When housing markets cool, condominiums are usually what plunge into the iciest waters. But Greater Hartford’s condo market seems to have a lot more buoyancy than it’s had in previous housing downturns.
Sales statistics compiled by The Warren Group show condominium sales in Hartford County dropping 16.4 percent for the first six months of 2007 — and yet the median price increased 1.5 percent compared to 2006.
For the month of June, sales dropped a staggering 21.1 percent, yet the median price jumped 2.8 percent.
Overall, the state had a 9.1 percent decrease in year-to-date condominium sales with a 4.2 percent increase in median price.
Puzzle Pieces
All of that is puzzling to Jeffrey Arakelian, president and CEO of the Greater Hartford Association of Realtors. Despite a big drop in the number of condos selling, condo inventory on GHAR’s multiple listing service bobbed up 31 percent for the first half of 2007.
That leads Arakelian to believe the condo market here is not as bad as some have been led to believe or as bad as other parts of the country.
“Typically, you would think with the increase in inventory, with slow sales, that the price would slow down too,” said Arakelian. “Certainly the prices aren’t going up like they were two or three years ago but they’re not negative right now.”
Beth DiLoreto, with Prudential Realty Connecticut’s Wethersfield office, downplayed the increase in inventory and labeled the decline in sales as a needed market correction.
“What we were going through in 2005, during the height of the craziness, was a crazy, elevated, goofy market,” said DiLoreto. “That wasn’t normal, this is normal. I believe this is just a correction and not a time to panic.”
Conversion Crunch
One explanation for the odd trends is that there isn’t so much an onslaught of individual condos being put on the market, as there are former apartments being converted to condos, asserts Christina Brine, with ERA Broder Group Real Estate in West Hartford.
“The problem is that we had a bunch of condo conversions that flooded the market,” Brine said. Some of those former rental units are too small to be attractive as ownership units. So they sit unsold, and unreasonably depress the market statistics.
“Sellers are going to eventually have to bite the bullet on some of these condominiums,” said Brine. “The sellers are still stuck in a year or two ago.”
Additionally, Brine said that a lot of the condominiums are not up to the standards of those looking to buy, specifically first-time owners who are looking for as little hassle as possible.
“They want a shiny condominium that looks like a new car,” she said. “If it’s not, then they’re out the door.”
Return To Normalcy
In 2004 and 2005, Arakelian said the condominium market was “very healthy” with large boosts in price and sales for nearly two straight years.
The recent downturn in sales could be merely a normalization of the market, he said.
“We’ve seen sort of a consistent rollback for both the single-family residential and condo market in the past six months to a year,” said Arakelian. “But you have to remember that 2004 and 2005 were record years.”
As of July, the median sales price for a condominium in the greater Hartford area was $172,500 compared to $167,000 a year ago.
“The prices are still pretty high but we’ve obviously seen a softening market,” said Arakelian. “It has not happened to the degree that we’ve seen in states like Florida, California, or an eastern city like Washington, D.C.”
Prudential’s DiLoreto said the slight upswing in prices is a sign the market is still strong but also indicates that condominiums are staying on the market longer.
“It’s interesting that sales prices have not come down,” she said. “The condos are staying on the market longer, just more than 60 days, but it’s not that significant. When I started in 1988, condos would be on the market for an average of 120 days. So to me, 60 days isn’t a long time — but it is compared to two years ago.”
Demographic Error
ERA’s Brine noted that the hype surrounding the impending retirement of baby boomers contributed to the condominium explosion that has not yet come to its expected fruition.
“There was all this talk and so many articles about the baby boomers retiring to the city and to condos to be near their grandchildren,” said Brine. “There’s a lot on the verge of happening in the city but it just hasn’t happened yet.”
The figures for Connecticut’s counties are, literally, all over the map, according to The Warren Group, which tracks all sales recorded in all state municipalities. Condo sales in Tolland County actually went up 2 percent from January to June, with an 8.1 percent jump in the median price. On the other end of the spectrum, New London County saw a decline of 18.4 percent in condominium sales coupled with a 2.6 percent drop in price.
Warren Group spokesman Terence Egan said it could be another three to six months before the condominium market has gone through a total adjustment.
“What we’ve seen in Massachusetts is that the condominium trends lagged the housing trends by a few months,” said Egan. “Through the boom years, it took condominiums a little longer to catch fire and, by the same token, took a little longer to level off.”
Adding to the confusion in Connecticut’s condominium market is the state’s aversion to falling prices that has plagued its New England neighbors.
“The prices have started to come down a bit but it’s tough to project out because Connecticut has been resistant to a significant decline even with sales dropping,” said Egan. “Frankly, we may see the price of condos hold form a little longer than we do in housing.”
