What do Lucy and Richard, Bob and Christina have in common? Spurred by the trifecta of an inventory of well-priced homes, record-low interest rates, and the incentive of an $8,000 tax credit, they’re all on their way to securing a piece of the American dream either in Branford or in surrounding communities.
Indeed, “inventory, financing and incentives” is the mantra of Realtor Sandra Reiners of Page Taft. She says her business is being driven by the tax credit. “The incentive is enormous,” Reiners says.
The deadline is nearing for prospective homebuyers to take advantage of the government’s $8,000 tax credit, and local real estate agents such as Reiners are eager to make the sales. First-time homebuyers or those who haven’t owned a home in three years have until Nov. 30 to close in order to receive the credit.
The full amount is available for individuals with an adjusted gross income of up to $75,000 and for married couples with a $150,000 joint return, and they must live in the house for three years. Vacation and rental properties are not eligible. Closings must take place between Jan. 1 and Nov. 30, 2009. Individuals with an adjusted gross income of $95,000 and couples earning $170,000 can receive a partial credit.
In Branford, open houses have seen good traffic. Local realtors are quick to agree that properties in the $200,000 to $350,000 are seeing the most action. And the consensus is that the “top of the market” — higher end single-family homes — has disappeared. According to the Multiple Listing Service (MLS), 13 single family homes were sold in June with a median price of $322,500; 16 condominiums sold with a median price of $173,500.
Sometimes the competition for a house can even get pretty stiff.
Lucy and Richard have been searching in Branford for the better part of the summer and have seen some desirable properties quickly snatched up.
“Without the incentive we wouldn’t be looking,” says Lucy. They’re semi-retired and are looking for a small single-level home in the mid-$200,000 range. They’re finding a lot of “mid-century” (the popular term now) houses that are solidly built, but need updating. They’re leery of the large condominium market in Branford because of the association fees and assessments that seem to be accompanying an aging condominium stock. The condo boom in Branford started in the early to mid 1970s.
In fact, the monthly homeowner association fee for a local waterfront condominium added $456 to its cost in addition to approximately $334 a month for taxes, plus the mortgage payment.
According to the National Association of Realtors, which is lobbying to have the $8,000 credit extended or broadened, sales were up a little more than 7 percent, while the Warren Group reported a 4 percent increase in sales of single family homes in Connecticut.
Whether home prices are still falling is another question. Both the Warren Group and the National Association of Realtors report declines in the median sales prices, However, 18 of the 20 cities tracked by Standard & Poor’s Case-Shiller Home Price Index for June 2009 showed some improvement although prices were still down over the previous June.
Interest rates are at all-time lows, running about 5.12 percent for a 30-year fixed rate mortgage in late August, according to Freddie Mac’s Primary Mortgage Market Survey. The 15-year fixed rates were pegged at 4.56 percent.
Reiners says financing is available for 96.5 percent of a home’s sales price with a down payment of 3.5 percent. Closing costs can be wrapped into the mortgage sweetening the deal. She describes one of her clients as a single mother with two sons who had rented for many years. The tax credit, Reiners says, enabled her to buy a nice end-unit condominium with a garage at a good price.
Dennis Amendola of Weichert Realtors in Branford, hosting an open house at a pretty cape on Home Place, believes this is a “trickle up” market. “It’s affecting the lower end of the market, which allows people to move up,” he says. He’s definitely seen more activity because of the tax credit with couples and single professionals, including his client Bob, actively searching.
Like Lucy and Richard, Bob confined his search to single family homes since he found condominium association fees “scary” and wanted to be able to do outside work. A lifelong Branford resident, he looked at a number of different houses this summer. While his search centered on Branford and the shoreline, his target is now a short sale in Wallingford. He has his eye set on a 1,000-square-foot, three-bedroom, one-bath house set on a quarter acre. He expects to pay a little under $200,000. He’s just waiting for a final blessing from the bank.
“The tax credit was a big incentive to start looking, “he says, “It’s almost the equivalent of closing costs … a home run.”
“I had been looking for about a year, but as the date for the tax credit drew closer, I accelerated my search,” says Christina, 28.
She landed a three-bedroom, one-bath, 1950s ranch in North Haven for $210,000; the property was originally listed at $217,000.
“It’s on a quiet street and had a nice basement,” she adds.
Jeff Clark, an associate broker with Coldwell Banker in Branford, said he’s had two transactions that were driven by the tax credit.
Many of his clients are young couples in their mid-20s.
“I can’t be certain that they wouldn’t buy anyhow. It could be accidental good luck for some, others may have been driven by it,” Clark says.
He believes the impact will be significant for the next 45 days, adding that other agents in his company have had a couple of tax-credit related sales.
Clark sees the benefit in terms of supporting condominium buyers. He says condominium prices have stabilized though the sales volume is down as seen in the Branford real estate sales he has been tracking.
From April 1 to Aug. 1, 2009, there were 72 condo sales in Branford with a median price of $193,500. For the same period in 2008, 70 units were sold, median price, $192,450. For 2007 (same time frame), 90 units, with a median price of $203,000 were sold; 2006 saw the sale of 113 units averaging $193,000 and for 2005, 110 units sold with a median price of $195,000.
Clark’s numbers for single-family homes also reflect lower sales and lower prices.
From April 1 to Aug. 1, 2009, 59 single-family homes in Branford were under contract with a median sales price of $299,000. For the same time period in 2008, 68 houses with a media price of $350,000 were sold; for 2007, 71 at $390,000; 2006, 72 houses at $380,000 and in 2005, 96 homes at $370,000. What is notable about those numbers is that the highest priced house dropped from $2,375,500 to just $792,500, which indicates that sales of higher end houses have indeed declined.
“People are being more cautious even if they are looking,” says Reiners, adding that the upper end of the market, $500,000 and above, is slower.
“The 6,000-square-foot McMansions are just sitting there….People are seeking more modest properties,” she says.
Marsha Oliver of Weichert Realtors in Orange was showing a Branford condominium on a recent Sunday. The attractive unit, nicely decorated with cathedral ceilings, was priced at about $210,000, down from $230,000. She sees the tax credit as a positive thing.
“People are excited about it,” she says. “Consumers are educated and they’re aware of the benefits.”
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