While the price of homes for sale in Connecticut is increasing in some areas, commercial real estate is going the opposite direction, staying stagnant, or, worse, falling down. Depending upon your expertise, now can be a good time to be a real estate agent in Connecticut, as home prices are going up. For example, prices are almost back to 2005 levels in the Danbury area.

A piece in the Housatonic Times describes the real estate climb in Brookfield, a suburb north of Danbury. With a desirable location and good school system, Brookfield has seen housing prices go up in 2009 and 2010. Agents in the area claim prices are at a “new normal,” indicating the gap over the past six years is closed.

But real estate in 2011 is not the same as 2010:

Mrs. Hensal [owner of Hensal Realty] said the market has changed since the subprime mortgage crisis that surfaced about three years ago.

“It used to be that maybe you could get by with a low credit rating,” she said. “That is no longer the case.”

Buyers are also more cautious. But the combination of these factors has led agents in the area to expect a surge in home buying – only with better responsibility on both ends.

Almost an hour east of Brookfield, however, Hartford has been better days for commercial real estate. A story published in the Hartford Courant discusses a recent survey conducted by the Society of Industrial and Office Realtors in which 33 out of 50 contacted local brokers responded. The brokers, in observing commercial and industrial real estate in central Connecticut, expect prices to stay flat or decline. Lease rates are expected to take a similar pattern.

The recent sale of the Connecticut River Plaza is one distinct example. The former location of UnitedHealthcare, which moved down the street to building City Place, was recently sold for $6.7 million, or, as the Courant article specifies, $12 per square foot.

As God is my witness, I will never… own a home again?

Recently, James Altucher, the managing director of Formula Capital and a successful blogger, published a piece about why you should never buy a home. As housing prices are still low, many advise investing, but Altucher, even with the sarcasm and slightly melodramatic attitude, thinks purchasing a home is a waste of money, an amount you will never recover. As an investment, it results in small returns and, over the years, ends up costing a significant amount in taxes and maintenance.

So, what are Altucher’s reasons? Although his post goes into more detail, his general points are:
• Homes require a large down payment, and you will never recover this loss. Rather, you will earn money from selling the property for a new one, but as that money goes toward a new home, your initial large down payment never returns.
• Homes are poor investments. Altucher claims properties have only had a 0.4-percent yearly return since 1890.
• Closing costs and regular maintenance are more money losses.
• Tax returns from mortgage payments are only small, and you end up paying more in taxes on your home.
• Home owning is antiquated. The last time the average person could own a home, he worked in a company close by and, because of distance, had fewer job options. This is no longer the case, and as deindustrialization dismantled the factory town, workers now need to travel farther to jobs with salaries that did not keep up with the price of buying a home.

Do you agree with Altucher, that renting is far more beneficial to financial stability and investment than purchasing a home? Not all professionals do. As we saw a month ago, other professionals state the opposite and claim that now is the ideal time for purchasing a home for your family or as an investment.

The Connecticut Post recently ran a story about Oxford, CT, a town near the center of the state. Describing it as a “boomtown,” the Post article makes Oxford seem like the center of Connecticut real estate, with seniors attracted to the area, more homes being built, and residents needing more schools and closer retail.

With a rural, bucolic character, Oxford is near major roads that lead to Bridgeport, Waterbury, and Danbury but is also located near a forest. This combination of character, convenience, and lower home prices has attracted residents to the area over the past few years. The Post article explains that Oxford’s population has grown 46 percent over the past 20 years, from 8,600 to 12,600 residents. In the 1990s, families were attracted to the area. Over the past decade, seniors are the largest growing population in Oxford.

Meadow Brook Estates and The Village, both housing for those 55 years old and up, have brought in many seniors and have resulted in 100 new homes being built in town, and 60 more are planned. The Village even has a golf course. Meadow Brook offers handicap access, single story homes, and services for plowing driveways and mowing lawns.

A primary concern depicted in the Post piece is whether Oxford can handle all of these residents and maintain its character. On one hand, those living in the town for many years want to keep up its rural charm. Those who moved in the area, however, want closer retail, and the growing population at one point resulted in a town high school being built.

With such a surge of new properties being built and many new homes for sale in Connecticut, a change is inevitable to meet the needs of the residents. Otherwise, those who moved into Oxford over the past 20 years may just move away.

What is the appropriate price for a home? According to an article published recently in the Philadelphia Inquirer, no one truly knows. After the housing bubble, multiple factors pushed prices down and have kept homeowners from selling, or if the home is put on the market, the price is still inflated. In some markets, present home prices are at 2000 levels, while in others, slight increases provide false hope for the market’s recovery. If the average price per home is still too high, what factors prevent it from going down to realistic levels?

• Foreclosures. As the Inquirer piece explains, foreclosures needing significant repair – such as the water-damaged property with the power turned off – make buyers hesitant, as they want a “move-in ready” home. Although foreclosures are available in nearly every market, some areas have a large percentage of foreclosed properties, such as Las Vegas, and this figure brings the average price per home down.
• Underwater mortgages. Homeowners who purchased properties prior to 2007 are likely stuck with mortgages greater than what their homes are currently worth. If loan modification is not presently possible, a homeowner has two options: waiting until the market improves or selling their property at a value less than the original price but larger than its present, 2011-adjusted value.
• Agents keeping prices high. Like homeowners wanting to not sell their home for significantly less than the original price, agents want to turn a profit on their properties. As a result, the average price per home is only 10 to 20 percent lower than the average 2007 price.
• Too-low prices could create another depression. Too many individuals selling their homes at a loss could end up financially hit. While the lack of buying – of real estate and any other items – is a result of the current economy, ending up selling for a price lower than your mortgage may put sellers into debt.

The abundance of foreclosures, which are expected to increase nationally in 2011, cannot be blamed on a single source. From adjustable rate mortgages and dishonest lenders to homeowners losing jobs or purchasing too-great of an investment to banks doing robo-signing, all parties share some of the blame.

Some of the filings that turned into foreclosed properties were the result of banks being too quick to sign paperwork – called “robo-signing” – and now, according to Reuters, U.S. bank regulators plan to punish banks that did not fully follow the foreclosure process. This included going against state and local foreclosure laws and wrongly evicting homeowners. Such banks, which include Bank of America, Citibank, and JP Morgan, may face fines or be required to forgive some loan balances.

Although punishment and greater regulation of banks may help those nationally in the foreclosure filing process, residents in New York state going through this process may soon be able to have free legal representation. Starting in two counties, this jurisdiction is expected to spread across the state by the end of the year. New York will be the first state to offer counsel to those facing foreclosure and could serve as a template for other states’ jurisdictions. Total Mortgage Services explains in the link above, this move is a direct result of banks going too quickly through or not following laws for foreclosure.

Another option, one more discussed than the two above, is loan modification, but much like predatory lending practices from four years ago, loan modification is full of scams that may push you closer to foreclosure. In a Boston real estate blog, Attorney Avi Liss discusses factors homeowners need to consider for loan modification. The interview going into more detail, but the general points are:
• Loan modification is not a quick fix. The process can take several months.
• Several factors contribute to acceptance for loan modification: financial hardship, state and federal tax filings, income, family size, equity, and organization of information.
• The loan modification amount can vary.
• If you are considering loan modification, work with an attorney or find a certified non-profit modification company, such as the National Assistance Corporation of America or another approved by the Home Affordable Mortgage Program.
• Don’t depend on loan modification, and as you wait for acceptance, continue to make mortgage payments in order to avoid foreclosure.