NH Legislature:NH Real Estate

Update

January 2010Russ Thibeault

Applied Economic Research

Research Support Provided By:

Applied Economic Research 2

Conclusions

• The worst of the real estate downturn has passed• Markets are generally stable, but at far lower levels

than we would like to experience• The outlook is for a gradual improvement during

2011 provided:– The number of new foreclosures drops somewhat– The state and national economies do not double dip– Interest rates don’t rise dramatically

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Sales Show Modest Recovery, But Remain Well Below Their Peak

• In 2010, about 12,500 homes sold.

• Sales were down slightly from 2009 levels

• 2010 is down 45% from peak levels

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Prices Are Stable

• Median price averaged $205,000 in 2010

• Up about 1% over 2009

• Down 27% since peak in 2005-06

• Matches or exceeds price drops in early 90s downturn

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Inventory Remains High

• 15,000 Unsold Units at Year End

• Has Been Dropping at a Very Modest Rate Since 2007

• Twice the Level of Earlier in This Decade

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Effective Inventory

• Would Take 15 months to sell off the units listed in the MLS system

• Not getting worse, but improvement is modest.

• 6-9 months is normal—supporting reasonable price increases

• Remains a buyers’ market

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Housing Recoveries Are Slow Boats• Took nearly a

decade for NH prices to get back to peak levels in the last major downturn

• Job growth was strong then

• Real recovery has yet to surface this time

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Primary Factors Driving the Market

• The overhang of foreclosed properties• Job and Income Growth• The Pace of New Construction• Interest Rates/Credit Availability• Affordability• Consumer Confidence

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Foreclosures Are a Problem—Wet Blanket on This Market

• 2010 will be a record year with about 4,000 foreclosure deeds

• 10 times normal level

• Represents about 25% of the properties sold in the MLS system

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NH Economy is Improving, Reversing Recent Pattern

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Few New Units Being Built: A Mixed Blessing

• Fewer than 2,000 units added in 2010—lowest pace in 40 years.

• Helps keep unsold inventory from growing.

• But: Extreme hardship for the building community

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Mortgage Rates Remain Very Low

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Affordability Is Dramatically Better

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Rental Market Conditions—No Dramatic Rent Change, But Vacancies Have Risen

Rent Increases Have Moderated Vacancy Rate Has Increased

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Outlook

• Improving economy should help stem new foreclosures.

• Improved affordability helps marketability, adding liquidity to the market.

• Most economists anticipate higher interest rates, which will keep the housing recovery modest.

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Prediction

•Patriots will win the Superbowl!

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