Learn more about the housing market in Connecticut

Every state is unique when it comes to the real estate market. That’s why it’s critical to understand the market you live or operate in. Whether you’re renting, buying, or selling, it will impact many aspects of your life.  

Connecticut Housing Market Overview 

Connecticut is known for its history, natural beauty, and proximity to some of the nation’s biggest Metropolitan areas. Connecticut metros themselves ranked among the top 20 hottest housing markets as of March 2023, most likely due to their popularity among former New York residents. Compared to the state’s 1% population growth, cities with close proximity to NYC, like Stamford, grew over 10%.  

However, the number of new listings in Connecticut have plummeted in 2024, showing a lack of willing home-sellers. Astronomical interest rates across the country tend to discourage sellers from putting their home on the market, and the current consensus among experts is that rates will remain high for the near future.  

Additionally, new, multi-unit builds have taken a backseat due to zoning restrictions in the tri-state area. A study done by the Partnership for Strong Communities found that only 2% of Connecticut’s land is zoned for buildings exceeding four units. Also, single-family homes are misaligned with the needs of the region, seeing as home prices and interest rates have led potential homebuyers to rent instead. Without an increase in multi-unit buildings in this area, it will be difficult for many middle- and lower-class residents to find housing that comes in below 30% of their monthly income in Connecticut. 

If the housing gap is closed by re-zoning laws and legislation, Connecticut’s employment crisis could potentially be eased as well. The New England region could miss out on $900 billion in GDP growth due to the limits on labor mobility and productivity from the lack of affordable housing according to McKinsey & Company. While there are a couple proposed initiatives to ease this pressure on the Connecticut housing market, until there is a viable solution for these strict zoning restrictions, Connecticut’s work force and housing market Connecticut used to boast about may start to stagnate.   

Connecticut Housing Market Trends 

To understand the real estate market of any state, it’s important to keep up with trends. Let’s look at some key ones in Connecticut.  

Note: These statistics are based on Redfin’s monthly housing data from April and May 2024. 

Median Home Price 

Connecticut’s median sale price as of May 2024 was $425,500, which is an 8% increase year-over-year according to Redfin’s monthly housing data. Connecticut’s average home price is relatively average for the nation, though it’s steadily increasing alongside other U.S. properties.  

Number of Homes Sold in April 2024 

There were 3,133 homes sold in Connecticut in May of 2024. This number is about 3.8% lower than May of last year. 

It’s important to keep in mind that the spring and summer are popular times for home sales to peak, so this number might be slightly inflated. The National Association of Realtors (NAR) notes that in February and March of each year, sales can increase by as much as 34% and prices by 3%. 

Median Days on Market (DOM) 

Days on market (DOM) is a measure of the average length of time a home remains listed on the market before being put under contract. A lower DOM signals a highly competitive seller’s market with more pressure on buyers to make higher offers and remove contingencies. A higher DOM signals a buyer’s market as sales are slower and sellers have less leverage. 

The current median days on market (DOM) in Connecticut is 31 days. This means that homes tend to sell around a month after being listed. Connecticut’s DOM is about average, considering the median for the nation is 34 days.  

New Supply Statistics 

In May 2024, Connecticut saw 9,217 homes for sale. This number is down 12.2% from May of 2023, as was the number of newly listed homes, which is 3,879 and down 13.9% from last year. Given that there were only about 1.29 new residential construction permits per 1,000 people in Connecticut in 2021 (one of the lowest rates in the country), this is evidence of a dwindling housing supply without many new homes to increase inventory. When new supply decreases as it has in Connecticut, buyers have less choice, and the prices could start to increase since there are more likely to be multiple parties bidding on the same property, thus increasing their purchase price offer.  

Zoning restrictions in the tri-state area of Connecticut, New Jersey, and New York prevent adequate new housing construction for multi-unit buildings in these areas. According to McKinsey & Company, building pace needs to significantly increase to close the 540,000-unit gap between supply and demand. Until this gap is closed, the number of affected households could increase by 7.6%, and will disproportionately affect cost-burdened and low-income groups. Cost-burdened households are families who spend more than 30% of their income to pay for housing. 

This decreasing amount of new supply could have disastrous effects on the economy, from a reduction of jobs and household income to a reduction in the population of the state, and a decrease in the quality of life for those who continue to reside in Connecticut while the supply remains an issue.  

Property Tax Rate 

Connecticut’s average property tax rate is 1.79% as of April 2024 according to Rocket Mortgage, the fifth highest average rate in the country. ATTOM, a real estate data firm, declared Connecticut as having one of the highest property tax rates in the country, even outpacing its neighbor, New York.  

Residents in Connecticut can expect to pay somewhere around $8,000 annually just in property taxes alone. It’s likely that rising public employee wages and the cost of operation for local governments and schools could be responsible for the upward trend in property taxes in this region, says ATTOM CEO Rob Barber.  

