The starter home under $200,000 is making a comeback.
Year-end real estate statistics for 2008 released over the past few days reflect a major market slowdown in New London County over the past year. But they also show a surprising increase in the number of home sales between $100,000 and $199,000.
While real estate sales in various categories are down 30 to 50 percent, reasonably priced single-family homes actually recorded a small increase last year.
In New London County, 422 sales in this category were recorded last year, 18 more than during the year before, according to statistics compiled by Les Bray, an agent and market analyst for William Pitt Sotheby's International Realty in Stonington.
”Everybody loves a bargain; it's sort of a national hobby,” said Liz Viering, president of Stonington Real Estate Co. “Prior to (last year), there was no house for sale under $200,000 - they just didn't exist.”
While the statistics clearly show some houses did sell for under $200,000 - even at the height of the market bubble in 2006-2007 - many were fixer-uppers or in dubious neighborhoods, according to experts. Now, said Bray, the houses moving into the lower category are better homes that previously might have sold in the low- to mid-$200,000s but have been repriced to reflect a buyer's market.
”You can find a lot of prices unheard of a couple years ago,” Viering said. “This is the first time in years that a lot of people ... can afford so much more home - or can afford it at all.”
Neither Bray nor Viering had statistics to back it up, but both agreed that the rising number of foreclosures locally also could have added to the number of lower-priced homes selling last year.
While low-priced homes were a surprising silver lining in last year's real estate picture, other categories took a beating.
According to statistics compiled by the Eastern Connecticut Association of Realtors, total real estate sales volume in New London and Windham counties was down more than 35 percent last year. The median price of a single-family home in the region declined by $30,000 during the year, from $265,000 to $235,000.
Condominiums, despite a 30 percent decline in sales, stood up pretty well, with median prices declining only 1 percent to $178,000.
”It's been a difficult year,” acknowledged John Bolduc, executive vice president of the local Realtors association. “We couldn't sustain the double-digit inflation.”
Still, Bolduc said, the 11.3 percent decline in the price of a typical home in the region last year doesn't compare to the market in the early 1990s, which at one point dropped closer to 30 percent. It took the region five years to recover from the speculative bubble of those years, which followed a 50 percent increase in real estate values during two years in the late 1980s, he said.
”It's not so bad this time,” he said. “There's plenty of mortgage funding available. ... It's a myth there is not mortgage money available - as long as you've got good credit.”
What's more, mortgage rates are at a 50-year low of 4.7 percent, Bolduc said, and the federal government is offering a $7,500 tax incentive to first-time buyers who purchase a home by July.
Such incentives may drive more sales of lower-priced homes, but they are unlikely to affect other parts of the real estate market that currently are feeling the pinch. Among those sectors is the $1 million-plus category, which, according to Bray's statistics, had about half the sales last year that it did the year before.
”Waterfront is still selling very well,” Viering said. “But higher-priced properties in rural towns are sitting. There's no interest.”
Viering's observation may explain some of the town-by-town statistics released by the local Realtors association, which show that inland communities have generally been harder hit by the downturn than coastal towns.
Some towns, such as East Lyme, have weathered the real estate downturn relatively well while towns farther inland, such as Ledyard, Lyme, North Stonington, Montville, Preston, Norwich and Salem, have seen declines of more than 10 percent.
But one coastal community stands out for bucking the trend. Stonington is notable for a decline in its median home price last year of nearly $100,000 - a 24 percent plunge that Viering explained by noting that sales clusters in town were concentrated in rural areas and Pawcatuck, which have lower values than areas such as Stonington Borough, Masons Island and Mystic, which recorded few sales last year compared to the year before.
With big declines in local home prices, Bolduc believes real estate in the region is primed for a turnaround, pointing to historical trends that show there has never been a six-year period since statistics were recorded in which prices didn't appreciate over that time.
But Bray said that by three separate ways of tracking home appreciation - using inflation indexes, median income and rental costs as a benchmark - real estate still hasn't hit a bottom in the region, and he expects lower prices for some period into the future. He added that the one thing notable about real estate in 2008 is that sellers finally have faced reality about prices.
”They know now that prices are not always going up, and they have learned to aggressively price,” he said. “It's hard to know where the bottom may be, but there may be a ways to go.”
