and people really need to get in the market now," he said. "The higher the rates go, the less affordable properties are."

Kinsall added that an encouraging trend has been an increase in new housing starts over the past year. The latest statistics show that new housing approvals through November are up statewide by about 21 percent over the same period a year ago.

"We're projecting a much better 2014," Kinsall said. "Hopefully, the consumer outlook and confidence will continue to build."

Both Bray and Bolduc also cited consumer confidence as the key to real estate performance in 2014. Bray added that this region, which has been hit harder than most of America because of job losses at key economic drivers such as Pfizer Inc. and Mohegan Sun and Foxwoods casinos, also needs to see signs of stability in the labor market.

"Casinos drove the market on the front end when things were going gangbusters," Bray said. "Now, they're creating a drag."

Bolduc agreed that eastern Connecticut is lagging the rest of the nation - and even other parts of the state - in any sort of real-estate rebound. But he said the region's current lull is typical of how the local real estate market responds to national recessions, with the area rarely seeing the extreme highs and lows of other regions.

"We always go in (to a recession) later and come out later," Bolduc said. "We don't have the swings the other areas have."

l.howard@theday.com

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