Regardless of the cause, Connecticut’s skyrocketing property tax rates are discouraging new homeowners from buying in this area. In fact, Redfin ranks Hartford, CT as the 10th highest region for rates of outbound movers, behind expensive cities like Los Angeles, New York, and San Francisco.  

Foreclosure Rate in Q1 of 2024 

For the first quarter of 2024, Connecticut residents experienced a foreclosure for 1 in every 989 homes (according to recent data from ATTOM). From quarter 1 of 2023, Connecticut saw an increase of 41.11%. This makes Connecticut the 7th highest state for foreclosure rate in the country.  

According to Realtor.com, pandemic moratoriums protected homeowners from foreclosure during the era of COVID lockdown but are now ended. Foreclosures in recent years have been historically low, so now that these protections have ceased, foreclosures have been on the rise. While a 41% increase is certainly startling, context is essential in understanding the potential causes for the change.  

Hottest Local Markets in Connecticut 

Below are a few of the hottest local markets to keep an eye on in Connecticut in 2024. 

1. Stamford

Stamford, CT is the largest city in Fairfield County. Fairfield County is close to New York City, making it attractive for commuters or those who are employed by the city’s many corporate headquarters like Conair, Philips, or Harman International.  

Rental properties in this area remain in high demand due to the influx of young professionals escaping NYC’s increasingly unaffordable rent prices. However, Stamford is not immune to the nationwide shortage of affordable options. Investors may benefit from the shortage of homes, since buyers will have a lack of choices and are more likely to pay what is listed for the property, especially when comparing Stamford rates to current NYC rental trends.  

Redfin characterizes Stamford’s housing market as somewhat competitive, with homes that sell on average 4% above list price and go pending around 32 days.  

2. Hartford

Hartford, CT is the capital of the state and is known for being one of the oldest cities in the nation. New Yorkers tend to move to Hartford the most, with a net inflow of 1,034 inbound movers from March to May 2024.  

Home prices in this area are around $320,000, which is up 27.2% year-over-year. Also increasing is the number of homes sold, which is up 14% from last year. Nearly 50% of homes sell above list price in this area, though it is not as competitive as neighboring cities like West Hartford or Wethersfield.  

Hartford boasts a strong walkability rating and good public transit, making it popular for younger populations looking to still have proximity to the bustling city while retaining some suburban safety and charm.  

3. Middletown

Middletown, CT is home to Wesleyan University and started out as a busy sailing port and industrial center. Now it’s largely residential with one of the most highly competitive housing market Connecticut has. Redfin ranks Middletown as very competitive, with a 12% increase in median sales price to $344,900. Many homes get multiple offers and can sell within nine days.  

Most Middletown homes in April 2024 (67.4%) sold above list price, and like many of the other hot markets in Connecticut, many of the incoming residents are young professionals from New York looking to rent more affordable homes. 

Economic Factors Impacting the Connecticut Housing Market 

A holistic view of the housing market in Connecticut requires a basic understanding of the main economic drivers affecting the market. Let’s look at a few critical ones below: 

Mortgage Rates 

The day this article was written, Connecticut’s average rate for a 30-year fixed mortgage is 7.06%. Seeing as down payments have climbed 40% year-over-year, affordability in Connecticut seems to be becoming challenging. This trend makes sense, seeing as affordability in the United States has become difficult recently. 

As interest rates climb, current homeowners could become discouraged from listing their properties since it’s unlikely they’ll find rates as low as their current one. Prospective Connecticut buyers should keep an eye on mortgage and interest rates to see how they impact the market.  

Inflation and Cost of Living 

Inflation in the United States have contributed to the growing issue of affordability in housing, alongside the heightening mortgage rates. Inflation increases the cost of living in Connecticut and surrounding areas, making it more difficult for low-income families to afford safe and habitable housing. Few people across the nation can afford to spend less than 30% of their monthly income on housing. 

Population Changes and Demographics 

Connecticut is an interesting state for demographics. While it ranks 48th for size, it is the 4th highest for population, with a staggering 738 people for every square mile in 2010.  

However, since 2020’s influx of New Yorkers escaping the pandemic in the city, Connecticut’s population growth has slowed significantly. This receding population is thanks in part to Connecticut’s worker shortage crisis—since 2020, Connecticut’s labor force has declined by 52,100 people, which is nearly 40% of New England’s labor losses for that period.  

Connecticut’s Governor Ned Lamont noted that the state’s high cost of living discourages middle- and lower-class workers from moving there. Even if there was a thriving workforce in Connecticut, there would be little to no affordable housing for them to live in.  

Other Factors for Connecticut: Utility Costs 

Connecticut faces yet another expense when moving to the area: the price of its electricity and gas. Second only to Hawaii, Connecticut’s electric and gas prices can be staggering to new residents.  

