Connecticut’s condominium market has been clobbered this year. Condominium sales have dropped by double-digit percentages — sometimes as much as 35 percent to over 40 percent — year-over-year for 18 months straight.

The decline moderated a bit in July, August and September, according to The Warren Group. In fact, The Warren Group’s latest numbers show that condo sales in September were essentially flat compared to September 2008.  But condo sales are off a whopping 27 percent for the first nine months of the year compared to the same period in 2008. 

Condo prices have also slumped, falling by 11.5 percent.

And the news for the condo market could get worse. As Ian Murphy reported in a recent story in The Commercial Record, new Federal Housing Administration rules could further erode condominium sales. The new rules, which go into effect next week, limit the number of FHA-insured loans per condo building to 30 percent.

They also require that condo association report on their reserve accounts annually. We’ll see how much prodding it will take before the FHA adjusts those rules …

Massachusetts is trying to set up a foreclosure mediation program that is similar to Connecticut’s.  

A Massachusetts lawmaker has filed a bill to require lenders to meet with a trained mediator and a homeowner who’s defaulted to try to negotiate and reach some type of agreement.

But unlike Connecticut, where the program is mandatory for homeowners already in the foreclosure process, the mediation would be voluntary for homeowners.

Foreclosures in Massachusetts have dropped just about 30 percent in the first nine months of 2009 compared to a year earlier, according to a new report by The Warren Group. But lenders have initiated more foreclosures this year – over 21,000 in the first three quarters.

Connecticut’s foreclosure activity has also declined but by a smaller percentage.

Foreclosures in the first eight months of 2009 are down 4 percent. But as in Massachusetts, lenders are starting foreclosure proceedings at a faster pace this year.

Lis pendens, which mark the start of the foreclosure process in Connecticut, are up 34 percent this year from 2008.

Federal officials and mortgage loan servicing companies have been patting themselves on the back for putting half a million struggling homeowners into trial mortgage modifications.

The U.S. Department of Housing and Urban Development and the U.S. Treasury Department sent a news release last week touting that the “new milestone” was reached ahead of the Nov.1 benchmark that the Obama administration set.

“The goal of 500,000 trial loan modifications by November 1 initially set in July pushed servicers to ramp up program implementation and sustain a faster pace of modifications; trial modifications are now being issued at a faster rate than new homeowners are becoming eligible,” according to the press release.

Sounds great, right?

But the bigger question is: how many of these trial modifications will actually keep people in their homes in the long-term? In other words, what percentage of homeowners who were offered trial modifications will re-default?

Research has shown that a good number of homeowners who received loan modifications in the past ended up falling behind on mortgage payments within months.  

A troubling report from the Office of the Comptroller of Currency revealed that half of the loans modified in the first quarter of last year became delinquent again within six months.

Will these modifications provide different results? Only time will tell.

Connecticut’s condo market has taken a serious beating during this housing downturn.

Condo transactions in cities like Stamford, Bridgeport and New Haven, have plunged to record lows.

In Stamford, there were only 216 condos sold through August. That’s the fewest transactions ever recorded for the city since The Warren Group started tracking Connecticut’s residential real estate market in 1988.

From 2004 to 2007, Stamford condo sales for that period were averaging over 700, according to data collected by The Warren Group.

Bridgeport is another city where condo sales are hurting.

There 112 sales in the first eight months of 2009, again the lowest number of condo transactions since The Warren Group started tracking housing sales 21 years ago.

By comparison, Bridgeport was seeing an average of 412 condos during the same months from 2004 to 2007.

And what about New Haven?

New Haven had 128 condo sales through August, which is the lowest since 1993.

Congressman Barney Frank wants to set aside $2 billion in rescue funds that banks have repaid to help unemployed homeowners avoid foreclosure.

Frank is reportedly planning to introduce a bill next week that would give homeowners who’ve lost their jobs and can’t keep up with mortgage payments loans.

Experts are predicting that a second wave of foreclosures will hit because of the high unemployment rate.

In Connecticut, there have been 3,618 foreclosures in the first eight months of the year, according to The Warren Group.

The number of lis pendens, which are the first step in the foreclosure process in Connecticut and indicate how many homeowners are at risk, has jumped 34 percent to 18,706 from 13,995 a year ago.

While Frank’s plan sounds reasonable to advocates who are trying to help struggling homeowners who live in Connecticut and other states, here’s one wrinkle with the plan: the money homeowners receive must be repaid.

In other words, this would only saddle unemployed workers who already have trouble paying bills with more debt.

A better long-term solution is to support policies that will create more jobs and boost the employment numbers. 

Frank said the House Financial Services Committee, which he heads, will begin to consider such job-creating policies in January after it wraps up the work it’s doing overhauling the regulation of financial institutions.

Instead of waiting three more months, Frank and his buddies in Congress should start that process right away.  

August was a good month for home sales in Connecticut. It was the second straight month that single-family home sales increased in Connecticut, The Warren Group reports today.

Here’s what’s not mentioned in the report: while sales of lower-price single-family homes helped to prop up the overall sales volume, higher-end home sales are dragging.

As I mentioned in this blog earlier this month, lower-priced homes were moving at a faster pace in July than residences with much bigger price tags.

If you add August transactions to the mix, single-family homes priced $150,000 to $300,000 shot up almost 17 percent compared to the same months in 2008.

In contrast, homes priced $700,000 and higher plunged nearly 24 percent – ouch!

But homeowners who are trying to unload an upscale property don’t despair.

If sales volume continues to climb in the lower-end of the real estate market that could trickle up to more upscale properties as homeowners seeking to trade up are finally able to make a move because they no longer have to worry about selling their starter homes.