Connecticut mortgage rates continue to hover above 5% as affordability drops across the country. While that may lead many to question whether homeownership is within reach, one Connecticut real estate expert said it might be the perfect time for some buyers.
Tammy Felenstein, president of the Connecticut Association of Realtors, called the current market “one of the most interesting” she’s ever seen in her 26 years in the industry.
She said 2021 featured a perfect storm of prices going up and “activity level through the roof.” But she said 2022 is very different.
“There’s definitely a slowdown, but I would call it more of a return to normalcy,” Felenstein said. “This is not a crash, it’s not a bubble; the demand is still there.”
She said the slowdown is perfect for buyers who have grown tired of being outbid amid the hot market or for those feeling what she called “buyer fatigue.”
“They can rest up knowing that inventory levels are going up, they have more to choose from and they don’t have to turn on a dime as they were having to a couple months ago,” Felenstein said.
Connecticut has four months of supply, according to the Connecticut Association of Realtors. That’s real estate-speak for how long it would take the existing supply of houses on the market to sell.
Six months of supply is normal. And while Connecticut is not quite there, she said the state has recovered from the low numbers seen last year.
“In the spring, many of our towns were talking in weeks of supply. At one point Darien [had] three weeks’ supply, Felenstein said. “That’s just unheard of.”
Housing stock has improved, but prices remain high
While interest rates above 5% aren’t making the situation any more appealing, Felenstein advises potential buyers not to take themselves out of the market.
“I think you have to take a long-range look at owning, so even if you buy something now and the interest rates are in the five or sixes, the likelihood is that your income is going to go up the longer that you live there and interest rates are likely to go down, and you can refinance,” she said.
The median sales price in Connecticut for a single-family home was $380,500 in May, while the National Association of Realtors recorded a national median sales price that topped $400,000. And other experts agree that prices likely won’t decrease for a couple of years.
All while the housing affordability index hit 102.5 in May – the lowest since June 2006, when it fell to 100.5. When the affordability index falls, that means homeownership is becoming difficult to attain.
The index, tracked by the National Association of Realtors, measures whether an average family earns enough to qualify for a mortgage with a 20% down payment. An index well above 100 means a family has more than enough income to afford a home. Prior to the pandemic, the average index for 2019 was 159.7.
Still, first-time homebuyers have some opportunities for assistance.
A new income-eligible program, administered by the Connecticut Housing Finance Authority and the state Department of Housing, is offering forgivable loans for down payments and closing costs. The program, called “Time to Own,” is geared toward helping low- to moderate-income families buy a home that might seem out of reach.
“There are resources out there. The program gives you a down payment in order to purchase, and it goes between $25,000 to $50,000,” Felenstein said.
