Connecticut Real Estate Market Trends & Analysis


The Connecticut real estate market has faced more obstacles than the majority of states across the country. Consequently, real estate in Connecticut is poised to carry the same momentum of years past into 2020. Investors should expect familiar trends to continue for the foreseeable future. A distinct lack of inventory should facilitate an increase in bidding wars, faster price appreciation rates, and quicker home sales.

Despite recent price gains, however, Connecticut home values remain relatively cheap, at least when compared to their national counterparts. Resulting affordability, in conjunction with exceptional healthcare options and educational institutions, have already begun attracting millennial buyers from across the country. However, an impending surge in new construction permits should alleviate the inventory burden and allow the local housing market to get back on track. Small as they may seem, these interim trends could very easily establish the foundation for a healthy real estate market moving forward. Now, more so than in years past, may be as good of a time as any to look into the Connecticut real estate market.

The Top Connecticut Real Estate Markets


While the best real estate market in Connecticut is up for debate, here’s a list of the cities investors may want to pay special considerations to:

Connecticut Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Attorneys
Conveyance: Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method: Judicial
Process Period: 5 - 6 months
Notice of Sale: Court
Redemption Period: Court Determined

Taxes

Income Tax: 3.0% - 6.99%
Corporate Tax: 9%
Sales Tax: 6.35%
Estate Tax: 7.2% - 12%
Inheritance Tax: No
Median Property Tax: 1.63%
Property Taxes by County: http://www.tax-rates.org/connecticut/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,555
Transfer Fee: Transfer fee 0.75% up to $800K; 1.25% of value over $800K
Origination Fee: $1,885.00

Overview

  • Median Home Value: $243,800

  • 1-Year Appreciation Rate: +1.3%

  • Median Home Value (1-Year Forecast): +0.3%

  • Median Rent Price: $1,825

  • Price-To-Rent Ratio: 11.13

  • Average Days On Market: 81

  • Percent With Negative Equity: 11.2%

  • Unemployment Rate: 3.6% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 3,572,665 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $73,781 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 7.89%

  • Foreclosure Rate: 1 in every 1,685

Median Home Prices In Connecticut


The median home price in Connecticut is approximately $243,800, which roughly marks the state’s return to pre-recession levels. Nearly 10 years ago (February 2010), in fact, Connecticut home values rested somewhere in the neighborhood of $244,000—that’s a difference of a couple hundred dollars from today’s prices. It is worth noting, however, that prices didn’t remain stagnant over that time, but rather exercised a great degree of variance. The average value of a home in Connecticut bottomed out around $215,000 in September 2012. Since then, home prices have gradually increased for more than seven consecutive years (with the exception of a couple month-over-month declines).

Since Connecticut home values bottomed out in 2012, they have increased 13.39% to get to where they are today. To put things into perspective, median home values across the United States appreciated at a rate that more than tripled that of Connecticut. Since the Connecticut real estate market bottomed out in September 2012, Median home values in the United States have increased 52.9%. In the last year (alone), median home values in the United States increased 4.8%, whereas homes in Connecticut were the beneficiaries of a much more modest 1.2% increase.

Despite considerably lower appreciation rates, the median home value in Connecticut is still slightly higher than the national average. However, the gap is expected to close over the next year. While median home values in Connecticut are expected to increase 0.7%, home values across the country should see a more encouraging 2.8% in the next 12 months.

The decline in appreciation rates (both in Connecticut and across the United States) over the last year isn’t necessarily an indictment on the housing sector, but instead the result of nearly a decade’s worth of historic increases. If for nothing else, there isn’t a lot of room left for growth, which has tempered the rate homes are expected to increase in value.

Median Rent Prices In Connecticut


The median rent price in Connecticut is $1,825, which is the highest it has been in more than a decade. In fact, since the recovery started to take hold around January of 2013, median rent prices in Connecticut have increased 13.4%. This year, state-wide rental asking prices have increased an average of $68, or a total of 3.8%. It is also safe to assume prices will continue to creep upwards for the foreseeable future. As home prices continue to appreciate, rental rates will follow closely behind.

To put things into perspective, the median rent price in the United States is $1,700. Not unlike rents in Connecticut, national rents share a direct correlation with home values. Over the course of the latest recovery (which really took hold around the first quarter of 2013), rental prices have increased almost exponentially with their home value counterparts. As a result, the median rent price in the United States has increased 28.7% from January 2013 to get to where it is today—that’s more than twice the rate if Connecticut rentals over the same period of time.

With a price-to-rent ratio of 11.13, it makes more sense for people in Connecticut to buy than rent. More specifically, however, the total cost of homeownership in the Connecticut real estate market is more affordable than the cost of renting a similar property. As a result, it is safe to assume the state’s rental market has actually driven more prospective buyers to actively participate in the housing sector.

Connecticut Foreclosure Trends & Statistics


According to RealtyTrac, a nationally recognized real estate information company that specializes in distressed properties, Connecticut has a relatively high distribution of distressed properties. With approximately one out of every 1,997 homes in some stage of distress (default, auction or bank owned), Connecticut boasts a foreclosure rate of about 5.0%. The country as a whole, on the other hand, has a foreclosure rate of 3.9%. The state’s higher foreclosure rate is largely attributed to its stagnant housing market. Prices have yet to appreciate on the same level as the rest of the country, keeping many homeowners underwater.

