Home sale price increases lagging in NH, soaring elsewhere
The sale price for single-family homes nationwide increased 10.2 percent on a year-over-year basis in February, according to the CoreLogic home price index released on April 3.
It's the biggest increase since March 2006 and the 12th consecutive monthly increase in home prices nationally, prompting widespread reports of a major revival in housing.
New Hampshire, however, appears to be missing the party on prices. The CoreLogic data shows appreciation in the Granite State over the same period at an anemic 2.6 percent, with only 11 states showing smaller gains.
Massachusetts fared best among New England states, with selling prices 6.7 percent higher than in February of last year. Vermont is doing fairly well at 4.3 percent, while Connecticut price appreciation has been virtually identical to New Hampshire. Maine and Rhode Island did even worse.
The states that saw the biggest drop in prices during the recession are showing the most impressive gains, with prices up anywhere from 15 to 20 percent over last year in states including Nevada, Arizona and California. Many states where the decline was closer to the national average are seeing appreciation in the 10 percent range, triggering news reports of multiple, full-priced offers and lines at open houses.
As New Hampshire residents see these reports about big price recovery in other parts of the country, they are wondering: Why not here?
Buyers are back, as demonstrated by increasing sales volume. The number of units sold in New Hampshire went up 23 percent in 2012 compared with the number in 2011.
Inventory tightened as foreclosures declined 23 percent in February 2013 compared with 2012.
Time on the market has shrunk from 144 days in January 2012 to 116 days in January 2013, and from 135 days in February 2012 to 124 days in 2013.
The consensus among economists and real estate professionals is that all those trends are likely to improve as the spring buying season gets under way.
Yet those same economists agree price appreciation will be incremental for the foreseeable future. The most optimistic prediction is that sale prices will not return to their pre-recessionary peaks until sometime between 2017 and the end of the decade.
"We finished last year with residential sales up more than 20 percent over 2011 in New Hampshire," said Bill Weidacher, a partner with Keller Williams Real Estate in Bedford and president of the New Hampshire Association of Realtors. "Prices, however, were only up one-tenth of 1 percent. So essentially the conclusion I draw is that while sales were up dramatically, prices were flat."
Good news, bad news
That's good news for buyers, but bad news for sellers, especially sellers who bought their homes during the peak period from 2005 to 2007 or refinanced and cashed-in on equity in those years.
The New Hampshire Board of Realtors triggered a lot of interest among sellers when it reported last month that the median price of the 681 homes sold in February was $199,000, up 12 percent from the $177,350 median price in February 2012. That can hardly be considered an indication of the real annual trend in prices, according to economists such as Brian Gottlob of Polecon Research in Dover.
The NHAR uses median sale prices, taking the midpoint of a relatively small number of monthly sales. Economists rely on more complicated calculations used by the Federal Finance Housing Agency, CoreLogic or the Case Shiller Home Price Indices, which take into account a variety of factors, such as repeat sales of the same properties.
Two of the state's leading economists, Dennis Delay and Ross Gittell, agree that price appreciation in the state is likely to improve slightly to 3 percent to 4 percent a year and stay there for a while.
Delay is chief economist at the New Hampshire Center for Public Policy Studies. Gittell is an economics professor who now serves as chancellor of the state's community college system.
"I don't think we will see New Hampshire home prices return to their pre-recession levels until 2017," Delay said.
Gittell was slightly less optimistic, predicting that 2007 prices won't be back until the end of the decade.
A decline in demand
Prices ultimately come down to a question of supply and demand. New Hampshire saw roaring growth in demand during the years of economic expansion in the mid-1980s and the mid-2000s.
The trends that drove that demand are fading - a point Gittell, Delay and others have been making for the past year as they discuss their widely publicized research on the New Hampshire economy - "From Tailwinds to Headwinds."
Job growth has been slow as the state struggles to restore the 25,000 jobs lost in the recession.
New Hampshire housing is still expensive, relative to the median income in the state, unlike other states where the equation is more balanced. And the state has one of the highest percentages of home ownership in the nation. According to the 2010 census, New Hampshire's home ownership rate of 74.9 percent was second only to West Virginia at 79.
When so much of the state's population already owns a home, and fewer people are moving in because of lackluster job growth, demand is going to be affected, Gottlob said.
Then there is the financial burden faced by many young people coming out of college.
"Young people are far less able or willing to strike out on their own because of higher debt levels and fewer career-type jobs," Gottlob said. "It's more difficult, particularly for first-time buyers."
More normal market
It all adds up to a more normal housing market, in which prices are not dropping through the floor or building to a bubble destined to burst.
"What I'm hearing on those reports of the real heated market around the rest of the country is that we're heading in that direction, just not as dramatically," said Dave Cummings, director of communications for the New Hampshire Association of Realtors. "And to our agents, that's good news. Most of the people I work with remember the spikes of the 2000s and what that hot, hot market led to - the recession in the market - so I think that this sort of more tempered optimism is a healthy thing."