‘LOOKING TO DEVELOP’
Demand for homes could lead to construction spike in Connecticut
As properties go, it was not going to last long on the market — a dream home on more than an acre of land in Greenwich, abutting more than three acres of conservation area and priced at a mere $1.8 million in an enclave where other houses are selling for more than $5 million.
The only element missing? The dream home itself, which exists only in the mind of the buyer who bought the acreage. But it won’t be long before a builder has that blueprint in hand, as a backhoe breaks ground on a new house.
As home hunters pounce on listings nearly as fast as sellers are putting them onto the market in Connecticut, construction of single-family homes is shaping up as the state’s next boom following a decade of apartment construction.
The last burst of new construction in Connecticut in 2008 ended up with many homes built “on spec” languishing empty for extended periods and some going into foreclosure for lack of buyers, after a hot housing market
imploded in the sub-prime mortgage collapse that triggered the Great Recession.
But experts agree that the COVID-19 pandemic continues to drive city dwellers to outlying towns, as more employers embrace remote working arrangements they cobbled together on the fly last year.
The CEO of Berkshire Hathaway HomeServices New England Properties does not see a spec-building bubble like 2007 in the offing, but says
there is sufficient interest in Connecticut options that newly built homes will find buyers in a hurry.
“We’re seeing more permits, for sure, and we’ll see more builders much more willing to bring their product and at a little bit higher of a price,” said Candace Adams, CEO of Berkshire Hathaway HomeServices New England Properties. “I’ve gotten ... inquiries for large parcels of land in Connecticut of people looking to develop it.”
Low interest rates, high lumber prices
A year after permits for apartments outnumbered new houses in Connecticut by 1,300 units, the pendulum swung in the opposite direction last year according to the U.S. Census Bureau. The more than 2,900 home permits estimated by the Census Bureau was the highest total since 2008, when municipal officials signed off on nearly 3,100 projects.
The SmartMLS multiple listing service had more than 2,500 listings for available residential lots in Connecticut, from a 19-acre waterfront spread on Greenwich’s Field Point Road priced at more than $45 million to a 33-acre wooded parcel in Stonington that sold this week for less than $1 million. Many of those lots carry approvals to be subdivided for multiple homes.
Currently in Connecticut, 1,600 newly constructed homes are listed for sale on Zillow, including 200 in the past month alone and several of those already under contract. But it is not quite yet a
build-it-and-sell-it bonanza — large numbers more remain available that came on the market last summer and fall.
The Connecticut Department of Consumer Protection currently lists 1,600 home builders approved to perform new construction.
“As far as who is buying, it depends on what part of the state we’re talking about,” Jim Perras, president of the Home Builders & Remodelers Association of Connecticut, said in an email. “In central Connecticut, typically what we are seeing is customers in their 30s or 40s with children — most are second time home buyers and residents from the area. Contrast that with the Fairfield County area, where the vast majority of new home buyers are from out of state, with many existing residents opting to remodel and build additions.”
Perras said that builders are busy enough that it is squeezing out any excess capacity for speculative home construction for subsequent sale. And he said builders are getting squeezed on another front — the cost of materials.
Prices for building materials have escalated sharply
the past several months including for lumber, confounding builders who are purchasing supplies after locking in prices for existing projects. The Associated General Contractors of America beseeched President Joe Biden on Thursday to intercede by finding ways to increase domestic lumber production or make it easier for suppliers to import from Canada or other countries.
But today’s buyers and builders have another extraordinary tool at their disposal — interest rates that at 2.7 percent for a 30year mortgage are at nearly half their level of two years ago. The Federal Reserve has indicated it will hold interest rates steady for at least the next year in an effort to boost economic activity coming out of the pandemic.
In Stonington, the agent who sold the 33-acre parcel near Lord’s Point indicated that activity is booming elsewhere as well, including on Mason’s Island at the mouth of the Mystic River.
“I just sold or put under deposit about six or seven lots there,” said Judi Caracausa of Market Realty in Mystic. “Wonderful new construction happening there too.”