State housing market plunges
Sales of single-family homes in Fairfield County plunged by 44.55 percent between May 2007 and May 2008, and prices statewide fell more than 10 percent during sameperiod.
The Warren Group, a Massachusetts-based real estate and banking industry research firm, said Tuesday there were 468 single-family homes sold in Fairfield County in May 2008, compared to 844 sold in May 2007.
The median price those sales brought in Fairfield County in May 2008 was $545,000, a 13.15 percent decline from $627,000 in May 2007.
“You’ve got economic gravity working against you,” said Vincent Valvo, group publisher of The Warren Group’s trade journals.
He said Fairfield County enjoyed some of the highest rise in prices and highest number of sales for several years, but now the buyers aren’t there.
The median single-family home price in New Haven County dropped from $265,000 in May 2007 to $250,000 in May 2008. Sales were off 14.75 percent.
The Warren Group’s report said Fairfield County’s decline helped drive down the statewide median price of a single-family home from $305,000 in May 2007 to $272,000.
Despite a collapse in prices — the percentage levels are comparable to declines in 1992 — the median price for a home in Connecticut remains out of reach for many potential homebuyers, Valvo said.
In the early 1990s, housing prices fell in the state after years of overbuilding and a decrease in buyers in the wake of a large number of job losses.
Today, it’s the lack of credit that’s driving down prices and sales, Valvo said.
Lenders are not only reviewing borrowers’ histories more closely but are also requiring down payments, usually of 10 percent, he said.
That means to buy a $500,000 house, Valvo said, a buyer would have to be able to come up with $50,000 for a down payment. That doesn’t include the $10,000 to $20,000 in legal fees, inspections and other costs that pile up as part of the transaction, he added.
Young couples just can’t come up with that kind of money, Valvo said, so there are fewer consumers with the means to buy.
The statewide median is also high.
According to the U.S. Federal Housing Administration’s mortgage calculator, a person would have to make $73,000 a year to qualify for a mortgage to cover the state median price for a single-family home bought in May. This is based on a mortgage rate of 6 percent with little outstanding debt. FHA recommends the monthly mortgage payment should not exceed 36 percent of income after subtracting for other debts and needs.
The median income in Connecticut, according to the U.S. Census Bureau, was $63,422 in 2006, the most recent year for which data is available. Only in Windham County is the median sale price affordable for someone making the state’s median income.
Donald Klepper-Smith, chief economist of New Haven-based DataCorps Partners, said the real estate market, like the state and national economies, is a mix of good and bad news.
“It depends on which side of the equation you’re on,” Klepper-Smith said of falling prices. If you’ve already got your house, this is terrible news because your equity is being eaten up. If you don’t have a house, it means you might finally get one you can afford.
Even though prices and sales fell at the highest rate since 1992, Klepper-Smith and Valvo said Connecticut’s economy is in much better condition than it was then.
Connecticut gained jobs in May. That wasn’t the case in 1992, Klepper-Smith said, when Connecticut lost 162,000 jobs in a recession.
So this is an economic storm the state can weather, Klepper-Smith said.
Condominium sales were likewise down in Connecticut in May.
According to The Warren Group, sales of condominiums fell from 1,338 in May 2007 to 854 in May 2008. The median sales price of a condo in Connecticut was $200,000 in May 2008, compared to $208,500 in the 2007 period.
The median price for a condominium in Fairfield County declined from $329,000 in May 2007 to $322,500. The number of sales dropped from 448 to 230 during the same period.
The price for a condominium in New Haven County was unchanged from a year ago, at $180,000.