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Home prices seen as economic indicator

New Hampshire Union Leader

November 12. 2017 9:17PM
The Stabile Companies are building 31 single-family detached condos in Dover. Expensive land costs, higher costs for subcontractors and fears over tariffs boosting lumber prices are weighing on builders' bottom lines, according to company principal John Stabile. (COURTESY)

MANCHESTER — Builder John Stabile should start building 25 luxury single-family homes off River Road in Manchester’s North End within the next month, with prices starting in the $600,000s.

In nearby Litchfield, construction should begin early next year for 41 planned single-family homes starting in the low-$400,000s.

Expensive land costs, higher costs for subcontractors and fears over tariffs boosting lumber prices are weighing on builders’ bottom lines, according to Stabile, the principal of The Stabile Companies.

“It’s awful hard to make the numbers work” for starter homes, Stabile said in an interview last week. “The starter home business hasn’t been good for some time.”

Stabile expects this year to build about 100 housing units — a combination of homes, townhouses and condos — in New Hampshire.

“This is the best it’s been for us in New Hampshire for seven or eight years,” he said. Before the Great Recession, Stabile built more than 100 New Hampshire units a year.

New home construction was discussed at a housing and economy conference at the Radisson last week.

“We’re just not seeing a whole lot of housing construction relative to past experience,” said Dean Christon, executive director of the New Hampshire Housing Finance Authority, which organized the conference.

“The pricing on the new homes that are selling now are substantially higher than the prices on existing homes,” he told 250 people attending the conference.

The number of homes for sale selling at $300,000 or less has fallen by about 50 percent over the past few years while inventory for homes priced above $300,000 has decreased by only 10 percent.

“Clearly, that is indicative of rising prices ... but it also begins to create an affordability issue,” he said. “It begins to create an entry problem for particularly first-time buyers.”

Economist Elliot Eisenberg told the conference that many areas of the country are experiencing a similar problem.

“They’re just not building any of the cheap houses that we desperately need,” he said.

According to the New Hampshire Realtors, the median sales price in October stood at $265,000 for a single-family home statewide, with Rockingham County leading the way at $345,000.

Before the conference, Christon said in reviewing the historical numbers for building permits in the state, “you can see that the level of activity coming out of this recession is a lot lighter than what it was coming out of previous recessions, and I think that’s part of the issue here.”

Asked about zoning, Christon said: “A lot of developers will tell us the regulatory environment is a big constraint on their ability to produce housing, that it adds risk and it add costs to what can be produced, and it actually deters many people from even trying to build housing.”

Stabile said this post-recession acted differently than some others “because of the millenials and other factors; kids moving back in with the parents,” Stabile said.

Today, some people prefer paying $2,500 or $3,000 a month to rent one of his townhouses to avoid committing to a mortgage, he said.

Christon told conference attendees he was concerned about a proposal in the GOP tax plan that would eliminate a housing bond program that helps builders and first-time home buyers. It provides for tax-exempt bonds used to encourage builders as well as tax credits for first-time buyers.

Over the years, the program has helped support about 8,000 housing units and 35,000 first-time buyers, he said.

Dover economist Brian Gottlob said he believes market changes slowed new construction.

“Demographic groups like millenials weren’t and aren’t buying homes at rates of previous generations, and the rate of household formations — young people setting out on there own to form households — slowed significantly during and after the recession,” he said.

Gottlob said there are plenty of Granite State communities where housing is affordable.

“The number one reason why housing prices are higher in some areas is people with money want to live there,” he said. “Housing prices will rise to match the desirability of a community and people’s ability to pay no matter where you live and what regulations exist.”

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