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Decline in home prices hurting sellers

By Lee Howard

Publication: The Day

Published March 12. 2014 4:00AM

People who have bought a home in the region during the past decade will probably lose money if they resell.

That's the conclusion of Les Bray, a Stonington real estate agent who runs a number-crunching business called Sound Investment Consultants. Bray based his report on median resale prices paid for new and existing homes in New London County since 2003.

When it comes to resale of existing homes, about three-quarters of people who bought a home within the past decade are taking a loss when they sell, Bray said in a phone interview Tuesday. For new homes, the tale is even sadder, with roughly 90 percent of these properties being sold for less than the original price.

"People have a decision to make: How badly do you want to sell, and are you willing to take a loss?" Bray said.

John Bolduc, chief executive of the Eastern Connecticut Realtors Association that covers New London and Windham counties, agreed that Bray's median-price numbers jibe with figures his organization compiles. But he questioned some of Bray's assumptions and pointed out that had the report gone back even one year earlier, the resale numbers would have looked much rosier.

Bray said he began investigating the resale situation in New London County after becoming concerned about the erosion of the region's median sale price for single-family homes that is averaging about 30 percent. He looked at brokered sales of homes with matching addresses as well as bank-owned real estate transactions.

"I've been really troubled about what's driving the median," Bray said.

Bray's most recent numbers for February gave him no comfort. The median price for a single-family home last month stood at $166,500, down from $181,400 a year ago. Over the past year, the median price in New London County was $210,000, down about 2 percent.

But when Bray delved into resale numbers, an even darker picture emerged. First, he looked at previously occupied homes that were purchased since 2003 and then resold, finding that only 27 percent saw a price increase — and many of these could have been bought by investors and then flipped for a profit, skewing numbers on the high side.

Then he looked at homes bought new in the past decade and then resold since 2012, a figure that he expected would tell a more accurate tale of home-price losses or gains because buyers wouldn't be expected to invest much money in improvements. This told an even grimmer tale, with 90 percent of new homes reselling at a loss.

"That's a true sign of the economy," Bray said.

Bolduc agreed that there is still a downward pressure on local home prices. But he questioned some of Bray's basic assumptions, such as that many previously occupied homes likely saw improvements and few new homes likely underwent renovations.

He pointed out as well that many of the homes sold to avoid foreclosure or directly by banks after foreclosure likely saw significant deterioration that dragged down prices.

Bolduc cited Realtor association figures for New London and Windham counties showing that the median price paid for a home last year was $193,000, down from $210,225 a decade previously. But had Bray's report looked at 2002 numbers, which showed a median price of $173,225, the resale situation would have looked more positive, he said.

"It depends on how you want to take it," Bolduc said.

Bolduc said the National Association of Realtors is expecting flat home sales in the United States this year while projecting price increases averaging 5 percent. Locally, he expected the opposite: a modest improvement in sales but flat prices. "We need the jobs to produce the sales," Bolduc said. "Without jobs, the economy can't improve."

Figures released by Bray showed a 1.6 percent uptick in New London County single-family sales during February compared to the same month last year. Condo sales also saw a modest increase, though the median price of $70,000 was down about 26 percent from February of last year.

l.howard@theday.com

FEBRUARY REAL ESTATE SALES IN NEW LONDON COUNTY

Category 2013 2014 %Change
Single-family sales 124126+1.6%
Condominium sales1617+6.3%
Single-family median price$181,400$166,500-8.2%
Condo median price$94,250$70,000-25.7%
Source: Sound Investment Consultants

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