MANCHESTER, NH – Lack of inventory will continue to be at the heart of New Hampshire’s tight residential real estate market, Ben Cushing, president of the New Hampshire Association of Realtors, said Thursday.
“The good news is that buyers still want to buy,” said Cushing, a broker and vice president with Four Seasons Southeby’s, in Hanover.
While the bad news is lack of inventory, there’s still some good news about the bad news.
NHAR members are working to help communities understand that restrictions on things like home size, lot size, density, and more, need to change as the state’s reality surrounding housing has changed.
“That’s where it starts, the grassroots levels of our communities,” he said.
Interest rates are likely to plateau, Cushing said, but the higher rates over the last half of 2022 didn’t have a huge impact on sales. “Buyers still need a place to live.”
The year closed with 14,456 single-family homes sold, a decrease of 17.3 percent from 2021, according to NHAR’s year-end statistics. The median sale price for a single-family home was $440,000, up 11.4 percent from 2021’s median sale price of $395,000 (median means half of the homes sold for more, half for less). Days on the market stayed about the same, with an average of 23, compared to 2021’s 25.
But the most crucial number is that the year ended with 1.3 months’ worth of available inventory. Inventory reflects how many months it would take to sell off what’s available if nothing else came on the market. A market is considered balanced when there’s five to seven months’ supply.
Cushing said there were about 6,000 properties available at the end of 2022, compared to 7,500 at the end of 2019 and 15,000 at the end of 2011. “So, inventory is really the big problem,” he said.
New Hampshire hasn’t had a five to seven-month supply of homes in more than five years, Dave Cummings, NHAR director of communications, told InkLink in November. The last time there was two months’ inventory available was July 2020, according to NHAR statistics.
Nationally, inventory is also low, with a 3.3 months’ supply. Economists predict that the low inventory will keep prices high nationwide.
The New Hampshire condominium inventory, a much smaller market, was at 1.2 at the end of December, but the number of condos available for sale, 438, was 22 percent higher than the end of December last year,
Lowering the temperature
Cushing said a good analogy for what will likely happen was used by NHAR CEO Bob Quinn at the state association meeting recently.
“[Quinn] said, you know, it’s like looking at the temperature. Right now, inventory and things going on in the state is like 110 degrees. Are things going to relax, and might we see some more inventory come on the market and sales relax a little bit? And prices relax a little bit? Yeah, the temperatures going to come down. But if we’re at 110 right now, it might come down to 95. It’s not like it’s going to cool off and go to 50,” Cushing said.
One element that will help is the cost of building materials are slowly coming down after all-time highs over the past three years.
The biggest impact on inventory, though, will come from towns and cities loosening rules and allowing more single-family, and multi-family, home development, he said. House and lot size restrictions, density rules, including those that won’t allow a large older home to be subdivided into a multi-family building, should be updated for the state’s 21st century needs.
Residents often equate residential development with more families with children, and draw a false conclusion that means taxes will go up, Cushing said.
“That’s one thing that a lot of communities think,” he said. “If we get a lot of new homes built in our towns, you know, starter homes, if you will, we’re going to get a lot of families moving in, and when more kids come into our community, our tax rate is going to go through the roof.”
Cushing cited a 2019 study by Richard England, a University of New Hampshire professor emeritus, that found there is no correlation between the percentage change in resident student population and local education tax rate. The study, which was commissioned by the NHAR, also determined that several towns had a lower education tax rate despite recent elementary growth, and other towns had higher tax rates despite a decline in resident student population.
He said when people see more residential construction, they’ll know the housing market is on its way to loosening up.
“We seeing some construction, but we aren’t seeing enough as of yet,” he said.
He said some communities are easing restrictions. “In some of those communities, we might see some new houses popping up, and for me once we build up momentum, I’m going to feel more confident that housing is beginning to make a little bit of a comeback in our state.”
Affordability remains an issue
Some other key statistics from the December NHAR market report, released last week, show that buyers are getting a sliver of a break. Those who can afford to buy a house, that is.
