Prices keep climbing

The figures are in and they show that as the inventory of homes on the market is low, prices are increasing.

In the month of February, home prices in Connecticut rose more than 7%. In February, 1,149 single-family homes sold in Connecticut as compared to 1,245 in February of last year. Add to those figures the fact that the median price for single-family homes rose (7.14%) for the fifth consecutive month in February, according to The Warren Group.

Poor weather has been another reason why sellers have delayed putting their homes on the market.

With below-normal temperatures and a long winter, many sellers are waiting for spring weather before listing their homes. When more sellers list their homes, sales activity will increase, because there is pent-up demand.

Fairfield County home sales were about the same as last year. The median price in the county increased 2.15%. What is interesting is that Greenwich and Bridgeport had the same and the most number of sales in the state for the month.  The median home price for Bridgeport was $150,500 as compared to the median home price in Greenwich, which was $1,947,350 in February.

Reportedly, Bridgeport prices increased 22% when comparing February sales this year with February sales from last year.  Greenwich prices increased 62% for the same time frame.

These price increases, however, have to be put into context. A year ago, distressed sales and the majority of sales were in the lower price points in Greenwich, which skews the results. Fairfield County led the other Connecticut counties in terms of home sales and median price.

Homes (meaning single-family and condos) purchased with cash went from 234 in 2011 to 407 in 2012. Some of these are investors who renovate the home to either flip it or rent. These purchases by cash-heavy investors are providing more of a return on investment than many financial alternatives. Some of these cash buyers are being conservative or wishing to avoid debt and risk foreclosure. Other cash buyers are seeing the short-term return or benefit from rental properties and are looking forward to the long-term gain when home prices significantly increase.

Sitting on cash provides for a negative return, especially, when interest rates are so low. Investors are joining forces, in some cases, to purchase real estate and benefit from rentals and the expected long-term gain or renovate to flip. Yes, flipping is back.

Sellers benefit from cash deals, because the risk of a non-performing buyer is minimized; there won’t be an appraisal to challenge or lower the price, and the deal can be done sooner rather than later.

The buyer benefits from paying with cash. Buyers would not incur a higher interest rate on the mortgage for an investment property because they would be able to assume a tenant in place for immediate income, and they would be able to quickly close.

Borrowers still make up the majority of sales transactions. Saving cash for the down payment on a home is necessary. Typically, the more cash put down to purchase, the more favorable the interest rates and terms and conditions the buyer will receive on the loan. Further, the buyer can still take a mortgage deduction on his or her taxes. Having cash is always a benefit.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected] or she may be reached directly at 203-249-2244.

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