According to an analyst, a series of factors are pushing Connecticut’s real estate market so high that it is excluding many renters and buyers.

“If you don’t take control of this by possibly raising interest rates, you’re going to see this possibly unsustainable increase,” said Jeffrey Cohen, a Kinnard fellow in real estate and professor of finance at the University of Connecticut. . work.

The repercussions of this runaway rise in rental and sale prices could be as serious as the increase in homelessness.

“The question is, what’s it going to do to people trying to buy, and if fewer people are going to be able to buy, they’re going to have to live somewhere or they’re going to be homeless,” he said. “There must be something giving.”

One factor is record demand. Candace Adams, CEO of Berkshire Hathaway Home Services, said in a statement recently that “ad visits and listing listings remain at record highs” and “most homes sold in Connecticut are selling significantly above the price catalogue”.

“More single-family homes were sold in the first quarter of 2022 compared to 2020, 2019, 2018 and 2017,” she wrote.

“There’s a backlog of people who wanted to get into the housing markets in Connecticut, and they couldn’t do it simply because there wasn’t enough volume of supply for people to can buy,” Cohen explained. “So there is a backlog of demand.”

This lack of available inventory is also pushing rents up.

“Rents have gone up, in part because people who wanted to get into the housing market, there’s no opportunity,” Cohen said. “So they’re staying longer in apartments, they can’t move into single-family homes as quickly as they otherwise would. And so that puts a lot of pressure on the demand for rentals.

Another factor is what Cohen called “institutional investors.” Large corporations, some of which are based overseas, buy up huge swathes of available housing in a given area, driving up prices and making it harder for individual families to compete.

“Institutional investors are, in some ways, forcing a lot of other people to rent who might otherwise be buyers, because it takes supply out of the market,” Cohen said. “That means there’s a lot less stuff available for people to buy, which can drive up the price of an owner-occupied home.”

The pandemic was also a factor, particularly in Connecticut, where families felt they could move out of cities like New York or Boston as work became remote, Cohen said.

Headline inflation also has an effect.

“There’s just a general level of price increases and everything in the economy right now,” Cohen said. “When the cost of fuel increases, the cost of heating increases. If you are in an apartment, the owner will have to pass it on to the tenants. »

That could, Cohen said, lead to a national housing crisis.

“If you consider it important in society for people to have housing, and if there is no easy way to ensure that everyone has affordable housing, it could lead to a crisis. “, did he declare. may have already started.

Cohen lives in West Hartford and, anecdotally, he has seen more examples of financial hardship.

“You see people standing on street corners with signs saying ‘Help. I lived in Connecticut for 22 years. I’ve never seen that in West Hartford before,” he said. “For me, that’s a sign that people need help, obviously.”

The last housing crisis dates back to 2007 and 2008. Prices reached an unsustainable level, leading to what Cohen called a market correction, while others called it a crash.

“That could be what we are going to see in the future. When exactly, we don’t know,” he said. “Rising interest rates could trigger that if it hits a certain point.”

Cohen doesn’t expect that to happen in the next six months.

“At least in the short term, I don’t see that happening,” he said.

“I think there’s always such a backlog of applications from people who want to enter the housing markets in Connecticut,” he said. “I mean, people who work in New York have moved all the way to Maine, to find places at affordable prices.”

The continued rise in housing costs and lack of inventory particularly affects the middle class, who may not qualify for affordable housing, but who can no longer afford to live in Connecticut.

Cohen said this could have a deleterious effect on the job market, affecting “people’s ability to accept job opportunities, making it difficult for some employers to fill jobs.”

There’s a “silver lining,” Cohen said.

In the past, the real estate market in Connecticut was not going as high as that of New York and Boston, and other places in the country. This left landowners with less equity, but it also shielded them from the worst of the crash.

“When there’s a big correction in other parts of the country that went up, Connecticut also had a small correction, but nowhere near as big as the other cities because they didn’t appreciate as much “, Cohen said. “It’s time, in some ways, for Connecticut homeowners to start building up a little more equity.”


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