The percentage of asking price that single-family homes sold for decreased slightly from 99.9 percent in November and stayed below 100 percent for the third month in a row. It was 99.7 percent in October, the first month in 2022 it was below 100 percent. The monthly high was in May, when it was 105.2 percent.
That may be a break for buyers, but fewer people than ever can afford to buy a home in the state.
New Hampshire’s affordability index for 2022 was 70, which means that the state’s median income is only 70 percent of what someone would need to buy a single-family home. It not only includes price, but property taxes, insurance and interest rates. The N.H. affordability rate is at a more than 20-year low, and down from 103 at the end of 2021.
Cushing said that home ownership is an important way to build wealth, and while affordability is an issue that he hopes will ease as inventory grows, those who already own a home are benefiting from an increase in values.
“Home ownership is a key thing to all of us, not just here in the Northeast, but in the United States,” he said. “It’s a sense of pride that people can take in home ownership. And there’s no question in the last couple, two, three years, value in people’s homes has gone up considerably. People’s values have skyrocketed.”
He said the “skyrocket path” isn’t likely to continue. “But home ownership is still where it’s at. People’s values will, in my opinion, be a very, very solid investment. They’re going to maintain.”
“It’s been a crazy ride,” over the past three years, he added. Brokers “don’t want to see the peaks and valleys. We just want to see a nice gradual increase in value over time. I think that will always continue for people.”
What’s hot, what’s not
Sale of a waterfront mansion in Rye closed right before the year ended, making it the state’s most expensive home sale ever, according to Mansion Global, which tracks high-end home sales.
The property was bought by Peter LeSaffre, CEO and founder of Fusion Worldwide, a Boston-based electronics company, and his wife, Mary Lou, a retired real estate attorney, in an off-market deal, Mansion Globe reported, citing property records. The couple was represented by Jim Giampa of Carey & Giampa Realtors, which has New Hampshire offices in Rye, Portsmouth, Hampton, as well as in York, Maine. Mansion Global reported that Giampa confirmed the sale, but a non-disclosure agreement prevented him from saying more.
No surprise that sale was in the state’s most expensive county to buy a home, Rockingham County, where the median sales price in 2022 was $575,000. The county did $2 billion in volume in 2022, a huge chunk of the state’s $7.6 billion in volume. Both the county and the state volumes were down a little more than 5 percent from 2021. Hillsborough County, the state’s most populous, was next with $1.8 billion.
The lowest 2022 median sales price in the state was Coos County, the state’s northernmost, at $199,900, up from $185,500 in 2021. The 465 single-home sales in the county generated $111.8 million in volume. Vacation condos, though, were hot in Coos County. The median price of a condo was $577,500, with 23 sold. In 2021, 20 Coos County condos were sold, with a median sales price of $512,000. The state 2022 median for a condo was $345,000.
The only other county in the state where the median sales price for a condo was higher than for a single-family home was Sullivan County, which includes the western shore of Lake Sunapee. The condo MSP in Sullivan County was $337,500 and for single-family homes was $299,500.
Every county had a decrease in closed single-family home sales in 2022, with the state average 17.7 percent. Coos County, which sold three more condos in 2022 than in 2021, was the only one of New Hampshire’s 10 counties to have an increase in total condo sales, which dropped 14.3 percent statewide.
The good news
Cushing said the high prices and lack of inventory aren’t scaring buyers off.
“There are still plenty of buyers who want to buy,” he said. “There are still plenty of buyers that still need a place to live. We saw really brisk sales in 2022, and I personally hope that will continue.”
He said that New Hampshire will always attract buyers. “It’s a great place to live.”
New Hampshire residents looking for a new home tend to stay in the state. “A high percentage of people buying homes in New Hampshire live in New Hampshire,” he said.
He recently had a couple of sale in the Hanover area, “But it was people from New Hampshire relocating in New Hampshire.”
He said one trend over the past couple of years has been out-of-staters with second homes in New Hampshire making them their primary home.
He said people aren’t buying from out of state in the “crazy, crazy numbers” they were during the height of the pandemic, but they’re still coming to the Granite State, as well as Vermont and Maine, to live a more rural life.
“We’re always going to see that,” he said.