* Only Greenwich and Norwalk saw both median price & number of closings increase.
* New Canaan, Rowayton, Weston and Westport declined in closings and median $.
* The most expensive towns (median $):
Greenwich $1,850,000, up from $1,797,500
Darien $1,440,000, up from $1,400,000 (3%)
New Canaan $1,380,000 down from $1.445
Westport $1,247,500 down from $1,340,500
Mortgage Rates Fall for Second Straight Week
30-year mortgage rates averaged 4.53% for the week ending August 16th, down from 4.59% the prior week.
Rates have remained within a narrow range over the past few months, despite rising inflation data.
One year ago rates were averaging 3.89%
What Will Happen In the Next Year?
If interest rates rise by .85 percentage points in the next year (using the average forecasts of Freddie, Fannie and the Mortgage Bankers Association) and housing prices rise only 2.6% then a typical mortgage payment will rise 13.3% from $804 to $910.
What Would Be the Effect on Real Estate Sales?
According to a recent survey by Redfin, 21% of respondents said rates passing 5% would increase the urgency to buy a home, 27% would slow their search to see if rates come back down, and 6% said they would cancel their search altogether because of rising rates. 38% of respondents cited high taxes as their greatest concern. 77% expect home prices in their area to rise in the coming year.
First, let’s talk about the 100-point Pavement Condition Index (PCI). When a road scores above 86% PCI it’s excellent, requiring only corrective maintenance: crack sealing at about a $1 per square yard. Between 85% and 75% PCI a road is “good” and requires micro-thin overlays and cape seals at approximately $5 per square meter. When a road falls below 75% the road shouldn’t merely be patched, it must be repaved or reconstructed at a price of between $22 and $60 per square yard. “Very good” roads should be maintained for minimal investment and stretched to over 30 years of life.
In 2003, New Canaan’s roads scored 77% and in danger of needing reconstruction. Our Public Works department presented a 20-year plan in order to get our score back to 85% with the greatest efficiency. Unfortunately, between 2004 and 2008 the price of asphalt rose with the price of oil from $50 to $92 per ton and even with steady investment New Canaan’s average pavement quality declined to 74% below which roads need complete rebuilding.
And yet every year we challenge Tiger Mann, the head of Public Works, with questions designed to cut that road budget. Every year he patiently explains the math behind our most efficient system to get the Pavement Condition Index (PCI) from a score of 74% in 2009 to a score that is currently 81%. Every year our roads naturally deteriorate 2.5%. If we spend $2 million then the road quality stays about the same. Spending $2.5 million per year has allowed our PCI to rise about a half-point per year toward that goal. The Eversource road-paving investment amounts to about $3 million over five years and allows us to finish our 20-year plan in about 18 years, hopefully by 2021.
We have not managed the maintenance of our buildings with the same discipline and consistency we have applied toward our roads. This has caused some of us on Town Council to ask the obvious question, “Can we put together a building maintenance program, consistently funded at $1 to $2 million per year, that allows us to chip away at our $20 to $40 million obligation to repair and restore the 56 buildings that the Town owns?”
First, 50% of that budget is Waveny House. If we are serious about Waveny we must wrap our heads around $1 million per year for the next 20 years. The second step is to identify the buildings that the Town should not own. Legally protect (with conservation easements) and then sell those buildings which are inefficient and inappropriate for a town to own and maintain: the Vine Cottage, the Police Station, the Outback, the Irwin House and Irwin Barn, the Gores Pavilion and the New Canaan Playhouse head that list.
New Canaan has the highest per-capita debt in Connecticut at $5,800, double that of Darien because we are a larger town with many more miles of roads and dozens more buildings. Therefore the Board of Finance has presented to the Town Council their recommendation that we reduce our debt service as a percentage of expenses over the next five years from 12% to 10%.
The Town Council, Board of Education and Board of Finance agreed last year to work on common budget guidance in the fall. Those meetings are still needed. There is a disconnect between current Board of Finance guidance to reduce Town debt service to 10% levels and the new public-private initiatives we read about each week. Your town government needs to have an honest conversation about priorities and scrub the five-year capital plan.
State and local
High net worth taxpayers are continuing to leave Connecticut. The election will have an impact on our budget thinking. We need to vote for a change in our taxes that will have an impact on our budget planning. The latest poll shows Lamont leads Stefanowski by 6 points with a margin of error of 4 points. 40% of Connecticut voters are independent. Stefanowski has gained 6% with unaffiliated this month, but he trails among women by 22%. This race is too close to call.
Congressional elections, transportation
New Canaan tax base is largely dependent on Wall Street, and it benefited from recent deregulation of the financial sector, federal stimulation and the bull market. But, the latest polls predict a Republican Senate and a Democratic House in Washington. We should anticipate gridlock from a balanced Congress at a time when what New Canaan needs is federal attention on our infrastructure. New Canaan needs multiple good commuting options, particularly faster and more trains. Town leaders are working on the affordable expansion of Talmadge Hill to make more parking available for commuters. This should shorten the waiting lists. I am surprised at how few people are taking advantage of newly available “Boxcar” parking in the St. Aloysius lot. Parking habits are equally slow to change.
The property tax change is a concern for budget planning. In January we will learn that many tax bills will rise between 10% and 20%. Why? The Grand List is predicted to shrink 8% reflecting a reset at the top end of our market and subsequent compression as top tier prices fell and put price pressure throughout the system on lower-priced homes. Those homes will make up the deficit.
Therefore, the Board of Finance and Town Council must re-evaluate our Tax Relief for Seniors program and its means-testing in light of the coming property tax volatility. We want to retain our seniors as we explore new senior housing options. It’s a small line item but deserves a fresh look.