Despite the higher foreclosure rate in Connecticut, the state appears to have made progress over the last 12 months. “In September, the number of properties that received a foreclosure filing in CT was 16% lower than the previous month and 30% lower than the same time last year,” according to the latest data provided by RealtyTrac.

As the economy continues to strengthen, foreclosure activity should continue to drop. That said, the entire state has a long way to go. There are still several counties that have become synonymous with higher foreclosure rates, not the least of which include:

  • New Haven (1 in every 1,492)

  • Windham (1 in every 1,599)

  • New London (1 in every 2,078)

  • Middlesex (1 in every 2,170)

  • Fairfield (1 in every 2,171)


Tax Lien Investing


  • Tax Lien or Deed: Tax Deed Sale with Right of Redemption

  • Interest Rate: 18% after Tax Deed sale

  • Redemption Period: 6 months after Tax Deed sale

Real Estate Investing In Connecticut


Connecticut real estate investors, not unlike investors across the country, favor distressed assets over those that are priced more traditionally. Placing an emphasis on distressed homes increases their odds of locating deals with potentially larger profit margins. With that in mind, there’s one type of distressed property Connecticut real estate investors should pay special considerations to: pre-foreclosures. As their names suggest, pre-foreclosures are the assists of homeowners who have fallen behind in payments. Their inability to keep up with mortgage obligations have placed their homes at risk of falling into foreclosure. Consequently, pre-foreclosures aren’t in foreclosure, but rather at risk of it.

As it turns out, the majority of Connecticut’s distressed properties are pre-foreclosures. More than half of the distressed properties identified by RealtyTrac, in fact, are at risk of falling into foreclosure, which means the majority of the state’s distressed homeowners should exhibit at least some degree of motivation to sell; that or risk falling into foreclosure. You see, those behind on payments are better off selling to investors than losing their properties to foreclosure. Pre-foreclosures may often be had at a discount because of the seller’s motivation to sell before the bank steps in. Connecticut real estate investors should, therefore, visit a respective neighborhood’s local courthouse; there, they’ll be able to identify the homes that are behind on mortgage payments.

Of course, knowing where to find real estate deals in Connecticut is only part of the equation. Once investors secure deals, they need to know what to do with them, which begs the question: Which exit strategies are working the best for Connecticut real estate investors?

There is room in the Connecticut real estate investing industry to fit all three of today’s most popular exit strategies: wholesaling, rehabbing and long-term rentals. Despite nearly seven years of appreciation, prices still look as if they have room for growth, so it’s reasonable to suspect rehabbers and wholesalers will be able to enjoy respectable profit margins for the foreseeable future. Even rental properties appear to be good investments in the right neighborhoods.

Connecticut Housing Market Predictions


Predicting Connecticut real estate trends is no easy task. Despite a relatively static housing market, there’s always an inherent degree of variance at play. There’s always going to be at least a slight margin of error associated with predicting the housing market, as there are far too many variables that must be accounted for. Nonetheless, it is good practice for investors to keep a pulse on the local market. With an “ear to the ground,” it is possible to make better, well-informed decisions. Consequently, there are a few Connecticut real estate market projections that are more likely to play out than others:

  • The local market will build off of recent momentum: For the better part of a decade, the Connecticut real estate market has trailed behind national trends. While not quite stagnant, progress has been made at a slower pace than the rest of the country. However, as the calendar gets closer to turning over to 2020, there is a heightened sense of momentum in the market. In particular, the Connecticut real estate market appears to be the beneficiary of a high volume of buyers and sellers. It is officially safe to assume real estate in Connecticut will see a lot more activity than in years past.

  • Foreclosure activity will continue to decline: Connecticut has been associated with a high foreclosure rate for far too long. Thanks, in large part, to a relatively stagnant economy, home values haven’t experienced the same upwards momentum witnessed across the majority of the county. Prices have increased for the better part of a decade, helping some homeowners get out from underwater, but there is still plenty of room for growth. In fact, as the economy improves, Connecticut should continue to see its foreclosure activity decline in the face of rising prices.

  • Market optimism will promote healthy activity: With the economy strengthening, optimism in the Connecticut housing market has risen. The majority of residents now believe it is a great time to buy a home, which bodes well for the entire sector. The favorable sentiment should promote a healthier market and benefit everyone involved.

Connecticut Real Estate Market Summary


The Connecticut real estate market has had a hard time keeping pace with national trends. Real estate activity and home prices have trailed their national counterparts for the majority of the current recovery. Nonetheless, real estate in Connecticut is on the rise, and while it may not be improving at the same rate as the rest of the country, it’s moving in the right direction. As a result, optimism has promoted a more active market, which bodes well for buyers, sellers and investors. The momentum that was realized in 2019 should continue over into 2020, and help real estate in Connecticut get one step closer to the majority of states across the United States.

Sources:



https://www.bhhsneproperties.com/mce/prj/bne/Graphs/qr/preview/CT_ALL.htm
https://www.zillow.com/ct/home-values/
https://www.zillow.com/home-values/
https://www.realtytrac.com/statsandtrends/ct/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/ct/
https://www.bls.gov/regions/new-england/connecticut.htm#eag
https://www.census.gov/quickfacts/CT

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