Why are these utility rates so high? Population growth in the New England region has outpaced the supply of gas and electricity in the area, leading to congestion in these states’ electric transmission system, driving up costs. Connecticut also sits at the end of the natural gas pipeline, which can further hike prices on utility bills. While this issue is regional, with all six New England states ranking in the top 10 highest rates for the nation, it may be something to factor into your monthly housing cost.  

Connecticut Housing Market Forecast 2024 

For the remainder of 2024, buyers can expect to see Connecticut’s median sale price increasing, since the state has a limited inventory of properties in the market. Additionally, with both new and sold listings down 26% year-to-date, the list-to-selling ratio is at a staggering 104%, repelling many prospective buyers.  

However, some housing experts have hope that the housing market in Connecticut could start to come back this year. The indicator that fuels this hope is pending sales—monthly, Connecticut pending sales have declined less and less according to William Pitt Sotheby’s International Realty.  

Forbes predicts that home affordability will continue to be an issue throughout the remainder of the year with high mortgage rates and inflation. Sellers will continue to be favored due to low inventory and an increasing median home sale price.  

Likelihood of Connecticut Housing Market Crash  

While a lack of inventory and a questionable national economy may worry some Connecticut buyers, a housing market crash in Connecticut is unlikely anytime soon.  

Housing prices, while still increasing, are not increasing as quickly as they once did. This slowing pace bodes well for the overall market, and some Connecticut real estate agents predict that prices will level at some point in 2024.  

Employment within Connecticut does remain an issue, but the state itself is within the top five wealthiest states in the U.S. due to residents who travel to higher-paying jobs in New York City. With that kind of income flowing into the Connecticut economy, a housing crash is not expected to occur in the coming months, though inventory remains low for those outside the upper classes. 

Forecast for The U.S. Housing Market 

Now that we’ve looked at Connecticut’s housing market, let’s zoom out a little bit. What about the U.S. housing market? What do you need to keep an eye on in the coming years? 

The United States’s current median existing-home sale price is around $384,500 per the National Association of Realtors. The inventory, though, remains low. A balanced market typically has a 5-to-6-month supply, but the current figure is 2.9. 

We’re currently in a seller’s market with buyers looking at continued rising house prices. The same trend can be seen with renters. Housing continues to appreciate, in general.  

Dr. Lawrence Yun, Chief Economist and Senior Vice President of Research, National Association of Realtors, believes the housing market will appreciate 15 to 25% over the next five years. He thinks that the seller’s market will continue because housing inventory will remain low. In five years, however, he predicts a more balanced market, in which neither party has a built-in advantage. Thus, the market will shift to a case-by-case basis to determine what kinds of deals people can get. 

Hybrid work also impacts the housing market. This shift in work culture means suburbia will continue to grow. States like Texas, the Carolinas, Tennessee, and Florida should see continual growth. 

The number of single-family homes built decreased over the past couple years while the number of multi-family homes increased due to lower prices and a demand for affordable housing. Higher mortgage rates and inflation (affecting price of materials) were the main causes.  

Lower income households continue to struggle in the current housing market. This trend appears likely to continue into the foreseeable future. Without enhanced supply or helpful subsidies, the outlook is that many Americans will still wrestle with housing affordability in the years to come.  

Connecticut Rental Market 

The rental and buying market are obviously closely linked. When home prices fall, landlords are more likely to buy properties to rent out. Home prices and rental prices are correlated as well because a hot market means prices rise.  

Rents were more unaffordable than ever in 2021 and 2022. In 2022, 22.4 million households paying rent said it was unaffordable, which is the highest that figure has ever been, according to a January report from the Joint Center for Housing Studies at Harvard University. The study found that half of all renters in the United States spent over 30% of their income on rent and utilities.  

The markets cooled in 2023, though, due to new units and decelerating demand. But a serious problem persists: Rent increases are still outpacing income gains.  

Moreover, high interest rates are keeping borrowing and transaction activity down. Over half the banks surveyed by the Federal Reserve reported that demand for multifamily loans decreased year-over-year. 

The pandemic caused a housing disparity that isn’t going away anytime soon. Unaffordable housing is a serious issue across America. Whether high rents or low income is the main cause doesn’t change the fact that this problem is widespread.  

This short summary leads directly into Connecticut’s current rental market, with key trends from Zillow: 

Connecticut Rental Market Key Trends 

• Median rent: $2,000 

• Month-over-month rent change: +$25 

• Year-over-year change: +$71 

• Available rentals: 4,416 

Conclusion 

Connecticut’s 2024 housing market is characterized by low inventory and high demand. Prospective buyers are right to feel wary about certain aspects of home buying in this area, but it’s important to continue to do your own research into market trends and indicators to make the smartest decision for you. Keep an eye on market dynamics and changes like shifts in home prices, inventory levels, and interest rates.