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July 31, 2019

Migration, Demographic Shifts and it’s effect on New England Real Estate

Filed under: the home market — Tags: , — marc @ 7:50 am

Migration, Demographic Shifts and it’s effect on New England Real Estate

By Marc P. Nadeau, SRA

Being from Connecticut, I tend to focus on what’s happening here in the Nutmeg State, and it’s not pretty. We continue to lose population, mostly to southern states and states with greater tax advantages. The Connecticut Office of Policy and Management’s 2017 paper on migration focused on several issues, the number of persons leaving the state and income levels that those former residents were part of. The bottom line is a net loss. The declining population is not exclusive to Connecticut as many of the Northeastern States are also taking a hit when it comes to population.

The graph to follow shows recent trends for Northeastern States:

What’s driving the Migration?

There are a number of factors that are driving the shift in population in Connecticut and New England for that matter. Firstly, we in Connecticut have been experiencing a relocation of employers with United Technologies, Pfizer and General Electric being at the top of the list. United Technologies, which includes companies like Pratt & Whitney, Otis Elevator, Kidde and Carrier committed to relocating their corporate and some manufacturing base to Palm Beach Gardens, Florida. The new facility, which opened in 2018 is a 224,000 square foot marvel in technology that is home to UTC’s Center for Intelligent Buildings. The local Florida municipality cites a $660 million benefit over a five-year period. That’s $660 million that is no longer impacting Connecticut. An interview with a UTC executive revealed that many of the Hartford-based employees were offered packages to relocate to Florida, and many capitalized on the opportunity.

Pfizer, the pharmaceutical giant that had long planned its landing in New London, with the City of New London being at the helm of the largest and most controversial eminent domain case perhaps in this country’s history to accommodate Pfizer’s coming. (Kelo vs. City of New London) The case involved the taking of land from private property owners for private use, in this case, for Pfizer to construct a giant office park housing hundreds of workers. Pfizer developed a fraction of the promised buildings and then fled to Massachusetts, leaving vacant buildings and in some cases barren land where homes once stood.

Finally, General Electric, the Fairfield, Connecticut based manufacturing and technology giant with a $130 billion business decided a couple years ago to up and relocate the headquarters to Boston. General Electric had been sparring with the State of Connecticut for several years, looking for greater incentives to keep their base here in the Nutmeg State. Massachusetts offered a mere $120 million in incentives along with $25 million in property tax relief and voila, GE and its giant workforce of both middle management and executives are committed to another market that will surely benefit from Connecticut’s loss. Governor Malloy’s response at the time was “This is a clear signal that Connecticut must continue to adapt to a changing business climate.”

The list goes on with the three above references being just a piece of the puzzle. Not to mention that Connecticut and New England, once the manufacturing hub of the country have lost thousands of small business to other parts of this country, foreign companies and in some cases pure attrition, with that small business just evaporating.

Change in Federal Tax Laws

Congress enacted Trump’s tax plan during 2018 which is proving to be a deterrent for many property owners, especially for property owners in many parts of New England, where taxes are historically high, especially relative to income levels. For example, in Bayville, NY, a small community on Long Island the median income is $77,800, yet local property taxes on homes typically exceed $20,000. The new tax act now limits the amount one can deduct for state and local property taxes (SALT) to $10,000.

Shift in Demographics

In as much Connecticut has seen a negative outflow of population, there have been a number of people move into the state as well. Unfortunately, the outflow is largely by those individuals that have high-paying jobs and/or are of significant wealth. Conversely, the incoming population is largely that of more service and hourly workers that can’t begin to offset the income that was formerly flowing into Connecticut’s coffers.

Massachusetts also has an overall negative population flow however, the surrounding Boston Market has been expanding for years, with a booming real estate market and what has been for a long time, increasing values. The benefits come from the expanding base of tech business and biotech companies that have migrated to the area. An interview with a recent hire in the pharmaceutical business relocated to Boston from Connecticut for a job with a foreign company who set up offices in Boston to be “near what is a confluence of biomedical and pharmaceutical giants”.

Impact upon Property Values

By and large the market in Connecticut is experiencing a wane in values with the upper end of the marketplace being most impacted. As the audience shrinks for high-end product, so do values. Along the shoreline in Eastern Connecticut, where this appraiser is located, there has been a noticeable increase in marketing times and a decline in prices for homes in excess of $500,000. Relating to marketing times, below is a graph showing a slow but steady increasing number of days it takes to complete a sale from the inception of listing.

