Who's Gonna Buy These Places?

   That's the first question I am asked when I describe the 68 attached housing units proposed by Cherenzia on Mary Hall and Greenhaven roads. The question carries an air of disbelief as well a practical assessment of the local real estate situation.

        A Harvard study published on June 12, 2011, reports that “the U.S. housing market has a very bumpy road to travel ....with millions of owners stuck in homes ... and existing home sales remain[ing] depressed while new home sales continue near record lows.” 

       The article goes on to state that “total housing construction starts were well below 1 million for the third consecutive year in 2010, while completion of single- and multi-family houses was down to 652,000 .... New home sales dropped another 14 percent in 2010 to a low of 323,000, marking the fifth consecutive year of double-digit declines.”

       Local new reflects national news stories.  Patch.com reported July 12, 2011, that there “is currently 18 months of inventory on the ... Stonington market.”  And a headline from The Day in a July 17, 2011, story said: “Region’s home prices stay stuck on low.”  The piece reports that “the bulk of sales consists of foreclosures, short sales and home under $200,000 for first-time buyers.”

Broker Peter A. Harvey wrote a “Feasibility Market Study” for the Cherenzia project in November 2010.  He identified three market segments as potential buyers.

       The first is described as “older step-down buyers from within the local community who are selling an existing larger home” or “current owners of older condominium units in the area desiring something new...”

       Tim Bray of Sotheby’s International Realty describes this segment. “It used to be a trend that people who owned larger homes as they got older would want to sell and they could sell.  Today, that isn’t so easy.” In other words, if you can’t sell, you can’t buy.

        Harvey’s choice for a second market segment is “buyers presently living and working outside the area, particularly in the metro New York and western Connecticut areas ... for weekend and vacation use.” Bray describes this type of buyer as “calling but not buying,” while another local realtor has declared the previously robust Stonington second-home/vacation-home market now dead.

         That leaves the third segment in Harvey’s report: “(Y)ounger single and married couples without children, making a first purchase to build equity.”  The New York Times  on May 30, 2011, reported that the luster once associated with home ownership is wearing thin. “The emotional scars left by the collapse are changing the American psyche.  There was a time when owning a home was a symbol that you had made it. Now it’s O.K. not to own.” A man’s home may still be his castle but it is no longer his investment portfolio.

          So, it seems that each of Harvey’s market segments is having a hard slog these days. But what about price?  Will the Cherenzia units be offered at such an attractive price that price becomes the magic wand to promotes sales?

           Bray explains that the median household income for Stonington is $71,000.  By tripling that income, you arrive at the median price of a home here.  Bray establishes that price as $214,000.

         According to Harvey’s “Feasibility Market Study,” “The target price points for Cherenzia units are $315,000 and $280,000. These prices “are deemed to be achievable and slightly below market rate.”  These prices are also well above the median price of $214,000 mentioned above.  

       The New York Times sums up both the local and the national moods. “A house is a long-term commitment that many are loathe to make in uncertain times such as these.”

         As we asked earlier: “Who’s gonna buy these places?”