What’s Going On: Home prices may start to ease in 2024 after a gigantic run
This may be the year when home prices start to look attractive again.
The leader of the Ledyard-based Eastern Connecticut Association of Realtors sees signs that single-family home prices in the region may not be jumping by double digits this year, as they had for much of the past several years. Plus, there are rumblings in the financial markets that the Federal Reserve will lower interest rates this year, likely reducing the cost of mortgages.
Susy Hurlbert, chief executive officer of ECAR, said in an interview Wednesday that while median single-family sales in 2023 rose locally by 7.6% compared with the previous year, that was a significant reduction from other periods going back to 2020, when the cost of buying a home was jumping at least 10% annually. And she pointed out that the fourth-quarter median home price in 2023 was up only 6.3% from the same period the previous year, another sign of a slowdown.
“I see the trend going down on how much single-family prices are going up,” Hurlbert said.
Hurlbert was quick to add that she’s not predicting home prices will start falling anytime soon; they simply need a breather after so much growth kicked off during covid.
ECAR’s president said she is worried that the price of homes locally is starting to bypass the average family’s ability to afford a slice of the American dream.
She ticked off some numbers related to the median price of homes locally and the current interest rates being charged for mortgages showing families making six-figure salaries are currently challenged financially when buying a home. Then she cited the average two-bedroom apartment cost locally of about $1,800 and compared it with a $2,200 monthly mortgage cost for a typical home today.
“It’s hard to afford to buy a home right now,” she said. “It’s expensive to buy.”
Still, she added, experience has proven over time that homeowners can build family wealth significantly faster than renters.
Hurlbert last week released both fourth-quarter and full-year 2023 home-sale numbers that overall indicated a cooling real estate market even as prices continue to see an uptick.
Total single-family home sales were off about 20% last year compared to a year earlier, yet sellers on average were still getting slightly more than the asking price. Condominium sales were off about 25%, yet again the typical sale was going for slightly above the ask.
Hurlbert pointed out that the median price of a single-family home locally last year was $340,000, the highest ever recorded by ECAR, which tracks New London and Windham counties. By comparison, the highest annual median home price recorded before the last local real estate bubble was $255,000 in 2007, one year before the nation’s financial collapse related to the subprime mortgage crisis.
“We’re in a completely different situation,” Hurlbert added. “There’s no sign of a bubble.”
And while unit sales are down year-over-year, there is still more activity in the local real estate market today than in 2007, she said. In fact, the lower sales numbers in 2023 compared with a year earlier represent pretty much an average year over the past couple decades.
“We’re not at a low inventory,” she said.
Condo prices are actually growing more quickly than home prices locally, up about 14% last year. Land sales and multi-family sales are also doing well, with prices up 16% and 12% respectively.
“People holding onto land see it’s a good time to move it,” Hurlbert said. “Large parcels are being sold off to create an apartment building.”
It’s a good sign, she said, that more housing is needed. And perhaps a way to once again keep a lid on the cost of home prices locally.
“I’m concerned that the cost of homeownership has gotten so high,” Hurlbert said.
Lee Howard is The Day’s business editor. To reach him, email email@example.com.
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