After a tough year in the real estate market, professionals along the New Hampshire Seacoast region say several factors have begun to stabilize and they are optimistic about 2007.
According to the Portsmouth Herald, October represented the low of a year characterized nationally and locally as a “roller-coaster ride” in which home sales contracted and rebounded.
But a resurgence in the final two months, thanks in part to favorable mortgage rates and a steady jobs market, suggests the correction may have passed somewhat unceremoniously.
“Values have fallen, in some cases, to what would have to be described as bargain levels. Interest rates, too, are very, very attractive - at near record lows,” said John Rice, chairman of the Seacoast Board of Realtors.
“While values should continue to slightly decline through 2007 as inventory is absorbed, it is likely that we are near the bottom of this correction.”
Sales of existing homes in the the New England region increased 6 percent to a level of 1.06 million in November, but were 4.5 percent below where they were back in November 2005, according to the National Association of Realtors. The median existing home price in the Northeast was $269,000, down 2.2 percent.
In December, 162 single-family homes went under contract in Rockingham and Strafford counties, an encouraging sign, said Sharon Aldrich of Keller Williams Realty. She said housing affordability is at the core, as rapid appreciation pushed many buyers and scared others out of the market.
“There was quite a large group that were discouraged. People who were not able to buy in the past will be able to in 2007,” she said.
Sales of single-family existing homes in the Maine housing market were down by more than 12 percent from November 2005, with median prices down nearly 4 percent, the Maine Association of Realtors reports. Still, the number of units sold in York County in October-November 2006 showed signs of improvement.
“You can’t keep going up forever,” said Mike Kleist, manager of Century 21 Atlantic Realty in York. “It certainly has slowed down a bit, but it’s hard to tell because it’s typically slow now. Once spring comes, we should know better. I don’t think we’ll have a record year, but consistent.”
Kleist said those who complain about the market now should’ve been around in 1982 or 1990. Those were really slow years, he said.
While the Seacoast is certainly affected by national trends, the quality of life and diversity of the New Hampshire housing market always attract buyers.
The price range of 76 single-family homes for sale in Portsmouth starts at $139,000 and tops out at $9.5 million, while the 84 condominium units range from $125,900 to $1.5 million.
Kleist said the market will flourish again once a compromise is reached between buyers and sellers on the state of the real estate market.
“Sellers need to remember that despite a value decline on paper, in most cases, they will still realize a tidy gain, especially if property has been maintained and updated through the years. Property priced to the market does sell in a timely manner,” he said.
Whether you’re looking for a New Hampshire mortgage or get approved for a Maine mortgage, conditions are ripe for securing a great deal. Take advantage of a buyer’s market and make 2007 the year you achieve your home ownership dreams.
At least 10 homes in New Hampshire are up for sale for $5 million and above, reports The Boston Globe, though prices are dropping on some of the so-called “starter castles.”
For example, a home in Rye that went on the market for $8.7 million in July now is listed at $7.8 million. The price on another in Portsmouth has dropped from $12 million to $9.5 million. The goal is to entice New Hampshire mortgage applicants.
Other sellers are more patient.
“We’re staying where we are,” said Tom Falcon, who represents the owners of Farm Island in Tuftonboro, which offers 23 acres of wooded island, sandy covers, 3,800 feet of shorefront and a house at a high point on the land.
The property has been on the market since November 2005 and is listed at $5.9 million.
Susan Bradley Realty of Laconia has two of the 10 listings on the top 10.
“The high end of the market has been very strong,” Bradley said.
Russ Thibeault, a New Hampshire housing market analyst and president of Applied Economics Research in Laconia, said lakefront or ocean properties still are a strong segment of the real estate market despite a dip in sales in the mid-$300,000 range.
The “chopped up” aspect of Lake Winnipesaukee means smaller lots, which has kept prices from rising about $12 million as they have in other states, he said. Meanwhile, the price of an average single-family home is dropping as the number of sales continues its downward trend and mortgage loan applicants gain leverage.
Home sales are down about 11 percent from a year ago, according to the Northern New England Real Estate Network.
The average selling price has decreased 3 percent in the last month to $291,700, and has dropped 7 percent from what it was a year ago. Homes also are taking longer to sell, standing at an average of 111 days compared to 85 days a year ago.
“It’s a market that’s correcting itself,” said Kathy Corey Fox, president of the New Hampshire Association of Realtors. “We were spoiled in 2004 and 2005 with double digit increases, but that’s abnormal.”
Asked how business was, a New Hampshire real estate broker confided to a friend a few weeks ago that he was just as busy as he was a year ago. The difference is that all activity is not translating into sales like before.
The slowdown in the real estate market is a reality, here and across the nation. The latest analysis shows that the downturn in New Hampshire mortgage activity has accelerated in recent months.
