Home Prices on the Rise Across the Country
The National Association of Realtors is having its annual convention this week, so there has been a lot published on the state of the real estate market everywhere. One of the statistics that grabs attention is that there has been about a 25% rise in average home prices around the country in the past year. That exceeds every other period in recent memory; the closest was the run-up to the stock market crash that preceded the Great Recession in 2007. Some "hot" cities, like Boise, Sacramento, and Austin, had price increases that substantially surpassed the national average. What does that mean for us in Connecticut?
New Haven Has Seen Prices Increases
We have seen price increases. We have certainly seen multiple offers, though not quite the 96 offers on a home in Austin, most sight unseen. We have seen buyers waive inspections, mortgage contingencies, and other testing. We have even seen banks waive appraisals, which is a worrying trend, if we are pretending that banks won't ever "overlend", as they have in earlier superheated markets.
How New Haven Compares to Austin
Supply, there just aren't enough houses out there to satisfy the demand. And we know, whether it's real property or toilet paper, that higher prices result from a shortage. What else is comparable are the demographics. Older people are downsizing, and millennials are forming households. They want smaller lots and more neighbors, but essentially they still want open space, good schools, and commutability. And there are a lot of millennials, since they have delayed buying into their 30s, in many cases. Finally, mortgage rates are low for everyone everywhere.
So, what's the difference?
What is not like Austin is where we started. Connecticut, for many reasons, has been languishing in job creation, population, and the value of real estate. This has been going on for decades now, and we are actually being helped by COVID. Smaller cities are in now, for their amenities without the crowding. Remote working is also helping us, since we are close to NYC and Boston. If you add low interest rates to public health concerns, to the biotech startups that are bringing in millennials, and you put all of that on top of the average sales price for the past 30 years or so, you can see that there is the potential for a greater rise (especially in percentage terms, with a low base) and a lower likelihood of overinflation in the region.
While science tells us that what goes up must come down, and while that is generally true in markets of all kinds, there are always little pockets where there is potential for profit that lasts. And it could very well be that Connecticut, particularly Greater New Haven, will be one of those pockets.