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The Connecticut real estate market is not crashing, it’s actually on the raise.
We’ve all read what the media has to say about the real estate market, it’s slowing down, crashing, prices are declining and all the other negative news around it. But does this really pertain to the Connecticut market? Is this what us agents are seeing on the field? Not really!
Home prices have been steadily increasing since the beginning of 2020. The median home price in the state of Connecticut is now around $340,000 as of February of 2023. This is a significant increase from the median of $249,200 seen in January of 2020. Earlier this year, Realtor.com predicted that the Hartford, West Hartford, East Hartford metro would be the number 1 Housing Market in the U.S. for 2023. See the full article here.
Spring Market is just around the corner and we are still seeing multiple offers on properties. Properties are selling in a matter of just a few days and over the asking price. Why is this? The answer is quite simple actually, supply and demand.
In this article I share my thoughts on the current status of the Connecticut housing market.
There’s a difference in between a market slowdown and a market crash.
I think it is important to explain the difference in between a slowdown and a crash, as I see these two terms used correlatively.
A real estate market slowdown is a period of time when the real estate market is not as active. Simply explained, it means that there are not as many pending sales. This can be due to a variety of factors. Some of this factors include: economic conditions, housing supply and demand, and interest rates. A market crash is a more severe and sudden downturn in the market. This is often due to a major event or economic crisis that causes a sharp decrease in the market. A market crash can occur over a short period of time and can have a significant impact on real estate values.
There has been a lot of speculation in the media about a market slowdown and price drops due to higher interest rates. This is causing some concern among potential buyers and sellers. Many are wondering if the market is headed for a crash. But there are several reasons why the Connecticut real estate market is not going to crash.
1. The most important factor is the overall health of the economy.
Low unemployment, wage growth, and access to credit are all helping to drive the real estate market. Additionally, the population is growing, which creates more demand for housing. According to a press release from the U.S. Census, the U.S. resident population increased by 0.4%, in 2022. The Wall Street Journal also recently reported, that entering this year, forecasters had projected the economy to cool. But recent data shows a strong labor market and improved spending.
2. Housing supply is limited.
Another factor is the nature of the real estate market itself. The market is built on long-term investments and the housing supply is limited. A balanced real estate market should have a housing inventory of 5-6 months. As of February of 2023, the monthly housing supply in Connecticut remained at around 2 months. This means, that the market is far less volatile than other areas of the economy. Additionally, the demand for homes is high, which indicates a seller’s market. There are more buyers than homes available.
So overall, the real estate market in Connecticut is very healthy and is expected to continue to improve in the near future.
3. Lack of New Construction
New construction has failed to keep up with the demand for the following reasons:
- Great Recession (2007 – 2009) – Had severe impact in housing inventory as new builds declined very sharply, hitting all-time record lows in April of 2009. This has since increased but we have not hit pre-Great Recession levels for new construction.
- US Failed to keep up with housing demand – Millennials, now the largest generation in the US are now at the prime age of buying a home. The 2022 Millennial Home Improvement Survey found that 67% of Generation Y responded that they were likely to buy in the next two years.
- COVID Pandemic – triggered supply chain issues/labor shortages and raised material costs for new construction. While at the same time the government artificially lowered interest rates, making it very attractive or buyers to shop for the property of their dreams.
- Now people are holding on to their house – regardless of whether is time to downsize, or upsize, people are holding off on listing their house because they want to hold on the interest rate they locked in during the pandemic
Summary:
Overall, the real estate market is unlikely to experience a crash. The economy is healthy, demand is high, and the inventory is low. With that being said, it is still important to do your research and not over-extend your budget when making a real estate purchase. Finally, the real estate market is heavily regulated. This means that prices are more stable and the market is less susceptible to speculative bubbles.
If you or anyone you know, has any additional questions regarding the current status of your local Connecticut Real Estate Market, don’t hesitate to contact me so we can chat!