Even as new affordable housing units are being constructed, home sales excluding condominiums fell 19 percent in New Hampshire during the first 10 months of this year, compared with 2005.
Statewide, the median price fell 1 percent in this year’s first 10 months to $309,000, and sales volume fell by $800 million. Condo prices fell 3 percent to $201,000 and sales dropped 18 percent.
We have been riding the crest of a real estate boom. Sellers have in recent years been demanding top dollar for their homes and more often than not prospective buyers were eagerly lined up to pay the asking price.
But no more.
The numbers tell the tale.
Data provided by Foster’s Online shows taht there was not one month this year that matched the months of the previous year — not one. They weren’t too bad in first half of the year, but in August 2006 revenues went south as real estate sales plummeted.
January through December saw total revenues from financing, refinancing, home mortgages, liens, attachments, etc. drop by more than $210,000 — more than 13 percent less than revenue generated a year earlier.
At least one other troubling number is tracking the slide in sales. There were 36 foreclosures on property in 2005 in the months of January through November. This year the number of foreclosures for the same period reached 103 — a rise of 186 percent.
Some people have been referring to the real estate bubble, but that metaphor should not be taken too far. The real estate market is not like a soap bubble that suddenly bursts, or like a speculative boom in a commodity that can suddenly collapse.
Real estate typically, at first, plateaus as prices stop rising. Owners refuse to sell at lower prices, and so properties remain for sale for longer. Construction gradually slows as previous projects get completed but there are fewer housing starts.
That’s the situation in which we find ourselves.
The New England housing market saw prices rise by 73 percent from 1995-2004 compared with 44 percent growth nationwide. Experts say that in New Hampshire, from 2005-2010, the median home price will rise at an annual average of 1.2 percent, the fourth-fastest appreciation rate among the six New England states.
This is not an issue only of concern to agents, mortgage brokers, bankers, and home sellers and buyers. It has real ramifications in the town and city halls and school district headquarters everywhere.
Local fiscal policy in recent years has quite clearly been predicated on the continuing heady increase in the value of taxable property through sales of existing buildings and new construction which generated the kinds of revenue that helped to cushion the impact of increased spending.
But with the market having lost its effervescence, municipal managers and school officials need to reorder their priorities and strategies if they really expect to keep property taxes in check. Taxpayers are becoming increasingly anxious that officials will not adjust their way of doing business to suit the changing conditions.
Homeowners across New England seemed to have it all in the first half of this decade: rapid jumps in price made homes stellar investments, and if they decided to sell, buyers eagerly paid top dollar.
But 2006 is shaping up to be the year the region turned into a buyer’s market, with a housing slump hitting New England harder than most of the rest of the country, and predicted to stay that way through decade’s end.
The downturn cuts across the housing spectrum, from Maine to Connecticut. Economists predict New England’s historically volatile market will recover more slowly than the nation’s even if home mortgage costs remain low.
The downturn has sellers going to unusual lengths to unload properties.
The Boston Globe reports that in suburban Somerville, just outside of Boston, an area condo developer trying to sell the last of 18 units slashed prices — to $599,000, nearly 17 percent below what a comparable unit sold for three years in the same project.
“In any other market, this would be gone,” said real estate agent John Schwagerl, who has two potential buyers holding off on placing offers until they can unload their current homes. “The phones are ringing less. But when they do ring, there’s more work involved with it.”
In downtown Boston, the developer of a 14-story condo project held a real estate auction — a sales tool rarely used since the housing downturn of the early 1990s.
Bidders at the Folio Boston project’s October auction snapped up 31 luxury units in less than two hours at an average price of $778,000 — about 20 percent below the average asking price before the auction. The head of the firm that ran the event expects the market slump will lead to more such sales in Boston and elsewhere.
New England saw home prices rise by 73 percent from 1995-2004 compared with 44 percent growth nationwide. Gains in some areas were sharper, with prices nearly doubling in Boston.
Now New England is seeing a return to what it experienced at the end of the last century: prices growing faster than the nation’s through most of the ’80s, only to take a dive when boom turned bust in the 1990s. The region is prone to bigger swings than areas such as the Midwest, making both the ups and downs of real estate far more pronounced.
“The downturn here is more severe because the upside was so big,” said Karl Case, an economics professor at Wellesley College.
New England and the Northeast in general are more prone to wide housing market swings because development is more dense, with less available land to build. There are more restrictions on development, so it takes longer for developers in built-up areas to put up new houses.
The New England Economic Partnership projects the region’s home prices will remain flat through 2010 — in part because of price declines across parts of the region this year — and fall short of the U.S. forecast of 2.1 percent growth per year through the decade’s end.
