Conditions are building for another year of strong housing demand, but for-sale inventory and the construction of new homes hasn’t kept pace, sending prices soaring. Market-watchers hope more COVID-19 vaccinations could fix that.
With mortgage interest rates still very low and the spring housing market expected to be leavened with many buyers who gave up looking in 2020 thanks to the historically busy market, real estate agents are carefully watching the number of homes on the market amid an inventory shortage the likes of which few have ever seen.
The January market report from the New Hampshire Association of Realtors noted that while the number of new listings decreased 12.8 percent year-over-year, it did increase nearly 17 percent over December.
Still, NHAR Director of Communications Dave Cummings said that’s not a complete sign that there is a greater willingness to sell at this moment, but he expects to see more inventory in the spring.
“What was already historically low housing stock a year ago dwindled even further during the pandemic, so we are continuing to wait for the bounce-back to begin,” he says. “To this point, we’ve only seen it drop, as buyers outpaced sellers by a strong margin throughout 2020.”
In Southeast New Hampshire, typically the busiest real estate market in the state, NHAR President Jim Lee said the spring market actually started about two months ago.
“In fact, the 2020 market never stopped,” he said. “We saw very strong demand coupled with very low inventory creating a minor frenzy for home sales with multiple offers and most at or over the asking price. Continued low interest rates are a major driving factor in this market along with low inventory and demand from buyers looking to get out of crowded states with high taxes.”
He believes the market will be strong in 2021 and because many people are working from home now, it’s driving the need and desire for larger homes with home office space, spaces to home school the kids, and recreation spaces for home gyms as well as outdoor space.
Hope for ‘Snowball Effect’
The expectation is that the market will begin to see an increase in inventory once prospective sellers, some of whom have probably been on the fence since last spring with the onset of the pandemic, begin to be more comfortable with moving once more people get vaccinated against COVID-19.
“The numbers would lead us to believe there is pent-up housing stock that will begin to come on the market in the spring and summer, and we expect that will have something of a snowball effect, as once folks see more housing supply, they will be more likely to sell, knowing that they will be more likely to find something to buy,” Cummings said.
Zillow recently released a survey that suggests Cummings’ hope could be well-founded. The survey found 26 percent of Generation Z & Millennial homeowners nationwide were more likely to move thanks to increasing vaccine distribution, while 15 percent of Generation X and 10 percent of Baby Boomer and Silent Generations homeowners agreed.
“The vaccine is likely to give potential sellers the comfort to allow buyers to tour their homes, which many have been reticent to do up to this point,” Zillow spokesperson Haley Mills said.
New Construction Not Enough
Joshua A. Greenwald, broker associate and sales manager at Keene–based Greenwald Realty Assoc., said single-family home inventory is running on empty for existing homes, necessitating either more inventory to come on the market or new construction homes to fill the void.
“Recently, land deals are happening left and right, and we are anxiously awaiting whether they translate into new home constructions,” he said. “Spec houses, which used to be plentiful prior to the recession over 10 years ago, have not seen the uptick needed to satisfy supply. From discussions with builders this is being driven by the high cost of construction, with lumber costs up 40 percent to 50 percent in some cases. That makes it difficult for a construction company to establish a satisfactory profit margin when building on spec.”
Sharon Wayman, executive director of the New Hampshire Home Builders Association, said construction of new homes were strong throughout the 2020 pandemic and builder-members continue to receive requests for quotes on new construction, with many having jobs lined up for months in advance.
In fact, the association’s numbers show housing starts increased 25 percent in 2020 from 2019.
“Moving into 2021 projections are good, but gains may be tempered by ongoing supply-side challenges related to materials, delivery times and labor shortages,” she said. “Even though housing starts ended the year strong, rising lumber prices and increasing regulatory cost concerns could affect future production.”
Still, on the Seacoast, Lee noted new construction is scarce heading into spring.
“I found a total of seven new homes listed in the MLS,” he says. “However close in around Portsmouth, there is one 57-home development that has broken ground, though no houses underway as of yet. They are 2,000-plus square feet and no pricing information available.”
