What’s affecting housing sales?

The Commerce Department reported last week that home construction across the U.S. fell in June due to wet weather in the South. However the good news is that analysts believe this is a temporary derailment to the recovering real estate market.

Housing starts fell 9.3% in June, which was the weakest report since September 2013 and was the second consecutive monthly decrease. Last month’s housing starts decline was attributed to the almost 30% drop in the South, which is the largest monthly decrease recorded for that region of the country. This is in contrast to other regions, which posted increases.

The area we call “the South” stretches from Maryland to Texas to Florida and there’s reason to believe this was an issue limited to that area. New construction in the Northeast increased 14% and in the Midwest it increased 28%.

In the South, the unusually wet winter and spring restricted construction. A shortage of lots left several developers unable to start building homes in June to meet demand.

Adding to the delays is that city building departments are taking more time to issue permits, mostly because municipal staffs have been reduced. Other regions of the country typically build through the winter as they do in the South.

There were positive signs reported as well. Construction of single-family homes was up 4% from the prior year for the second quarter. Single-family home permits were up 2.6% from the prior month and housing starts increased 7.5% from last year.

The U.S. Commerce Department, however, revised the rate of construction in May from a decrease of 6.5% to a decrease of 7.3%. Applications for building permits decreased 4.2% in June from the prior month, which was the lowest rate since January.

According to analysts, the construction decline was attributed to a 9% decrease in single-family homes and an almost 10% drop in apartments and condominiums having a minimum of two units.

Another factor affecting the availability of homes for sale are homes having mortgages exceeding their market value. As earlier reported, almost 20 million homes across the country are underwater or have mortgages that are more than the value of the home. In southwestern Connecticut, Bridgeport had the largest amount of underwater homes at 42% and Stamford had 33%. Greenwich and Darien had the fewest, at 3% of homes under water.

In Greenwich, homes with a zip code of 06830 (which is in central/mid-country Greenwich) have 7% underwater, homes with a zip code of 06831 (western and northern Greenwich) have 6% of homes underwater as did homes with 06870 (Old Greenwich and North Mianus), followed by homes with a zip code of 06807 (Cos Cob) with 5% and then homes with a zip code of 06878 (Riverside) with 3%. This comes from an Occidental College professor in southern California who used Zillow data.

Putting aside the accuracy of the report’s data, the indicators are consistent with what we already know. Greenwich market values hold their value when compared to most towns in Fairfield County. Old Greenwich was impacted by Sandy and revised flood regulations.

New construction is down, as there is a shortage of parcels affecting central and mid-country Greenwich and changes in the preferences of buyers (i.e. desire more cost-efficient homes) is also having an impact.

 

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]

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