Source: Connecticut Multiple Listing Service


This appraiser anticipates greater fallout from the migrating employers, tax limitations and what is translating into an ever more expensive place to live. As for Connecticut, it will likely take some time to right Connecticut’s economy. That new footing will have to start with a more cohesive bipartisan state government, as Republicans and Democrats have long been at odds with each other and cannot seem to agree on how to solve the state’s economic dilemma.

Marc Nadeau, SRA is a General Certified Appraiser with 35 years of real estate appraisal, development and consulting work experience.

September 26, 2017

Demographics shifts and the impact on real estate values

Filed under: the home market — Tags: , — marc @ 9:23 am

Demographic Shifts and the Impact on Real Estate Values

by Marc P. Nadeau, SRA

The landscape is changing in Connecticut and this time we’re not just referring to trees, shrubs and coastline.  Yes, there have been obvious changes to the physical landscape by way of eroding beaches, flooding in areas that historically were not impacted by flooding and a continued erosion of our state roads and highways and, to those naysayers that think climate change has nothing to do with the physical changes to many areas within our state, I say think again!   All one has to do is to pull an older legal description of a waterfront property most anywhere in the state and one will find that the distance to the water is now much closer than it was say, 50 or 100 years ago.

In as much that the changes to the physical landscape are impacting values, this article is not so much focused on the environmental shifts in the state as opposed to the economic changes.

Real Estate Value Changes as a result of a shifting landscape of population

Seemingly, most of us have recovered from what I like to call the Meltdown of 2008, when the entire financial system experienced a hiccup like no other.  Century-old banking institutions failed, auto manufacturers went out of business, millions of homeowners just walked away from their homes and the equity markets for the most part fell off the proverbial financial cliff.  It would certainly seem as though the past events helped shape the psychological view of the buying and owning a home – which may help explain the rising demand for good rental properties versus a decline in home ownership.

Connecticut has seen a significant shift in physical population as well as income distribution.   A recently-published paper by Manisha Srivastava from Connecticut’s Office and Policy and Management entitled Connecticut’s Population and Migration Trends: A Multi-Data Source Dive succinctly dissects the changes in the population landscape.   In short, the state is losing not just population but also higher-wage earners who had become the foundation for Connecticut’s economic platform.   The following chart shows recent and projected population flow within the state.

The chart shows a migration away from the state of 20,000 to 30,000 people each year over the past few years.   What may be more important is the component of the shifting population and who they are and their place within the economic stratum.   According to the Connecticut Budget released in May of 2017, the state is reeling from the consequences of sliding tax revenues that have historically come from the financial section, most notably from hedge fund managers.  Recent figures have shown that the tax revenue from the state’s top 100 highest-paying taxpayers declined 45% from 2015 to 2016.   That drop translates into a $200 million loss in tax revenue for Connecticut.

A Deeper Look into the Migrating Population

Connecticut has become one of the most expensive states to live on nearly all fronts.  Everything from housing costs to energy costs, to the state income tax rates, Connecticut is a front-runner in nearly all of the aforementioned categories.

· Recently published energy costs reveal that the cost of energy in Connecticut is nearly twice that the national average.

· Connecticut is the sixth most expensive state to live in from the standpoint of average housing costs.

· The state ranks as the second-most expensive place to live from a tax standpoint.   The tax figure is a collective one, factoring in both state income and local property taxes.

· There has been a general growth in reporting of individual income in the northeast with Connecticut being the laggard.  The following chart compares Connecticut to other Northeast states.

In comparison to Massachusetts for example, which has had an increasing population and has benefitted from a migration of top businesses and corporations to the state, Connecticut is simply failing.   And, the reality is that much of Connecticut’s migrating income is not necessarily leaving the country but is going to other states including that of Massachusetts, Florida and other southern states.  In the past three years alone we have seen major corporations make the move to greener pastures.   These corporations include: United Technologies relocating to West Palm Beach, Florida with the benefit of no state income tax for its employees and a 10-year property tax abatement; Pfizer relocating to the Boston area from New London, Connecticut leaving behind a wake of a ravaged and unspoken for landscape of redevelopment parcels that came about by one of the worst Supreme Court Decisions in the history of this country, Kelo vs. City of New London; and General Electric Corporation announcing its move to Massachusetts after is life-long history of being headquartered in Fairfield.  These corporations are taking with them not just their employees but also the taxable income associated with those employees, most of which are upper management people earning salaries at the high end of the wage spectrum.