Among New England’s six states, only Connecticut and Vermont are expected to see housing prices rise at rates above national averages through 2010. Massachusetts mortgage demand is projected to drop by 1.8 percent as the Bay State — the region’s most populous — is hit the hardest.
Meanwhile, permits to build new homes are expected to decline in all New England states through 2010 by 6.2 percent. That compares with a slip of just 0.3 percent per year expected for the nation, which is experiencing faster population growth than New England.
Every state in the region except New Hampshire ranked among the nation’s bottom 10 in housing starts from 2000-2004, the Federal Reserve Bank of Boston reported.
Yet as those interested in buying and selling continue to jockey for position across the New England region, industry officials are reminding area customers that most homes will likely yield some healthy investment returns — provided the owner holds onto the property for a few years.
“People who buy now will come out just fine. People who have a little guts and act now can expect prices will eventually get better,” said Fred Meyer, of University Real Estate in Cambridge.
A new apartment building (pictured below) in downtown Exeter, N.H., offers a small solution to the need of affordable housing in the Granite State’s popular Seacoast region, but real estate trends may encourage first-time buyers to start looking for their first home.
Construction began recently on the 30-unit building, the Portsmouth Herald reports, but it will take roughly a year before the units - half of which will be held at “affordable” levels while the other half go for market rates - are available.
While the project is being developed, the current Southern New Hampshire housing market may give those on the lower income bracket a chance to look at buying their first home.
“We are in a snail’s pace market,” Realtor Florence Ruffner joked. “Prices have leveled; people can get in now that maybe couldn’t get in six months ago. I think it’s a good time for someone to jump into the market.”
With New Hampshire mortgage rates around 6.625 percent and the inflated market becoming more normal, Ruffner said now is a great time to buy a home.
“I think it’s gone back to a more normal market,” said Ruffner, the owner of Ruffner Real Estate in Exeter and a 25-year industry veteran. “It can now take 6-9 months to sell a property, before it was just wild. That was just a very different kind of market. It’s more like what it used to be before the wave. We rode the wave and now it’s calm.”
While the market is calm compared to last year, there is still plenty of business.
“People are taking longer in making decisions … they have the luxury of taking their time. Still, people are not giving houses away, and they shouldn’t. People are entitled to fair market value of their home,” she said.
As for the affordable housing in downtown Exeter, Ruffner understands not everyone can afford his or her first home right away. While it may provide housing for about 15 workers, the state, lending institutions or someone needs to come up with programs for first-time buyers, she said.
Norrisbrook, a condominium complex in Exeter, has units selling for about $150,000, complete with two bedrooms, two baths, living room and dining room. These prices have come down substantially from a year ago.
“There are things in town that the first-time buyer can get in to start out,” she said.
Mark Danie, a loan officer with CCO Mortgage, thinks the New Hampshire market is switching from a seller’s market to a buyer’s market.
“It’s a supply-and-demand situation. Those out there looking for the $250,000 range have many to select from. They are able to compare and contrast properties. They can be more picky than they were before.”
While some may consider mortgage rates high compared to a year or two ago when they were at 5.5 percent, the rates today are good compared to how they’ve been over the past 40 years.
In 1986, Danie was locked into a 10.5 percent rate when he bought his house. Today, he could have bought the house with a 6.5 percent rate.
There’s also the matter of property tax, which is relatively expensive in New Hampshire, Danie said, and always plays a part in how much the first-time home buyer can afford.
Buying a $200,000 home in Exeter, which is considerably low, with a 95 percent home loan at 6.625 percent, would cost roughly $1,216 a month. But taxes could be as expensive as $5,000 a year.
The New Hampshire Banking Department has adopted new federal guidelines to guard against negative amortization loans, also called “exotic” or “non-traditional” mortgages.
The Manchester Union-Leader reports that the department announced its intent to implement the guidelines Monday to ensure that buyers are only given home loans that are appropriate and that they had the risks fully disclosed.
Banking Commissioner Peter Hildreth said the guidelines aren’t specific because each type of mortgage loan is unique, as is each borrower who comes looking for one.
For the institutions regulated by the state, the state banking commission goes in every 18 months and examines the types of loans made. And the commission investigates consumer complaints as they are filed.
“These guidelines already apply to all banks and this extends them to mortgage companies,” Hildreth said.
These non-traditional mortgage loans often involve an introductory period in which none of the payment goes to the principal and only part of the interest, leaving the remainder of the interest to be added onto the principal, he said. After the period is over, the payment can skyrocket.
“This is not saying you can’t make those loans, just that you need to make sure you disclose in clear terms explaining things like the rate shock that often comes at the end of the introductory period,” Hildreth said.
He said there is no way to measure how much of a problem the loans are in the New Hampshire housing market, which is growing faster than other parts of New England.
