3 Key Reasons West Hartford CT Real Estate Isn’t Crashing
The lack of housing inventory in West Hartford, CT
Indicates that a market crash is not looming on the horizon. I have been closely monitoring the real estate market in West Hartford, CT. Despite concerns of a possible market crash, it appears to be an unlikely scenario in West Hartford. A major contributing factor to avoiding a market crash is the significant shortage of available properties, with the trend continuing to decline. This makes it difficult for buyers to find suitable homes, requiring persistence and patience for those seeking to purchase in West Hartford, CT. As a result of the limited supply of homes for sale, there has been a steady rise in the value of homes for sale in West Hartford.
You might remember the housing crash in 2008, even if you didn’t own a home at the time. If you’re worried there’s going to be a repeat of what happened back then, there’s good news – the housing market now is different from 2008.
One important reason is there aren’t enough homes for sale. That means there’s an undersupply, not an oversupply like the last time. For the market to crash, there would have to be too many houses for sale, but the data doesn’t show that happening.
Housing supply comes from three main sources:
- Homeowners deciding to sell their houses
- Newly built homes
- Distressed properties (foreclosures or short sales)
Here’s a closer look at today’s housing inventory to understand why this isn’t like 2008.
Homeowners Deciding To Sell Their Houses
Although the housing supply did grow nationally compared to last year, it’s still low. The current month’s supply in West Hartford continued to move lower and remains well below the norm locally. The average level of supply in West Hartford has been closer to a 5-6 months supply of homes for sale. The graph above clearly shows the decline of home supply. If you look at the latest national data (shown in green), compared to 2008 (shown in red), there’s only about a third of that available inventory today.
So, what does this mean? There aren’t enough homes for sale to make home values drop significantly at this point in the market cycle. To have a repeat of 2008, there’d need to be a lot more people selling their houses with very few buyers, and that’s not happening right now. One of the other issues holding back supply is high interest rates that have created golden handcuffs for some sellers. When potential home sellers compare their low under 3% mortgage rate to today’s 8+ percent rates, many decide to stay put in their present home.
Newly Built Homes
People are also talking a lot about what’s going on with newly built houses these days, and that might make you wonder if homebuilders are overdoing it. The graph below shows the number of new houses built over the last 52 years:
The 14 years of underbuilding (shown in red) is a big part of the reason why inventory is so low today. Basically, builders haven’t been building enough homes for years now and that’s created a significant deficit in supply.
While the final blue bar on the graph shows that’s ramping up and is on pace to hit the long-term average again, it won’t suddenly create an oversupply. That’s because there’s too much of a gap to make up. Plus, builders are being intentional about not overbuilding homes like they did during the bubble. Investors and builders are increasing the inventory of apartments, offices, and condos in West Hartford, CT, according to a recent report from the Hartford Courant.
Distressed Properties (Foreclosures and Short Sales)
The last place inventory can come from is distressed properties, including short sales and foreclosures. Back during the housing crisis, there was a flood of foreclosures due to lending standards that allowed many people to get a home loan they couldn’t truly afford.
Today, lending standards are much tighter, resulting in more qualified buyers and far fewer foreclosures. The graph below uses data from the Federal Reserve to show how things have changed since the housing crash:
This graph illustrates as lending standards got tighter and buyers were more qualified, the number of foreclosures started to go down. And in 2020 and 2021, the combination of a moratorium on foreclosures and the forbearance program helped prevent a repeat of the wave of foreclosures we saw back around 2008.
The forbearance program was a game changer, giving homeowners options for things like loan deferrals and modifications they didn’t have before. And data on the success of that program shows four out of every five homeowners coming out of forbearance are either paid in full or have worked out a repayment plan to avoid foreclosure. These are a few of the biggest reasons there won’t be a wave of foreclosures coming to the market.
What This Means for You
Inventory levels aren’t anywhere near where they’d need to be for prices to drop significantly and the housing market to crash. According to Bankrate, that isn’t going to change anytime soon, especially considering buyer demand is still strong:
“This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future.”
It is unlikely that we will experience a repeat of the 2008 housing crisis as there is currently a shortage of available homes in the market, and there are no indications that this will change in the near future. Therefore, based on the current housing inventory levels, we don’t see an impending housing market crash like 2008.