Peter Francese once again brings us his great insight into the state of New Hampshire’s real estate market. One thing Peter says is  “ As to when we will see the bottom of the market, we are probably awfully close to it right now.”

We have to agree with him and while we don’t think we’re there yet…we’re pretty close. Certain market areas and certain price ranges are “hot” while others are getting pretty warm. Personally, we think it will be a while before we see prices increase but properties are moving, people are buying and buyers have many choices. The spring market is here…even with all the snow on the ground.

Reprinted with permission from the New Hampshire Association of REALTORS.

Where’s
the bottom?
-by Peter Francese

That’s the big question. Even the Chairman of the Federal Reserve Bank, who has access to databases we can only dream about, says he doesn’t know. Perhaps it’s vain of us mere mortals to even ask the question. But we’re going to, anyway.

There are several factors that will determine when housing demand will start to rise such that prices will firm and sales will happen more quickly. High on the list of them is consumer psychology. Right now consumers in general are not very optimistic about the future. But if the buying public thinks that 2009 will be a better year than this one, then demand for dwellings will likely rise.

The fact that this is a presidential election year, the major theme of which is “change,” suggests that there’s a better-than-even chance during this year that consumers will become more optimistic about the future. But regardless of the public’s mood, interest rates and the availability of credit will either get in the way of home sales or facilitate them. So far, interest rates are low enough to encourage more home sales, but lenders have become, for the most part, way too risk-averse.This is probably because mortgage lenders can’t pawn off those loans quite so easily anymore. What is likely to open up the credit markets and make mortgages easier to obtain is a positive move by Fannie Mae and Freddie Mac to increase liquidity, calm the mortgage-backed securities markets and get that system working again. Given the incredibly huge amounts of money involved, something like that is likely to happen soon.Here in New Hampshire, the housing market has always looked better than in other states because we avoided nearly all of the mortgage fraud, speculation and other excesses that created so many problems in the hyper-growth areas of the South and Southwest. But we have our own “issues” to contend with. And the most serious of them is the lack of growth. Chart I (below) shows how the flow of people to our state from other states has markedly slowed over the past seven years and is now negative.Population growth is one of our key drivers of housing demand. Fortunately for us, it’s not the only driver, but lack of growth will have an impact if it doesn’t turn around soon. One reason for this slowing growth is the lack of affordable rental units for young adults.Communities don’t want them, in large part because of the irrational fear that they will increase school enrollment and thus drive up property taxes. For a bigger discussion of this issue, please look for our book, Communities & Consequences, in your nearest library or bookstore, watch for the film of the same name on New Hampshire Public Television, or visit the project website, http://www.communitiesandconsequences.org/.Chart II shows the average sales price for residential homes and condominiums for the past year and is about a flat a curve as anyone should expect to see, given current market conditions. But Chart III shows that it is taking significantly longer to sell a home in New Hampshire - an average of almost five months.

So the bottom line as to when we’ll see the bottom of this market is that we are probably awfully close to it right now, at least in terms of price. But coming off of that bottom and seeing a more robust market for home sales may take some months. The consumer needs to get in a better mood, towns in our state need to feel more positive about workforce housing, and mortgage lenders have to feel better about making new home loans.

Sure there are risks that none of those things will happen. But our state is in the best economic position of any state in this region to benefit from improving conditions. In any event, we will enjoy a better future when we are willing to be more welcoming toward young people by providing them with affordable places to live.

Source: U.S. Census Bureau

Source: Northern New England Real Estate Network

Source: Northern New England Real Estate Network

Source: Northern New England Real Estate Network (NNEREN). Statistics are based on information from NNEREN for the respective periods shown for the respective regions in the State of New Hampshire or all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of the New Hampshire Association of REALTORS® and not that of NNEREN.