Connecticut’s real estate landscape is currently grappling with a perplexing paradox. Despite high housing prices, the number of homes available for sale remains stubbornly low. This situation creates a catch-22 where prices are elevated due to limited inventory, yet homeowners are hesitant to sell, fearing they might lose favorable interest rates, according to local real estate experts.
Recent data from RE/MAX and the state’s Multiple Listing Service (MLS) underscores this point. The number of houses listed for sale in Connecticut has significantly decreased compared to previous years. Simultaneously, elevated interest rates discourage potential sellers who are locked into lower rates on their current mortgages.
Currently, Connecticut has just over 3,500 condominiums and single-family homes actively marketed for sale, representing a mere two-month supply of inventory. Pre-pandemic, the state typically boasted over 15,000 homes for sale, according to MLS records.
Alt text: A real estate sign indicating “For Sale” is prominently displayed in the front yard of a single-family house, symbolizing the current limited housing inventory.
Median sale prices are also on the rise, while the average time homes spend on the market has decreased year-over-year. In the Hartford region, the median home price climbed to approximately $345,000 in July, up from $321,250 in the same month last year, as reported by RE/MAX.
“When there’s only a few homes for sale, you have all the bees to the honey, and that’s where you get your high prices,” explained MJ Agostini, a real estate agent with RE/MAX Right Choice in Berlin. This analogy perfectly illustrates how limited supply in the housing market drives up competition and, consequently, prices.
Adding to the complexity, the Federal Reserve recently increased its benchmark interest rate by 0.25% to 5.4%, marking the highest level in over two decades. This increase further discourages homeowners from selling, as they are reluctant to relinquish their existing, lower interest rates. “It doesn’t make financial sense to move,” Agostini stated, highlighting the financial disincentive for many homeowners to enter the market as sellers.
The current housing inventory of approximately two months signifies that, under existing sales rates and without new listings, all available homes would be sold within roughly two months. Before the pandemic disruptions, a more balanced market typically maintained around six months of inventory, according to David Gallitto, a real estate agent with Huntsman, Meade and Partners Compass Realty Corporation and the president of the Connecticut Association of Realtors.
Nationally, across 50 surveyed metropolitan areas, housing inventory in July was down nearly 21% compared to July 2022, according to the RE/MAX report. This national trend mirrors the situation in Connecticut, indicating a widespread inventory shortage.
“It’s sort of like a feeding frenzy,” remarked Tammy Felenstein, an agent with William Raveis and the past president of the state Realtors Association, describing the intense competition among buyers for the scarce number of available homes.
Alt text: Empty grocery store shelves are depicted to visually represent the limited housing inventory, drawing a parallel between scarcity in essential goods and homes for sale.
Several factors contribute to this constrained housing supply. Following the 2008 housing market downturn, new home construction slowed significantly across the country. In Connecticut, the situation was further exacerbated by rising costs for developers to build entry-level homes, particularly with the supply chain disruptions experienced during the pandemic.
Connecticut also experienced an influx of new residents relocating from New York and Boston, along with an increase in second home purchases during the pandemic. This surge in demand, driven by people seeking to move out of urban centers, further strained the already limited housing inventory.
The scarcity of homes for sale is not confined to specific segments; it affects all market types across Connecticut, Gallitto noted. “Needless to say, it’s a very tough situation for people out there that are trying to enter into the homebuying market,” he added. Properties are being quickly snapped up as soon as they are listed, remaining on the market for an average of just 10 days before going under contract.
Homes are frequently receiving multiple offers, often exceeding the asking price. Agostini recounted a recent listing priced at $399,000 that attracted an astounding 36 offers, showcasing the fierce competition buyers face.
“If you have somewhere to go, it’s a great time to sell,” Felenstein suggested, acknowledging the advantageous position sellers are in due to the current market dynamics.
Typically, a market might expect to see more houses listed for sale in early fall as summer vacations conclude, Felenstein mentioned. However, she concluded, “it’s not a normal market,” indicating that traditional seasonal patterns may not alleviate the current inventory shortage. The confluence of low inventory and high interest rates continues to shape a challenging landscape for prospective homebuyers in Connecticut.
