Updated: Aug 20
Written by Connor Dudas and Gabe Agüero
Connecticut is currently experiencing an astronomical explosion in buyer activity in its housing market, undoubtedly catalyzed by the multitudinous economic and geographic repercussions of the coronavirus pandemic. Specifically, the proliferation of “remote work” arrangements is incentivizing professionals in neighboring states to relocate to the Nutmeg State. Economic fundamentals dictate that when prospective home buyer demand exceeds available housing inventory, housing prices will increase. Home prices certainly increased. The aforementioned ebullitions of buyer demand have contributed to a 23.1% increase in average selling prices in 2020. Governor Ned Lamont and other government officials have celebrated Connecticut’s real estate market as a byproduct of the state’s economic revitalization and Connecticut Comptroller Kevin Lempo recently projected a $306.9 million General Fund Surplus. But Connecticut’s hyper zealous housing market is not universally advantageous for its residents.
Pre-existing homeowners are significant beneficiaries of the previously described market conditions. The real estate markets inundation of prospective participants, primarily buyers from neighboring states or localities, has encouraged financial institutions to reduce interest rates, thereby rendering Fair Housing Administration loans and conventional fixed rate mortgages more financially accessible. In conjunction with historically generous interest rates, homeowners are capitalizing on substantially increased home values in myriad capacities. Homeowners are restructuring or refinancing mortgages at dramatically decreased interest rates, taking advantage of high home values and initiating the selling and downsizing process, or accumulating home equity through accelerated repayments.
Unfortunately, the coronavirus pandemic and the accompanying real estate metamorphosis have rendered low-income homeowners and renters increasingly susceptible to foreclosure and eviction, respectively. According to an American Enterprise analysis Federal Housing Administration geographic data, one out of six Southwest Connecticut homeowners with a Federal Housing Administration mortgage, designated for low to moderate income borrowers, were characterized as delinquent, constituting the seventh highest delinquency rate of the nation’s 169 largest metropolitan geographies. Additionally, a Connecticut Fair Housing Center FHA loan analysis illuminates that 16.7% of FHA loans are “seriously” delinquent in Southwest Connecticut, and 14% in New Haven. Federal Housing Administration insured loans represent 20% of Connecticut’s housing market. Consequently, statistically disproportionate rates of delinquency among FHA insured mortgage owners, if not mitigated with temporary mortgage assistance, could precipitate a housing-market triggered recession, according to Jeff Gentes, an attorney specializing in foreclosure prevention at The Connecticut Fair Housing Center.
Expectedly, Connecticut Housing Finance Authority mortgage closures data demonstrates that drastically fewer low-income residents are purchasing homes throughout 2020 and 2021. According to Nandini Natarajan, the chief executive officer of the Connecticut Housing Finance Authority, “The competitive market may have squeezed out low and moderate income borrowers who don’t have access to as many resources as high income borrowers.” Governor Lamont’s budget recommendations included the appropriation of $150 million to construct subsidized affordable housing to reverse consistently declining affordable housing construction in Connecticut. Previously, Lamont’s administration cultivated a pandemic mortgage assistance program to the magnitude of $10 million. During the pandemic’s infancy regulators required lenders of federally insured mortgages to provide deferral opportunities to homeowners and prescribed restrictions to minimize balloon payments, which have substantially reduced foreclosures.
Nonetheless, the debilitating financial ramifications of Connecticut’s increasingly segregated housing market have been disproportionately absorbed by African American and Latino communities. The United States Census Bureau’s bi-weekly survey of households routinely shows that Connecticut’s White residents are financially equipped to pay their mortgages at four times the rate of African American and Latino residents. The economic and humanitarian effects of Connecticut’s tumultuous housing market are severely bifurcated; simultaneously facilitating increased financial flexibility for established homeowners and amplifying systemically entrenched socioeconomic and racial inequalities in Connecticut.
Corcoran, Dan. “Interactive Map: What's Going on With Connecticut's Rental Market?” NBC Connecticut, NBC Connecticut, 9 Aug. 2021, www.nbcconnecticut.com/investigations/interactive-map-whats-going-on-with-connecticuts-rental-market/2555339/.
Diaz, Amber. “CT Housing Market Skyrockets, Demand Outweighing Supply.” WTNH.com, WTNH.com, 24 June 2021, www.wtnh.com/news/consumer/ct-housing-market-skyrockets-demand-outweighing-supply/.
Vallejo, Camila. “As CT Housing Market Continues Its Surge, Comptroller Warns About Downsides.” WSHU, www.wshu.org/post/ct-housing-market-continues-its-surge-comptroller-warns-about-downsides#stream/0.
“The Pandemic's Effect on the Housing Market Helped Some -- but Others Are Left behind.” The CT Mirror, 6 Apr. 2021, ctmirror.org/2021/04/05/the-pandemics-effect-on-the-housing-market-helped-some-but-others-are-left-behind/.