The effect on Real Estate and the Fix for the Problem

In as much this appraiser/author has a practice that is concentrated along the shoreline, east of New Haven, this appraiser has generally seen a slow waning of prices across the board.  That waning of prices has averaged approximately 3% annually over the past couple years.  Show below is a chart for the Town of Guilford, one of the many impacted shoreline towns.

Source: Connecticut Multiple Listing Service

Interviews with brokers in other parts of the state reveal like if not greater rates of price decline.

The Fix

The fix is without question rooted in the political landscape where lawmakers need to come together in a partisan way, finding revenue sources (other than individual and corporate taxation). These revenues will be needed to restore our infrastructure, restore Connecticut’s reputation as a viable state to do business in and ultimately, draw back the needed foundation of the working population.

Author Bio

Marc Nadeau is a designated appraiser with 33 years of experience based in Guilford, Connecticut. His specialties include: appraising historic properties, water-influenced properties, appraisals for tax planning and litigation. Marc Nadeau is recently authored the book for the Appraisal Institute, Identifying Residential Architectural Styles.

March 21, 2015

Residential Market Perspective

Filed under: the home market — Tags: , , — marc @ 5:01 am

For the majority of residential real estate values in Connecticut the market has remained flat.   Lower end and mid-market properties continue to bounce along what has become a logical resting point for this market after having come down from their 2006 highs.

Within every market remain underlying factors that either drive values up or bring them down.   On the positive side, marketing times for most properties have become shorter and interest rates have remained at their historic lows for several years now, making the entry for new homeowners more affordable and perhaps opening the window for existing homeowners to step up to a more expensive price point.  On the down side are economic indicators and rising ownership costs that have essentially kept a lid on market appreciation.

Economically, Connecticut and New England have not seen any material job growth along with virtually no increase in real wages for years.   Coupled with the fact that the population in this area continues to ebb resulting in a smaller audience for area properties.   Additionally, the loss of manufacturing as well as white collar jobs has only created a gap in the market that can be difficult to fill.  Add to the mix the rising costs of home maintenance, fuel and insurance, home ownership for some has become a difficult task to balance.  On the subject of insurance, properties located in flood zones have sometimes become white elephants and have been difficult to market, especially in the wake of the recent hurricanes that caused record damage to coastal New England.

Back to the positive, upscale communities continue to flourish, quality-built homes continue to have buyers and cities and urban areas are experiencing a renewal in popularity, with many suburbanites now doing a reverse migration of what was experienced in the 1970s and 1980s, taking in many of the cultural and convenient aspects that some cities offer.  As far as the water-influenced market, low-lying homes and properties plagued with flooding issues will likely continue to wane in popularity, while the water-influenced homes, including that of water view homes that sit high and dry will likely become more sought-after and therefore, more valuable.

Looking ahead….


August 9, 2010

State of the Market - Part II

Filed under: the home market — marc @ 2:30 am

In the previous posting on my site I discussed market trends and why, at the time I felt that we would continue to experience market decline through 2010. 

Realtors, homeowners, builders and developers alike are no longer in a state of denial when it comes acknowledging that we have experienced serious market decline. 

Current Market Trends ~ Inventory appears to have leveled off for most market sectors, especially in the lower price points (regardless of what market we are talking about).  The spring months experienced a surge in activity by way of greater sales and more prospective buyers bidding on properties.  As we are now in August and the market has returned to its anemic pace of last year it is clear that the “surge” in activity that we experienced was attributed to the Federal Tax Credits that were being offered to prospective home buyers.   Yes, it certainly looked good for a couple short months but now we are back in the doldrums of a stale real estate market. 

Market Complications ~ Complicating the anemic market further is the fact that credit and mortgages are hard to come by.   More stringent reporting requirements that have been placed on banks by Fannie Mae combined with a revised credit score reporting system (as it relates to mortgage applications) have only exasperated the home market. 

What will it Take? ~ An ease of credit and mortgage requirements along with a real increase in real income are necessary to refuel this stale market.   The last time we experienced such a down market was in 1991/1992.  It took nearly 7 years for the market to recover and that is likely true for this market as well.

The market continues its correction reflective of the fact that home prices just got to be too expensive relative to what people can actually afford.  According to the Connecticut Economic Resource Commission, in 2008 the average annual household income for the Town of Guilford was $97,577.   Comparing this figure to the State average of $67,236 the Guilford figure stacks up quite favorably.  The Guilford figure of $97,577 compared to the median house price of $425,000 looks less favorable and, when compared to the average new construction price of $750,000 at that time, the affordability becomes even less feasible. 

