Hartford Business Journal

8 Hartford Business Journal • March 9, 2015 www.HartfordBusiness.com Cash is King CT leads New England in all-cash home sales By Matthew Broderick Special to the Hartford Business Journal L ike much of the state this winter, Con- necticut's housing market has hardly been hot. In fact, according to recent figures from the Greater Hartford Associa- tion of Realtors, regional single-family home sales were down nearly 7 percent in January, compared to a year earlier. Prices dropped too, with the median sales price falling more than 14.5 percent to $187,000. The numbers are enough to make home sellers and Realtors feel blue, but there is also a very green trend happening in Connecticut: all-cash home purchases. According to recent data released by CoreLogic, a California-based research firm that tracks housing sector trends, roughly 35 percent of homes sold in the Nutmeg State in November 2014 were cash purchases. That was up from 33 percent a year earlier, making Con- necticut the top New England state for home cash sales, CoreLogic said. Much of the all-cash trend, experts say, has been driven by purchases of real estate owned properties, or REOs, which are typi- cally owned by a bank or government agency, and other investors looking to turn a quick profit by flipping houses. "More than six in 10 REO homes sales overall nationwide were cash deals," said Molly Boesel, senior economist at CoreLog- ic's Washington D.C.-based office. REO sales, Boesel said, often occur in fore- closure situations, which indicate a distressed housing market. However, she noted that housing trends in general — while still not a seller's market — are headed in the right direction. "In 2011, nearly a quarter of [nation- al home] sales were REO foreclosure transactions," Boesel said. "But last year, the number of REO sales was down to 10 percent and investors looking to flip houses indicate a healthier market emerging." That trend — along with near record low interest rates hovering under 5 percent — is good news, especially for first-time home buyers. In fact, according to new research released by Zillow Inc., an online housing market company, Hartford is expected to be the second best market in the country (behind Pittsburgh, Penn.) for first-time buyers, based on a formula that considered income growth, home prices and availability. And real estate in Connecticut, while still expensive by national standards, is still a good value relative to peak prices in 2006, the height of the market over the last decade. "While housing prices have largely stabi- lized," Boesel explained, "average housing prices nationally are still about 13 percent below their peek value." In Connecticut, average home prices are 25 percent lower than their 2006 values. That's good news for prospective buyers in the state. "We are seeing a slight increase in market- place activity," said Kathleen Shippee, a Farm- ington Valley-based real estate agent with Coldwell Banker Residential Brokerage. "And homebuyers are definitely taking advantage of the [low] rates, which are giving repeat buyers the ability to have more purchasing power." During her 16-year career, Shippee, who sells an average of 35 houses a year, says she's had a handful of buyers who have paid cash, which she acknowledges can have its advantages. "Some may have stemmed from the inability to qualify for a mortgage, higher interest rates, wanting a quick closing or just having the extra money and wanting to pay cash," Shippee said. While the majority of home-cash pur- chases aren't from individuals, Boesel says retirees are one group that drives the lion's share of cash sales. "Often older people are downsizing and don't want to take on a mortgage, so they make the large cash purchase," she explained. Boesel is quick to point out that the general trend of cash purchases is declining nationally. November 2014 represented 23 consecutive months of declining cash sales, which CoreLog- ic tracks through county records for nearly 90 percent of home sales in the U.S. But she also sees the value of cash purchases — from banks and investors — which helped stabilize housing markets in the aftermath of the Great Recession. For his part, Jeff Arakelian, CEO of the Greater Hartford Association of Realtors, remains hopeful about the region and the state's recovering housing market, despite the sluggish start to 2015. "This time of year is generally slow until the weather improves," he said. "There is a healthy amount of inventory in our area and historically low interest rates, making this a great time to buy." n Focus Residential Real estate Q&A talks about the spring home-buy- ing season with Candace Adams, presi- dent and CEO of Berkshire Hathaway HomeServices New England Properties. Q: So how is this spring's home- buying season shaping up? Are we expecting higher sales this spring compared to last year? What about home prices? A: Prices are stable. The pending market is up significantly year over year in spite of the weather. Provid- ing the inventory levels meet demand, prices will remain fairly flat. Q: Which end of the housing market (high, middle, or low end) do you expect to perform the best? Which do you expect to perform the worst? Why? A: The first-time buyer market is going to get some momentum due to low interest rates and loosening of the homebuyer credit guidelines. As they enter the market we will see some movement in the middle market as well. The luxury market will be stable, and available inventory will impact pricing. Q: Are brokers using any new technologies to sell homes? What about drones? I've heard realtors talk about using drone photography as part of their marketing. A: Drones will become part of the technology used by Realtors when the laws around using them are clear. It is expected that a bill will pass in Congress allowing drones to be used in certain geographic areas below 400 feet. There are many new technologies, including 3D visual tours and mobile applications that will improve the cus- tomer experience. Research and ana- lytical tools are improving the ability of Realtors to accurately predict trends and pricing. Q: How will the looming threat of higher interest rates impact this spring's housing market? A: The threat of higher interest rates typically takes buyers off the fence. Those who have been in the "wait-and-see mode" will enter the market. Investors are likely to move quickly as well. It is inevitable that rates will increase and it will have a predictable impact to the cycle. Q: What other interesting trends should we expect this spring? A: All indicators point to an active spring market. There are not likely to be robust gains in average sales price. Home- builders are gaining a level of con- fidence to re-enter the market, so I anticipate more new homes starts. Employment and consumer con- fidence will drive the momentum to the extent that there was pent-up demand, however, factors impacting Millennials from entering the mar- ket remain the same, including high student-loan debt, employment and the desire to have flexibility. Those who are buying are moving more toward metro centers and less to the suburbs. n CandaCe adaMs President and CeO of Berkshire Hathaway Homeservices new england Properties Q&a Interest rate hike looms large over spring home-buying season P H O T O | A n d y d e A n P H O T O g r A P H y, s H u T T e r s T O c k . c O m

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