New Hampshire’s housing market has an income gap problem.

The median household income has doubled since 1998, hovering at just under $100,000 today. But home prices have jumped at a much faster rate.

Back in 1998, the median New Hampshire home was 2.8 times more expensive than the median income could afford, according to an analysis by New Hampshire Housing, a state-supported housing organization. Today, that same median home is 5.5 times more expensive.

The result is a yawning gap in affordability that appears to only be increasing. It’s a divide that dominated a discussion on the future of housing hosted by the New Hampshire Business Review last month.

‘The gap between what households earn and what homes cost in New Hampshire has never been wider,’ said Heather McCann, managing director of engagement, policy and communications at New Hampshire Housing.

Economists generally advise households to spend no more than 30 percent of their gross income on housing. But the prices in New Hampshire make that advice difficult for all but a few in the state to follow.

For instance, in order to afford New Hampshire’s median house price by paying no more than 5 percent in a down payment and no more than 30 percent of income a year on a mortgage, a New Hampshire family would need to make $182,000 a year, McCann said. For one person with a full-time job, that averages out to about $88 an hour.

But in reality, the median household in New Hampshire makes $95,628, not $182,000. That means only about 15 percent of New Hampshire residents could comfortably afford that median home price, according to New Hampshire Housing.

And while the incomes have steadily risen in the last two decades, they have hardly kept pace with housing costs.

Analysts in New Hampshire have struggled to paint a clear picture about where the New Hampshire housing market is going this year. But one underlying factor has stubbornly persisted: low supply.

Rents are continuing to rise after climbing about 35 percent in the last five years, McCann noted. And because home prices are still high, many individuals and families are staying in rental units, unable to leave, even while the rents rise, she said.

The climbing prices has become a vicious circle for young people in the state, forcing some to leave, McCann said. But retirees are facing increasingly difficult conditions, too. With Social Security paying an average of $2,000 per month, many older residents are paying for too high a portion of that toward their housing.

Rents tend to crowd out other priorities such as food, transportation and health care, she said.

New Hampshire’s post-pandemic boom may have slowed, but it has not stopped. In August, the median sales price hit $550,000 in the state. That was a massive increase from just years earlier; the median price was just over $300,000 in 2019. But that increase was not followed by a similar increase in income for Granite Staters.

The price increases have been slowing: While year-to-year growth in the year following the COVID-19 pandemic saw home prices climbing by around 20 percent a year, this year, they are higher than last year by only about 2 percent, McCann said. But the current price levels are still far above what most Granite Staters can afford.

One key metric to assess the housing market is the average time homes stay on the market before they are sold. A short time period indicates a continued buying frenzy, which means prices are liable to rise or stay high.

At the current rate, the total number of New Hampshire’s listed homes could be sold in 2½ months. That is nowhere near the six-month timeframe that housing economists say would indicate a healthy market.

Meanwhile, the houses that are selling more slowly are more likely to be newly constructed. It would take 4.4 months to sell New Hampshire’s inventory of new homes, compared to 1.9 months to sell its inventory of existing homes. That suggests the new homes are more likely to be expensive, McCann said.

The sales prices bear that out: The median price of a newly constructed home is $750,000. That price has jumped 75 percent compared to new home prices in 2020, driven by a combination of supply constraints, inflation and tariffs.

The bottom line, analysts say: While housing supply may be increasing somewhat, it is not doing so quickly enough. And the housing that is being constructed is still out of reach for many buyers. Until the market cools further and prices fall, that dynamic will continue.

‘Even as new homes are added to the market, they tend to be larger homes at a higher price point and they’re just not easing the affordability pressures for the average New Hampshire household,’ McCann said.

That dynamic applies to rental housing, too; while affordable housing projects are being built, many new units are luxury units. More supply — even via more expensive housing — can eventually help lower prices overall, but it is slow. In the meantime, those at the lowest end of the income spectrum continue to suffer the most, she said.

‘It’s not bringing up enough units for folks to be able to afford. Prices are still going up,’ she said.

A longer version of this story was first published in The New Hampshire Bulletin. It is republished here under a Creative Commons license.