Market Study: First quarter of 2011 presented a number of challenges to the Connecticut real estate market
An unusually harsh winter with record-breaking snowfall seemed to have brought the state to a standstill. With the high levels of snow in a very short period of time, buyers retreated from the market, according to Prudential Connecticut Realty's first quarter market report. With the federal government no longer providing stimulus programs, homes are now selling on their own merits. The results were that sales of single-family homes were off 13 percent from the same period last year and statewide condominium sales were off by 16.5 percent for the same period, the report stated.
While the state experienced a 19 percent drop in pending sales for the first quarter of 2011, when compared to 2010, the numbers demonstrate resilience during a tough winter with pending contracts rising 23.2 percent over the previous quarter, according to the report. Pent-up demand that did not materialize in the first quarter should continue to make a positive impact on pending contracts in the second quarter.
Market momentum and the data shows that sales potential was the strongest in the first and second quarters of 2009 and 2010. The third quarter of 2010 also demonstrated strong sales potential, while the fourth quarters of both years proved to be the weakest. This trend is predicted to repeat in 2011 as the warmer weather approaches, according to Prudential.
Home sales across all eight Connecticut counties experienced a decline in the first quarter of 2011. While New London and Windham counties experienced slight declines, New Haven and Middlesex counties had the biggest declines in home sales, losing 20 and 14.8 percent, respectively. In condominium sales, New London County gained 7.4 percent and Windham County remained flat, while other counties saw greater losses.
As a result, the amount of time it took to sell off the current inventory, including those homes under contract at the time, rose for both single-family homes and condominiums in the first quarter. When compared to the first quarter of 2010, single-family homes experienced an increase of four months of unsold inventory in 2011 (7.5 months Q1 2010 vs. 11.5 months Q1 2011). When compared to the fourth quarter of 2010, there was an increase of 4.9 months. The condominium market demonstrated a slight increase of unsold inventory from year to year with 10.4 months of leftover inventory vs. 9.7 months in 2010. When compared to the fourth quarter of 2010, there was an increase of 1.6 months.
In most counties, single-family median home prices dropped slightly. Conversely, Middlesex County demonstrated a slight 3 percent increase year over year. Prices of condominiums have dropped in almost all cases, with the exception of Middlesex County, where the median condominium selling price increased by 5 percent for the same period.
As sales recover in the second and third quarters, prices are expected to level off and begin to stabilize, according to Prudential. Median prices for both property types reached their highest point in two years in the fourth quarter of 2010. The single-family market is tracking slightly off from that number, which is a positive sign moving forward, Prudential officials report.
Days on Market
Middlesex and Windham counties saw positive movement for condominium days on market with an average improvement of 23.8 percent vs. the same period last year. For the rest of the state, the average days on market rose in the first quarter of 2011. Although some counties did experience larger increases than others, Tolland, Windham, Litchfield, Middlesex, and Fairfield stayed close to the overall average days on market year to year.
From December 2010 through February, there were 471 permits issued across Connecticut, as reported by 124 towns. During the same period last year, 445 permits were reported.
By the end of 2010, 3,900 permits were issued statewide. Prudential projects the state will issue between 3,200 and 4,000 permits in 2011.
The Connecticut luxury market saw signs of marked improvement overall, with a 19 percent statewide increase in the $2 million-and-up market segment, when compared to the same period last year. Prices for homes under $2 million managed to gain slight increases, as well. In Fairfield County, the average luxury home price dropped by approximately 5 percent because of a weakness in the $5 million-plus segment of the marketplace. In the last 30 days, increased buyer activity has been cited with more homes going to contract, many of which are in the $5 million-plus market segment.
Looking forward, Prudential predicts there is light on the horizon. The 2011 real estate market will most likely improve as consumer confidence brings new buyers into the market, Prudential officials predict.
Improving weather also will have a positive impact on the market overall and mortgage interest rates still remain at historic lows. Both should help bolster sales in the second quarter. Unmet demand in the marketplace, combined with carryover of inventory from the first quarter, should offer opportunities to buyers that have been waiting in the wings for the right moment to make a move, Prudential predicts.
The first half of 2011 is expected to demonstrate moderate growth and the housing market should continue in its recovery, according to Prudential. With the snow now melted and the temperatures heading upward, the market should begin to heat up, too -- a positive sign that spring has finally arrived.