Connecticut Teardowns Are Back: Housing Bubble?

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"The crashing sound of Connecticut homes is making a comeback," blared a recent article in the Wall Street Journal. The much-maligned practice of tearing down older, smaller homes to make way for new, larger McMansions was most popular two or three years ago in the upscale communities of affluent Fairfield County, Conn. -- before credit default swaps and foreclosures became headlines.

Often, older properties were purchased by developers who then erected flashy new homes to sell at three or four times the price of the original. Some critics at the time pointed to the practice as evidence of a rapidly inflating housing bubble.

But these days, home prices in Fairfield County are down about 30 percent from their peak in 2007. And if the uptick in the Teardown of the Day postings on news site WestportNow.com are any indication: The desire and ability to buy a modest split-level in an upscale town, and build your version of the American dream, is alive and well and living in Fairfield County.

Is the era of the teardown back? And if so, what does it mean for home buyers?
"For a while, teardown activity did slow down," says Alexander Chingas, a realtor with The Riverside Realty Group, in Westport, Conn. "In the past two years, a home that might have been an automatic candidate for teardown, was rehabbed instead." But he says builders are taking advantage of less expensive properties. "If the buyer can do well on the price, that is the driving force."

The legacy of teardowns, or "infill development" in this region, which extends to the tri-state area around New York City, is well-documented. The National Trust for Historic Preservation in 2008 identified New York, New Jersey and Connecticut as "the epicenter of the teardown epidemic," voicing concerns over the "wiping out of historic neighborhoods one house at a time."

Westport granted 110 teardown permits in 2005, and half that number last year.

Preservation concerns aside, for now the rise in teardown activity in Fairfield County towns such as Greenwich, Fairfield and Westport seems to be in modest homes, whose historic value is wrapped up more in family memories than wrap-around porches. At least in Westport the community has an opportunity to voice opposition, because of an ordinance that any home more than 50 years old is subject to a delay period before it can be demolished. "[But] if it's a '50s ranch, there aren't that many people that mourn its passing," said Chingas.

While some in the real estate industry are concerned that new construction could create a glut in the housing market, as its recovery sluggishly continues, Chingas believes new construction will have a positive impact on all properties -- old and new.

"New construction coming to a neighborhood only improves it," he said. "At the same time, there is a large price gap between older resale homes and newer construction; a buyer would need to have the flexibility to go up to next price level, and not too many do. The new homes won't diminish the buyer pool for resale properties."

If anything, the new spate of teardowns in Connecticut represents a fresh streak of optimism for the housing market as a whole. After all, teardowns indicate a belief that once again there are buyers out there interested in new homes, who are confident they will retain their value. And while not everyone can afford to tear down a home they just bought, only to erect erect a new one, sales of such properties bode well for the values of existing homes nearby.
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