MERIDEN — The city’s real estate market is expected to continue its upward price trend in 2022, but anemic housing stock and the threat of higher interest rates could slow the pace.
A total of 823 homes were sold in Meriden in 2021, compared to 784 homes sold in 2020, according to a market report from Berkshire Hathaway HomeServices. The average sale price rose 24% from $176,681 to $219,776 in 2021 and the average days on market fell from 49 to 32. But December showed some tightening in listings and sales, possibly indicating a slowdown in activity, although prices remained firm. .
“2022 inventory is still very low and with a lot of anxious buyers,” said Joseph Criscuolo, owner of The Home Store. “Interest rates are still attractive at the moment. It looks like we will still see price appreciation this year, but not as high as in 2021.”
Rising interest rates will contribute to lower activity, Criscuolo said. Higher loan rates equate to less purchasing power and first-time home buyers will be hit the hardest.
“They may have to settle for less than a house in terms of square footage and amenities,” Criscuolo said. “The key factors sellers and buyers need to watch for are increases in days on market and price reductions that could indicate a shift in the market.”
Mortgage financiers and homebuyers are paying attention to the Federal Reserve’s Jan. 25-26 meeting after bank officials
signaled that they would start raising interest rates in March to curb inflation.
But Jonathan Carbutti of Carbutti & Co. Realtors said that if there was a slowdown, it was because of inventory, not rising interest rates.
“I already have one of my busiest Januarys,” Carbutti said. “I would have sold double last year if the inventory was there.”
Cash buyers are frustrated, Carbutti said. His company listed a home on Rolling Hills Drive for $439,000 in early January that is currently under contract for $444,500, according to local multiple listing services.
Even first-time buyers are coming in with 20% down payments and investors are “out of the woods,” Carbutti said.
“If there’s a downturn, it’s because of inventory,” Carbutti said. “The problem (for sellers) is where are they going to go?”
The threat of interest rate hikes will only encourage people to want to buy faster, said Tammy Felenstein, president of the Connecticut Association of Realtors and head of strategic growth and sales for William Raveis’ flagship office at Stamford.
“If anything, it increases demand,” Felenstein said. “We are playing musical chairs. There are thousands of buyers looking to buy, and only a few chairs.
After two years of pandemic-related restrictions, people are saving more, with the savings rate in the United States hitting an all-time high. People who buy a home now lock in low-interest payments for 30 years, she said.
Housing prices are accelerating at a faster rate than most investments and are not expected to decline until supply improves. Buyers who wait can only expect to pay more in the future, Felenstein said.
“It’s not a bubble,” Felenstein said. “It’s not even close to what happened during the Great Recession.”
In 2008, subprime lenders were giving mortgages to unqualified buyers who ended up defaulting on the loans.
Bad mortgages backed securities that were collapsing in value and rocking the housing market and the economy.
This latest acceleration is fueled by cash and is also reflected in lower supply and higher prices in the rental market, she said.
“Until we can get a supply, it will continue like this,” Felenstein said.
According to the Berkshire Hathaway report, low inventory in the resale market would generally lead to increased sales of new developments, however, homebuilders were facing serious supply-side issues, including a lack of of approved and affordable land, increased costs of building materials, supply chain bottlenecks. and the difficulty in finding skilled labour.
“These supply-side challenges existed before the pandemic, but have worsened significantly over the past 18 months,” the report said.
“As a result, in 2021, 946 new single-family homes (built in 2020 and 2021) closed in Connecticut. This number is down 5.5% from the 1,001 new homes sold in 2020.
Demand for new construction also pushed up the average selling price of new and existing homes. forcing many first-time buyers to leave the market.
“It’s hard to get materials, and the cost of materials is skyrocketing,” Greg Ugalde, a Connecticut-based builder and former president of the National Association of Home Builders. recently told the Connecticut Mirror.
“And that’s forced some builders to sit on the sidelines waiting for things like lumber to be brought under control.” Prices have doubled or tripled in some areas, and you need to factor that into the price of a house.
He said that wood is just one product whose cost is skyrocketing and affects the housing market as a whole, including prices.
“For every $1,000 you add to the price of a home, there are nearly 154,000 households that are taken out of the market. So when you raise prices you have to be on the lookout for the families you are losing,” Ugalde told the Mirror.
“It’s a challenge for first-time buyers,” said Sandra Maier Schede of Maier Real Estate. “They are aggressive with their contracts, repossession sites, and bank and credit union repossessions.”
A balanced real estate market is one that has six to nine months of inventory, but the state average is 1.3 months for homes priced below $500,000, well below normal.
“There will still be announcements to a limited extent with life changes for sellers – death, divorce, financial reasons, retirement,” Schede said. “The market that holds and does not move as usual is the move to a bigger house (no inventory to move) and the reduced seller who may have had to bring his family home due to stress related to COVID.”
Out-of-state buyers with cash deposits also compete with first-time buyers. Schede and other agents reported buyers from New York and New Jersey and even Fairfield County buying homes in Meriden and Wallingford to take advantage of lower prices.
Any increase in interest rates will primarily impact buyers who are heavily dependent on financing, but Schede does not expect the market to slow significantly in the coming year.
“The current market will continue into 2022 as there is pent-up demand that has not been met,” Schede said. “It’s still a buyer’s market.”
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