A new projection by an authority on the U.S. housing market says New London County will be the best housing market in Connecticut over the next five years, and one of the best in the nation.
The latest home price report by Fiserv Case-Shiller projects home values in New London County to rise by an average of 7.1 percent per year for the next five years. That projected increase is larger than any other area in Connecticut, and is more than double the expected 3.3 percent annual increases in home values across the country over that time.
David Stiff, the Chief Economist for Case-Shiller, told Patch Friday that the main reason for the expected increases in home values is because the values of homes are well below what people in the area can afford. Specifically, only 12 percent of an average New London County homeowner’s income goes to a mortgage payment, which is “significantly” lower than other areas of the country, he said.
“The basic answer is that housing is so cheap there,” Stiff said.
Home values have dropped by 23.4 percent in New London County since their high in 2006, according to the report by Case-Shiller. That is the largest percent drop of any area in Connecticut, but it also means there is plenty of value to recover, Stiff said.
“What it does mean is that there is more room for a bounceback,” he said.
Stiff said that the projections show that values will likely stay flat for another year, and then begin to rapidly increase in value. He said in 2015 and 2016, Case-Shiller is expecting New London County home values to increase by more than 10 percent each year.
Stiff also said that foreclosures, while still relatively high, are making up a smaller percentage of the overall housing market in the area. He said 10 percent of all homes for sale in New London County are bank-owned, which is far below the average of 20 percent across the nation. With those lower-priced banked-owned homes off the market, the value of all homes will increase, he said.
The news did not surprise Tony Sheridan, the president of the Chamber of Commerce of Eastern Connecticut. He said the worst of the recession is over and expects the New London County economy to pick up again.
“I’m not surprised to hear it,” Sheridan said. “There is a very compressed market right here and I think it is going to boom.”
The report proves what Sheridan has heard anecdotally. He said he’s talked to banks and businesses, who said they all have money to invest, but are hesitant about investing it. Case-Shiller’s data backs that up, as people in New Londo County are spending less of their money, at least on mortgages, compared to other areas in the country.
The way to get people to spend money again is to change the psyche of the area, Sheridan said. If people begin to gain confidence again, and begin to spend their money again, not only will home values increase but business overall will increase as well, he said.
That confidence could be regained if the federal government begins avoiding the types of high-publicity squabbles it is becoming infamous for, Sheridan said. Once the federal government instills some confidence, money will begin to be spent again in New London County, he said.
“It is going to take some discipline in Washington,” Sheridan said. “That is what the people are demanding.”
Local Realtors were not surprised by the projections either, saying home values have slowly begun to creep up. They also agreed that the federal government’s highly-publicized disagreements are having an impact on homeowner’s confidence, and said that needs to change.
“I think (potential homeowners) are still very skeptical of what’s going on in Washington,” said Al Kinsall, a Realtor based out of New London.
Kinsall said that, as Stiff said, many foreclosed properties in the area have been bought, fixed up and then sold. That is increasing the value of all homes, he said.