Alert: Extreme Cold Ahead

Real Estate Alert 2019-01-19

The precipitation is getting all the headlines, but the extreme cold predicted to follow is just as concerning.

Take a couple minutes today to make sure your house is ready for extended single-digit temperatures. Check your heating oil level, drain the exterior spigots, and bring in some firewood if you regularly burn fires. If you have drafty windows or doors, then consider buying insulating strips to temporarily plug the cracks.

Stay warm, and make sure your house stays warm too. Frozen pipes are bad news.

Free Houses in Sicily

Ruins

We recently wrote about municipal governments offering free houses in Japan in an effort to stabilize the population of rural areas.

Well, a similar offer is available with a Mediterranean flair. Sambuca, a town near the southern coast of Sicily, is offering homes for €1 to new residents who promise to fix up the properties within 3 years. The town dates back to the ancient Greeks, and has a variety of historical influences.

Although we’re not planning to jump at either offer, there is consensus in our house that we would choose Sicily over Japan.

AirBnB to try Modular Construction

Fast Company published an exclusive about AirBnB at the end of November. The home sharing company proposed a new initiative called Backyard, which came from their division focused on the future. It is very ambitious, as it aims to rethink the entire process of designing, building, and updating homes.

While the company’s move into the physical world of construction is the main headline, I’m more interested in one of the other details – that the homes will be modular.

Modular structures are not a new idea, but they have not gained much traction in the residential world. The vast majority of homes that people live in today were built on site from lumber.

Modular construction, where larger sections of a structure are built off-site, is more common in commercial development. For example, the large parking garage that the State built on the corner of Buckingham and Washington near the Capitol building relied heavily on modules that were trucked in and assembled by crane.

State Garage at Buckingham and Washington

I like the idea of modular homes. That might seem like a surprising position for an “old house” person to take, but if I ever built a new home then I would definitely look at modular options in order to increase the build quality and reduce the construction time. I would expect modular construction to save me money too.

What is exciting about AirBnB getting into modular construction is that they have the potential to try the idea at a large scale. The Fast Company article noted that the company was valued at about $38 billion. As a point of comparison public homebuilder D.R. Horton, one of the largest in the country, had a market cap of about $13 billion at that time.

A large scale trial of modular homebuilding by AirBnB is unlikely to happen in Connecticut. We don’t have a large unmet demand for housing, and the available land is relatively far from the existing job centers. We’ll have to watch their experiment from a distance.

Hopefully the combination of AirBnB’s drive to expand their business, their ability to finance the effort, and their fresh perspective on homebuilding will result in many home innovations and progress towards making modular construction the standard for new residential properties.

Strong 2018 Hartford County Single-Family Sales

Hartford County finished 2018 with a closed deal count in the mid-8,000s for single-family homes for the third year in a row.

2019-01-04 Hartford County Single Family Sales

Median single-family homes prices increased by 4.5% from $220,000 to $230,000. Average single-family home prices also increased, though by a smaller percentage.

2019-01-04 Hartford County Single Family Prices

Breaking the number of sales down by price band, we can see that number of deals at prices below $200,000 decreased, while the number of deals in the middle price bands increased.

2019-01-04 Hartford County Single Family Sales by Price Band

All of these observations are positive for the real estate market. Deal count is holding steady near the high points established in the early 2000s. Prices are rising as measured by both common valuation metrics. The decreasing number of deals at the lower price points are a result of the rising prices – properties moved up into the next price band.

Most interesting is that the market is behaving similarly to the first few years of the 2000s. The data shows stable deal count with upward pressure on prices. Price increases were driven by strength at the low end of the market, which represents the majority of Greater Hartford’s housing stock.

This year’s market checkup shows a healthy real estate market without any significant warning signs.