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August 7, 2023

Slow residential market hurting real estate, banking, ancillary industries

PHOTO | MICHELLE TUCCITTO SULLO This Colonial-style home at 84 Tyler Way in Bristol went on the market in June 2023 for $430,000.

The lack of residential homes for sale is having a negative impact on multiple industries, not just real estate.

In the financial sector, the slow home loan market has prompted layoffs at some financial institutions, and forced banks to shift their focus to other products and services to weather the downturn.

Realtors, lawyers, home inspectors and even photographers are also feeling the pinch from a slow-moving housing market being weighed down by low inventory and higher interest rates.

The Greater Hartford Association of Realtors recently reported a 33.6% decrease in inventory during the month of June compared to a year earlier, with just 754 single-family homes on the market.

New Greater Hartford listings in June dropped 28.3% to 623, while closed and pending sales fell 31.4% and 21.9%, respectively.

The one bright spot: The median sales price of a single-family home increased by 11% in June, to $390,000, according to association statistics.

David Gallitto

David P. Gallitto, president of CT Realtors, said statewide Connecticut inventory remains “still extremely low,” with only 3,600 single-family homes and condominiums on the market as of late July.

“That equates to 2 months of supply,” he said, with homes going under contract, on average, nine days from the start of the listing.

In contrast, Connecticut had about 22,000 single-family home and condominium listings pre-pandemic.

Currently, there are often multiple offers on properties, with final purchase prices going over the original asking price, he said.

Gallitto said it has been “hard” on the real estate community, which shrunk in the past year.

As of June 2023, Connecticut had 18,752 Realtors, down 2.4% from a year earlier, according to the National Association of Realtors’ most recent membership report.

“There are not enough listings to satisfy the demand in the market,” Gallitto said. “There is only so much one can do when there isn’t enough inventory to meet the demand.”

Lower income

Other industries linked to the home-sale market have been equally affected.

“Not as many loans written by mortgage companies, not as many closings for attorneys to handle and less homes for inspectors to inspect — it is a true trickle-down effect,” Gallitto said.

Paula Fahy Ostop

Paula Fahy Ostop, a West Hartford-based Realtor and team leader with the Marshall + Ostop Team at William Raveis Real Estate, said there are multiple reasons for the low inventory.

“There was such incredible activity in 2020 and 2021 that a lot of people got out of the market early,” she said.

Current interest rates are another factor. Many people who might have been looking to sell, either to downsize or upsize, are in homes now with low interest rates, around 3%, Ostop said.

In contrast, the national average for a new fixed 30-year mortgage loan was hovering at about 7.25% as of late July. Homeowners may be reluctant to sell their homes if they have low interest mortgages locked in on their current properties, Ostop said.

Another factor is the volatility of the stock market in the past year, prompting people to be hesitant to take money out toward a purchase, as they want their portfolios to recover.

“Those are the two biggest things we see holding people back,” Ostop said.

The atmosphere is having a “pretty significant impact” on the real estate industry, she noted.

“The agents and brokers — you are making money when transactions close,” Ostop said. “So, when we have fewer transactions, obviously that means the income overall is lower.”

‘Debt, death or divorce’

Supporting businesses such as real estate photographers and home inspectors are also seeing a significant downturn, she said.

Paul Orentas, owner of CT Property Inspections LLC in West Hartford, said business is down 75% for his company over the past nine months.

“Besides the problem of the lack of inventory, people are waiving inspections to win the contract,” Orentas said. “There is no such thing as a perfect home, and there are always unknowns that home inspections reveal.”

To make up for the loss of business, Orentas said he has been pursuing a license to do building inspections for municipalities.

Key to any turnaround, Ostop said, will be a decrease in interest rates and recovery of the stock market. Earlier this year, she predicted much of the inventory would come via “debt, death or divorce,” which create scenarios where people have to sell.

Meanwhile, interest rates have not impacted most potential buyers, who know they can refinance later when rates drop, Ostop said. Houses that are for sale are often fetching multiple offers, from three to 20, with some homes selling within five days.

Ostop said she has clients who have been actively searching for a home for 12 months.

“On very few occasions have we seen buyers drop out of the market,” she said. “When they are dropping out, it is because they are so frustrated with the number of offers they have made, and they still haven’t secured a home. They say, ‘I’m just going to take a break until the inventory increases.’”

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