What’s Ahead? ~ A continued downward trend in prices and values are expected, especially in areas where abundant inventory exists.  This appraiser is convinced that the market will continue its 6% decline for the general market through the end of the year and likely well into 2011.




January 13, 2010

Historic Homes ~ An Evolving Market Perspective

By: Marc P. Nadeau, SRA

Being from New England, when one thinks of a historic home the image often conjured up is that of a 1700s center chimney cape, a Federal style from the early 1800s, a Second Empire Victorian or even a brownstone.  All have become part of the architectural landscape that helps define New England.   The bulk of the architectural styles that everyone from appraiser to homeowner to builder has come to know were for the most part born during a 200-hundred-year period.  That period extends roughly from the year 1700 to 1900.

Fast forward to 1950, enter the modernists.  The A-list of architects that settled in New England and graced us with some of the most innovative and imaginative house designs include the likes of Philip Johnson, Marcel Breuer, John M. Johansen, Walter Gropius and Paul Rudolph.   For those not akin to architectural history and it’s drivers (so to speak), Mr. Johnson was perhaps the most celebrated American architect of the last half-century while Mr. Gropius and Mr. Rudolph served as deans of the Harvard and Yale Architecture Schools respectively.

The modernist style, embraced by some and distained by others has without question earned its place in the American catalog of historic homes.  Perhaps most famous of the Modernist movement is the “Glass House” located in New Canaan, CT.   The property is now owned and run by the National Trust for Historic Preservation with tours being available.

Philip Johnson's Glass House, New Canaan
Philip Johnson’s Glass House, New Canaan, CT

Value of Historic Homes

Historic homes of all periods continue to hold their own against their more modern contemporaries, often being sold at premiums over and above the general marketplace.   Homes designed by notable architects also seem to have their own unique value points and typically result in an even greater premium of value.   This appraiser, in the not too distant past had the assignment of appraising a Philip Johnson home in New Canaan, CT.  The historical array of comparable sales included homes by Johanson, Marcel Breuer and even a Frank Lloyd Wright design.  The collective array of sales from these well known architects demonstrated a distinctly higher value point over and above their lesser-known contemporary architects.

Endangered Species

Despite the market’s willingness to pay a premium for historic and antique homes these properties continue to be threatened with demolition from all walks of the development world.  Be it the homeowner looking to expand upon an existing structure, a developer seeking to maximize profit or the architect/designer wanting to make more productive use of existing spaces, these properties often become dated, outmoded or just cease to function for the modern-day dweller.

In recent years, there have been a number of publicized properties that faced demolition including the Meeker House, a 150-year-old house on Cross Highway in Westport, a 1950’s Paul Rudolph house on Minuteman Hill Road in Westport and the Alice Ball House, a Philip Johnson design in New Canaan.  The Meeker House was disassembled and moved to a different location, the Rudolph house was demolished amidst much opposition and the Ball House awaits an unknown fate.   Part of the issue with the Ball House, a 1,773 square foot modernist dwelling, was that the home ceased to meet the criteria for today’s homeowner.  The owner, (who happens to be an architect) proposed several scenarios to the town including saving the modernist house, perhaps using it for a guest house or a pool house while building a second more functional home on the same site.  The town environmental commission denied the application only making the preservation of the modernist structure less feasible.   The application, after revision was approved by the town but unfortunately, opposed by a neighbor who enjoined in a lawsuit against the property owner.

Potential Solutions

There is no question that the remedy for preservation needs to come from the local level.  Towns that serve to be home to the varied historic structures should perhaps consider special zoning/development provisions that would serve to preserve the historic architectural fabric.  One suggestion would be to allow for increased density coverage on these sites wherein perhaps the footprint of the historic structure would not count toward the overall allowable site density. Preservation today is often about co-existence.  An avenue such as this would pave the way for the construction of an additional structure leaving the often smaller, dysfunctional historic dwelling suitable for a guest quarters, pool house or complimentary use.

Bio of the author
Marc Nadeau is a designated appraiser which extensive experience in appraising, redeveloping and restoring historic properties.  Clients in this genre include individuals, The National Trust for Historic Preservation, the Connecticut Trust for Historic Preservation and the Philadelphia Preservation Trust.  Additional information regarding Mr. Nadeau’s services is available at: www.marcnadeau.com