With strong demand for more housing – from buyers moving into New Hampshire, from Millennials aging into the homebuying population and from downsizing Baby Boomers – expect prices to keep appreciating.
Steady as she goes.
That’s the order of the day for residential real estate statewide, market-watchers say, as the economy stays strong, interest rates look set to stay low and smaller homes remain the focus of demand for many buyers.
First-time homebuyers squared off against downsizing empty-nesters and second home buyers across New Hampshire throughout 2019, with the former often losing out, said Dan O’Halloran, broker and owner of the O’Halloran Group in New London and the 2019 president of New Hampshire Realtors.
“You’ll get a first-time buyer who’ll spend a couple hundred on a house or maybe up to $300,000 and they’ll put 5 percent down,” he said. “Retirees will be coming in and putting in a lot of money down or all cash. They’re beating out the younger buyers, the workforce we need to attract.”
Boomers Beat Out Millennials
Neither O’Halloran nor Ignatius MacLellan, managing director of the New Hampshire Housing Finance Agency’s homeownership division, see this state of affairs changing much in 2020.
“In a multiple offer situation, folks who are better off financially, folks who have recently sold a home have the cash to be successful in purchasing a home. That’s really hard for first-time homebuyers to beat,” MacLellan said, adding that it has even happened to younger members of NHHFA’s staff.
The main problem, both say, is that retirees and first-time buyers tend to want the same product: a smaller one- or two-bedroom house that might cost between $150,000 and $300,000, depending on the local market. The number of listings priced below $300,000 has decreased 65 percent in the last five years, MacLellan said, while the number of homes for sale above $300,000 has stayed relatively constant.
The median state-wide single-family sale price was $285,000 as of Nov. 30, according to the latest data from The Warren Group, publisher of The Registry Review.
“I think about what happens to hard-working people when the rents are so high. Now, the majority of people who come into food pantries [where he volunteers] are working full time,” he added. “With this shortage there are real personal impacts that we can’t forget.”
Another trend to watch, MacLellan said, is decreasing appetite for fixer-upper homes, particularly among Millennial buyers. Still, it’s not yet a universal truth, O’Halloran said.
“From a price point it’s hard to say,” he said. “Everyone has their own perspective of a fixer-upper – you have plenty of people who are handy and can swing a hammer and others who don’t even know what a hammer is.”
Tight Inventory Conditions
While Gov. Chris Sununu kicked off a legislative process in the fall that could lead to looser restrictions on building homes and, in particular, multifamily housing, there are no factors that point to increased housing production in 2020, or increased inventory, MacLellan said. Even if it becomes easier to secure planning permission for developments statewide, many towns will still have to contend with a lack of strong water and sewer infrastructure that could support these projects.
“Inventory is a constant struggle,” O’Halloran said. “A lot of that boils down to our local town legislation and planning board legislation. At a very local level, individual towns are having to make the best decision for their community. But [statewide] we need housing for people that have jobs, and generally that’s your middle–income population and that’s where there’s a big gap in inventory and where there’s a big challenge.”
The number of months’ supply in the statewide housing market was down 27.8 percent year-over-year, to 2.9 months, in November, according to the most recent data from NH Realtors. In the same month, the number of homes for sale dropped 24.6 percent to 3,991 on a year-over-year basis, and the number of new listings dropped 8.2 percent year-over-year, to 996.
In some communities, particularly in hot markets like Portsmouth, this led to not-infrequent multiple-offer situations and bidding wars during 2019, as The Registry Review has previously reported.
Supply restrictions, plus indications from Federal Reserve Chair Jerome Powell that he does not foresee a need to raise interest rates next year, have put the state on a path for steady price appreciation, MacLellan said.
“There continues to be a really good sense of optimism – things are on really good footing,” he said.
Persistently low interest rates, too, will help cushion some of the pain from higher prices.
“Lower rates do give you access to more money to buy a more expensive home,” MacLellan added.
