Metro Hartford Growth Projections

Major news outlets periodically publish housing data for US metro areas. This week’s version was reported by CNNMoney and is originally from Fiserv Lending Solutions. It’s a forecast of growth from April 2007 to April 2008 and a couple snapshot statistics. Although I’m not familiar with Fiserv, the forecasts are in line with others that I have seen since the beginning of the year.

There are two interesting points about our area in this report – homes in Greater Hartford are more affordable than in many other areas around the country and local home prices are expected to increase this year.

Some may be surprised to hear that housing in and around Hartford is actually affordable. The Fiserv data shows that median mortgages as a percentage of income are comparable to Springfield, MA and lower here than anywhere else in New England. Most of the places young professionals find desirable and exciting are considerably less affordable based on this statistic. Anecdotal data from friends and former business school classmates confirm the study’s conclusions. Our friends in the NYC, Boston, and Washington DC areas have considerably less buying power.

The other interesting result of the report is that home prices in the Hartford area are expected to appreciate 2.8% over the next year. Although the usual headline is that US housing is in big trouble, the reality is that real estate is a local industry so conditions are different around the country. Some markets are definitely losing value – typically they are the same ones that experienced such strong growth over the past few years. Most of New England is projected to either hold firm or decline slightly. The Cambridge, MA area is the only other region in NE expected to rise in value, though it’s growth forecast is less than half of Hartford’s.

So the Fiserv study shows that housing in Hartford is not only affordable compared to other metro areas, but that prices are going to be rising over the next year. It seems like the market is still in good shape and we should feel comfortable buying and selling.

Chicken Little…

No Chicken Little, the sky is NOT falling…

Home Prices Fall

Nationwide, home prices are expected to drop 0.7% and the national media is all riled up. That’s what happens to asset values. They go up, then they go down, then they go up again. Just like stocks. Just like mutual funds. Over the long term any asset will appreciate if it is valuable (and well maintained in the case of a house). Prices don’t matter if you are not looking to sell (unless you really need to pull some equity out of your home). Overall, people should think about homeownership over the long-term, not the quarterly fluctuations that may or may not be happening in your local market.

If you are planning on selling your current home in order to buy a new house, this still should not be a huge issue. Getting less on your sale means that you are probably going to pay less on your buy. So again, the long-term view should win out.

Affordable Housing in CT

Last week I talked about property taxes in West Hartford making housing unaffordable for some folks. This week it seems that we might want to look at affordable housing in CT in general. The Courant ran an interesting article a few days ago…

A Home They Can Buy…

Here’s a link to the official HOMEConnecticut site if you’d like to learn more…

HOMEConnecticut

Personally, when I moved here 3 years ago, I was surprised at how affordable housing actually was compared to other areas where I previously lived; Vermont, Boston and the DC area. However, I also live in Hartford, a town that often gets overlooked during home searches. I believe there are good buys out there if people are willing to keep an open mind.

Zillow

Most real estate agents I know HATE Zillow. Most consumers I know LOVE Zillow. Why the disconnect?

I believe agents dislike Zillow for 3 main reasons.

· Agents are afraid that consumers will gain access to information that previously only agents could access. Asymmetry of information pushed clients to agents because it was difficult to understand how houses were priced and how the real estate market worked.

· Agents are afraid of what Zillow could do to our business model. Most agents are not tech savvy and do not understand how they will need to adapt as real estate consumers do more research on their own. Compensation models could evolve and agents that have been in the business for many years do not look favorably at changing how they are paid.

· Agents believe that the pricing information Zillow provides is not necessarily accurate because it has no idea about the condition of the home, location in a neighborhood, etc. Agents have years of intangible data about area houses locked away in their brains and an algorithm machine like Zillow can never access this information.

Agents’ loathing of Zillow is something of an overreaction because there are some definite benefits to the site. Obviously I am a fan of consumers having all of the information they need to make educated decisions. I wouldn’t be writing this blog if I was concerned about keeping real estate topics a mystery. The Wiki that Zillow provides is an excellent place to get general information on real estate transactions. Recent sales price data can be interesting to analyze. And using Zillow’s pricing tool to understand the potential range of pricing for your home, your neighbor’s home, or your boss’s home satisfies the curious.

However, there are some faults with Zillow’s pricing model that users need to understand.

· If you live in an area that has both multi-family and single family homes, Zillow will compare these. A competent agent would never compare a multi to a single family because multis are typically used for investment purposes. You would always do a different type of financial analysis.

· Zillow often pulls homes that are in adjacent, but differing neighborhoods. I live in Hartford, but close to the West Hartford town line and Zillow often pulls comparison homes from West Hartford. Houses in West Hartford cannot be compared because of differing school systems, tax structures, crime rates, etc.

· Zillow has no way of knowing the condition of your house or the condition of the neighboring houses. You may live in impeccable home, but your neighbor’s home may be a dilapidated shack. This will greatly affect your home value, but Zillow has no uniform way of identifying this information or adding it to their pricing model.

Zillow is a great place to start if you’re simply looking for a rough estimate of your home’s value, are curious about other home values, or just looking for real estate information in general. If you’re thinking about selling, or just want to understand a more accurate price range for your home, calling an agent is still your best option.