Despite an anemic economic recovery, home sales in Connecticut increased in 2012 for the first time in seven years, reflecting national improvement in the housing market.
The 24,276 single-family homes sold represent an increase of 14.8 percent from 2011, according to a recent report from The Warren Group, a real estate research firm. The report also found that sales in the fourth quarter of 2012 increased 19 percent compared to the fourth quarter of 2011. Economists stressed caution, however, in drawing overly optimistic conclusions from the data, citing stalled job growth and political uncertainty in both Washington and Europe.
“There is a lot of uncertainty in home prices. People seem to be gaining too much confidence in the rebound,” Yale professor and housing-market expert Robert Shiller told the News in a Monday email.
Others echoed Shiller’s skepticism. West Hartford town manager and economist Ron van Winkle said that, based on housing data from the past 25 years, the market would not be considered “healthy” until at least 30,000 single-family homes were sold in a year.
The report comes a year after Connecticut saw record-low home sales combined with a spike in state unemployment. In 2011, a total of 21,141 single-family homes were sold in the state.
Connecticut home prices dropped 1.2 percent, from $243,000 in 2011 to $240,000 in 2012. Citing increased prices during the fourth quarter of last year, however, Warren Group CEO Timothy Warren Jr. remained optimistic.
“The market in Connecticut showed much improvement in 2012, compared to the previous year when we saw record lows for sales,” Warren said in a statement. “An improved employment picture and consumer confidence boosted the housing market in 2012, and prices will slowly follow suit.”
Connecticut’s housing rebound reflects a national trend. In 2012, national home sales increased 9 percent to 4.65 million, the highest level since 2007, when the housing bubble burst, according to the National Association of Realtors. Despite the housing market’s mild resurgence, the greater national recovery appears to have faltered, albeit slightly — consumer confidence, which rose through much of 2012, fell in January for the second month in a row, and unemployment remains at a relatively high 7.8 percent.
“[There is] uncertainty about the outlook for the whole U.S. economy, which has been very slow to recover after the financial crisis, and uncertainties abroad too,” Shiller said. “Congress is on an austerity plan, of the kind that put the U.K. into recession. We may yet eliminate the mortgage interest deduction, and government support for Fannie [Mae] and Freddie [Mac]. New regulations … make it harder for another bubble to gain a foothold.”
Van Winkle emphasized the importance of improvement in the job market in any long-term housing recovery. Currently, Connecticut’s unemployment rate stands at 8.6 percent — eight-tenths of a point higher than the national average.
“Sales will recover as job growth returns to the Connecticut economy,” van Winkle said.
Both Shiller and van Winkle encouraged federal and state governments to avoid providing incentives to homebuyers, although for different reasons, with van Winkle citing low home prices and Shiller noting the possibility of a potentially destructive housing bubble.
“As for encouraging potential homebuyers, I think that should be restricted to low-income homebuyers. We do not need to encourage the middle class back into another housing bubble,” Shiller said, referencing the 2006 housing bubble that led to the 2008 financial crisis.
In New Haven, however, the housing market has largely remained stable, according to Jack Hill, a realtor with New Haven-based Seabury Hill Realtors. Hill noted that East Rock, Westville and Wooster Square have maintained “extremely strong” markets in the past two to three years.
Hill attributed the continued strength of the New Haven market to low interest rates, the constant presence of professors and graduate students thanks to Yale and the perception among first-time buyers that home prices have “bottomed out.”
“There are always people buying because there are still jobs around here with Yale,” Hill said.
Noting a steady rental market, he added that investment from New Yorkers buying apartment buildings and multifamily homes in the city has also helped to maintain the market’s stability.
Connecticut home prices peaked in 2007, when they reached a median of $295,000 for a single-family home.