Every bank and lender will be bound by the guidelines, but some subsidiaries of large national banks say they are not regulated by states, but by federal rules.
Hildreth said the U.S. Supreme Court will decide whether it is the state or the federal government that regulates mortgage company subsidiaries of national banks in a case to be heard next month.
The New Hampshire Housing Finance Authority in Bedford, N.H., worries that too many companies have been approving inappropriately large mortgages to buyers, while reducing monthly payments and up-front mortgage rates to make them seem affordable.
The structure of a traditional loan is designed to ensure that a buyer can pay accumulating interest as well as a part of the principal loan each month, said Robert Fleury of the New Hampshire banking department.
Mortgage companies have been approving large loans to buyers who sometimes cannot afford them, and reducing monthly payments that do not entirely cover the cost of accumulating interest. The unpaid interest is added to the principal and interest builds on this reassessed principal, compounding the long-term debt.
NHHFA developed pre- and post-purchase counseling services earlier this year for buyers who are struggling with “non-traditional” mortgages.
The slowing Maine housing market is creating a dilemma for people who want to buy houses at low prices but are having trouble selling their own homes.
Looking to downsize, Cindy Benjamin of Maine bought a three-bedroom Cape last spring for $255,000, or $14,000 less than the asking price. Seven months later, she still can’t sell her four-bedroom colonial, despite lowering the asking price significantly from $425,000 to $378,900.
Area real estate agents say the situation isn’t uncommon.
While this is a good time to buy a house, it’s also a challenging time to sell one.
“I bought at the right time, but I’m trying to sell at the wrong time,” Benjamin told the Concord Monitor.
Sales and prices have been falling in New England and nationwide. Housing prices fell in September by nearly 10 percent across the U.S. compared to the previous year, the biggest decline in 35 years. Massachusetts home loan demand has fallen the most drastically, having boomed so much in the 2000-2005 time period.
- The median price drop in Maine over the past 12 months was just over 1 percent, but the number of houses sold in the state in September plunged nearly 19 percent.
- Many homeowners are finding out the hard way that in order to buy a new house, they need to sell their old homes first — and that’s a catch-22 when buyers won’t bite.
With many analysts predicting no end in sight to the market slump, some people need a reality check, says Cathy Manchester at Keller Williams Realty in Gray, Me.
Start with price, by reviewing the current inventory of homes on the market, how many are in your price range and how long they’re taking to sell, on average.
“You have to know what you’re up against for competition,” Manchester said.
Unless they can handle two home mortgage loans for a while, people need to unload their current home before they can afford to put a new house under contract.
When the real estate market was hot, sellers might agree to a contingency sale in the contract, making the purchase contingent on the buyer selling their house in a set amount of time. But with sales slow and plenty of inventory, that practice has fallen out of favor.
“Sellers now realize that’s a waste of time,” said Leonard Scott, owner of Assist-2-Sell in Falmouth, Me.
In today’s market, he said, a good strategy for people who can handle the hassle is to sell their home and find short-term rental housing. That will give them time to locate the right real estate at the best value, and there should be plenty of options to choose from this winter.
The Manchester-Nashua (N.H.) metropolitan area is the eighth best to invest in a home purchase nationally, and will experience 35 percent appreciation over the next five years, according to Business 2.0 magazine.
New Hampshire’s financial appeal is readily apparent: It has no income or sales tax, and it’s within commuting distance of Boston, one of the most expensive markets in the country, the Manchester Union-Leader reports.
“Unlike the destruction wrought by the tech crash of several years ago, the current housing market downturn won’t take a huge bite out of the value of U.S. residential real estate assets, which is estimated at more than $20 trillion,” Business 2.0 magazine said in a press release.
Unlike many housing markets around the country that are over-inflated and looking at price drops, economists are bullish on the southern New Hampshire market.
Manchester, a former textile mill town, is the largest city in northern New England, and neighboring Nashua, which twice has won honors as Money magazine’s “best place to live” in America, shares a border with Massachusetts, which has been losing population since 2004.
It has been widely speculated that the Massachusetts home loan market may see steady declines this year and next as people know they can move out of Boston, get more house for their dollar, and have a great quality of life.
Many believe now is a good time to buy, because appreciation rates started dropping in New England several quarters earlier than in the rest of the country.
As home mortgage rates hold steady, prices are expected to burst upward again by mid-2007, according to the report. Median prices in the Manchester-Nashua corridor will rise from $226,000 in 2006 to $305,000 in 2011, the magazine forecasts.
The magazine also sounded a note of caution regarding the strength of the southern New Hampshire market.
“It remains to be seen whether Southern New Hampshire can buck a much larger demographic trend: people leaving New England in droves to seek milder, sunnier climates,” the report said.
