The pace of decline in Connecticut's single family housing markets moderated throughout the state during the third quarter of 2009. In the middle of the market, preliminary numbers indicate that prices went down by less than 5% year-over-year, compared to 11-12% rates of decline in the first half of the year. The total decline since the peak in 2006Q1 is 17%. On an inflation adjusted basis Connecticut house prices are down about 26% since their peak. Several signs point to a moderating trend in the market.
House price decreases during the third quarter were unevenly distributed within the state. Over the past 6 months, the Bridgeport-Stamford metro area is down by about 10% compared to a year earlier, about the same rate of decline as experienced in each quarter since the collapse of Lehman Brothers in September 2008. Danbury and Norwich-New London are down by over 12%. The Hartford and New Haven areas have led the moderating trend, averaging single digit declines over the past six months.
New estimates for active condominium markets in Connecticut are now available for downloading. They show that condominium prices have been declining for only 7 quarters (since the beginning of 2008) as opposed to 11 quarters (since the beginning of 2007) for single family properties. Moreover, the decline since the peak is only about 13% for condominiums. These differences are likely due to the greater affordability of condominiums.
Will the number of arms length transactions recover from their current low levels, fueling brokerage, lending, title insurance, legal services and the like? In fact, transactions volume increased by over 5% in the third quarter, one sign that the market may be bottoming. The Real Estate Center compared transactions volume to numbers from a more normal period in the housing market: 1998 and 1999 when prices were rising at single digit rates. Applying this standard to single family markets, the average level of transactions over the past year might be able to grow by between 5% and 30%. For condominium markets, the upside potential is between 10% and 50%.
Methods and Data
Median home prices recently declined by over 11% according to the Warren Group whereas UConn’s constant quality indices are down less than 5%. Unlike UConn’s method, the median does not adjust for the size, age or location of the properties traded. When a greater percentage of smaller less-well located homes trade, as is the case now, the median index goes down more than the constant-quality index. The well-known Case-Shiller indices have declined by 20% in the NYC metro area since the peak in the summer of 2006 and by 15% in the Boston area since the summer of 2005. This puts Connecticut squarely in the middle, suggesting that the Case-Shiller repeat sales method produces results roughly similar to the method used by UConn, which includes one-only sales. Another difference between the two is geographical coverage. Details on single family markets in Connecticut are available by labor market area (LMA), by town, and for high and low value market segments.
For final numbers through 2009-second quarter and preliminary estimates for the third quarter of 2009 click “Quick Links” at: http://www.business.uconn.edu/realestate
Condominium price indices are also available at that link.