With the first quarter behind us, the Intersect is back to bring you CHFA’s Quarterly Housing Market Rundown. In this issue we provide an update on Connecticut rental markets and discuss the frenzied single-family market as we enter peak homebuying season.
The rental market in Connecticut remains strong over the first quarter of 2022. Since the beginning of the pandemic, the state has experienced significant rent growth, with asking rents increasing from 6.7% in the Stamford market (encompassing all of Fairfield County) to as high as 10.3% in the Norwich-New London market. With the addition of nearly 800 new units (a cumulative inventory expansion of 8.3%) over the past three years, the Norwich rental market has seen rents increase at an average annual gain of 5.7% during that time.
While the rate of rent increases may have potentially leveled off over the last few quarters, the growth remains significantly high. Within the Hartford rental market (which includes Hartford, Middlesex, and Tolland counties) higher-rated properties have seen the highest rent gains. However, even lower classified properties, such as those 1- and 2-star-rated buildings, have seen collective rent gains of 5.6% over the last year. Such buildings are considered below average in quality, with small windows, aging exteriors, and may require significant investment in renovation to prevent obsolescence. According to CoStar, a commercial real estate information firm, all of Connecticut’s rental markets will continue to see rents rise for the foreseeable future.
Connecticut’s rental unit development began to rebound in 2012 from the fallout of the Great Recession. Over the last five years, the Hartford and Stamford rental markets have seen the highest number of units under construction with significant growth in the New Haven rental market in the last three years. In addition to the 920 units currently under construction in the New Haven market, some 2,000 units have been delivered over the past three years, second only to the Stamford market in units-delivered during this period.
Indeed, according to CoStar, the Stamford market has one of the fastest-growing multifamily markets in the nation, with inventory expanding by roughly 50% since 2010. Additionally, the Stamford market reached a three-year high with more than $500 million in multifamily rental property sales, with proximity to New York City and easily accessible transit being major factors to the market’s strength.
In last quarter’s Rundown, the hot home-buying market was flagged as a trend to watch. This tight market shows little sign of slowing down. Zillow data from the first quarter of this year shows home value increases have been widespread in Connecticut, in some places up 50% compared to the value in January of 2020. In its 2022 March Housing Forecast, Fannie Mae predicted that the average median home price in the United States would increase by more than 8% between the first and second quarter of 2022.
Low inventory across the state has made the market that much more competitive. According to Zillow inventory data, the average number of unique CT home listings in the last quarter of 2019 was 20,000. In the first quarter of 2022 that number had dropped to just 6,500. This low inventory has forced buyers into practices normally advised against by experienced real estate agents including waiving inspection periods and offering thousands of dollars over asking price in order to be competitive.