New Hampshire is now the nation’s fifth-oldest state with a new record high median age of almost 40 years — more than three years above the national median.  Some perspective:  Back in 1990, our state was among the younger states.  It was the 31st oldest state, with a median age of 32.7 years — below the 32.8 years U.S. median.  But we are not the only ones aging fast.  The six New England states are now all among the 10 oldest states in the nation by this measure.

                       Rank 2007        State                   2007 Median age   

                              1                Maine                         41.6           

                              2                Vermont                     40.8

                              3                West Virginia              40.4

                              4                Florida                        39.9

                              5                New Hampshire        39.8

                                                United States             36.6

Before we get to what this rapid aging means for New Hampshire REALTORS®, here are some more details from these new estimates.
 
 
More households in New Hampshire are likely to decide later this spring or summer that now is the time to buy.
 
Our state leads the region in age 65-plus growth.  New Hampshire’s elderly population grew by 17,800 persons from 2000 to 2007, a 12 percent rate of increase. This compares to an age 65-plus growth of just 13,800 in all the other New England states combined (a 0.8 percent rise).  Nationwide, those age 65-plus have increased a bit over 8 percent since 2000.
  
   
There was also a 50,000 person increase in New Hampshire’s 55 to 64 population (up 46 percent) and a 36,000 person rise in the age 45 to 54 (up 20 percent).   But at the same time, the number of children under age 18 dropped by 11,000 (a 4 percent decline) to 298,000 — their lowest level since 1997.  And a big part of the state’s younger working age 25 to 44 population (and those kids’ parents) also shrank.  It declined 7.5 percent, a loss of over 28,000 potential workers since 2000.  (Please see chart below.)

Chart I:  NH age shifts 2000-2007 versus other New England states

Source:  Census Bureau estimates 

New Hampshire’s total population reached 1,315,800 in 2007, a 6.5 percent increase since the last census in 2000.  But the state’s annual growth rate slipped to just 0.3 percent from mid-2006 to mid-2007, somewhat above the 0.2 percent resident growth for the other New England states, but far below the 1.0 percent national growth rate.

What does all this mean for REALTORS® in light of today’s market conditions?  The answer lies partly in the most recent residential listing and home sales data from NNEREN, which shows about 15,800 homes listed for sale statewide, only slightly above the 15,600 listed last year at this time.  But during April, a total of about 1,100 homes sold compared to 1,470 in April of last year — a 25 percent drop.  Year to date, some 2,572 residential units were sold, 24 percent below the same period last year.

The huge inventory buildup that’s been occurring in other parts of the nation appears not to be happening here, but what we lack are enough home buyers.  And the shifting age structure described above, and in Chart I, is a big part of that lack.

There are not enough home buyers today in part because a very high percentage of the larger and fast growing older populations in New Hampshire are already homeowners.   And in today’s market uncertainty, selling one home to buy another can seem a daunting task.  Among the top growth ages, 55 to 64, for example, 85 percent of households are homeowners, as are 81 percent of the largest group: 45- to 54-year-olds.

But within the smaller, but so far not growing, age group 25 to 34, only about half are homeowners.  And a little over two-thirds of 35- to 44-year-olds are homeowners.  I estimate that there may be as many as 60,000 potential new homeowners among these two younger age groups, spanning 25 to 44 years old, compared to just 37,000 in the larger and older two groups, covering 45 to 64 years old. 

Finding starter homes for 25- to 44-year-old families could give a big boost to home sales in New Hampshire.  That would appear at first to be an easier than usual task, because these first-time buyers don’t have to find a buyer for their present home.  But in reality, it will probably be more difficult partly because mortgage lenders are not as able or as eager to lend as they have been in recent years.

Considering the double-digit declines in home sales during the first four months of this year over last year, combined with the high inventory of unsold homes, it is quite surprising how little the median sale price of residential units has declined — an average of only 8 percent statewide.  In some of the state’s more rural counties, however, the double-digit price declines have cut deeply into homeowner equity.

Nevertheless, in every county except Rockingham, half the residential units sold in the past four months cost the new owner $250,000 or less, which is a reasonably affordable home for a family or individual with an annual income of around $65,000, which is pretty close to the statewide median household income.

The nearly 800 condominiums sold statewide during the first four months of this year was 39 percent fewer than the 1,300 sold in same period last year, but the median sales price of $182,000 was just 3 percent lower than last year.

January -April 2008 NH Residential Sales (non-condominium)

 
Source:  Northern New England Real Estate Network (NNEREN).  Statistics are based on information from NNEREN for the respective periods shown for the respective regions in the State of New Hampshire or all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of the New Hampshire Association of REALTORS® and not that of NNEREN.

Reprinted with the permission of Peter Francese and the NHAR.

The first quarter 2008 home sales data for New Hampshire look about as bad as it gets. (Please see county-by-county home sales table below.)  Fortunately, that awful three-month period is behind, us and there are reasons to think that the psychology of home buyers in our state may improve in the coming months.
          
In the future, Realtors will look back on this period with awe that our housing market could have deteriorated so fast and so far.  It did so in large part because of the disintegration of the highly leveraged and derivative addicted financial sector.  That unprecedented and for the most part unforeseen collapse meant that any potential home buyer had good reasons to hold off until the situation at least stabilized. 
    
Well, now the financial news is full of stories about emerging inflation, tight credit and a soft job market.  The average consumer has little reason to be optimistic about their near-term prospects.  But not all consumer households or all states are average.  Places and people with an above-average and growing incomes are more likely to see beyond the current bad news and be more optimistic about the future.

New Hampshire is one of those places.  Chart I below shows how our state differs from the nation in terms of household income for three important age and income categories.  In terms of the all household median income, New Hampshire, at nearly $60,000, is 123 percent of the United States median of $48,500, according to the latest (2006) Census Bureau American Community Survey.

But for households in the age category 25 to 44, where many families are in the market for a home, our state has significantly more high income households than the U.S. average and proportionally fewer low-income households.  The chart also shows that households with an annual income over $75,000 well exceed the U.S. average in every age category.

For New Hampshire, this means that we have an above-average number of households who probably would have an easier time getting a mortgage.  For example, there are over 40,000 households ages 25 to 44 and about 60,000 households ages 45 to 64 in New Hampshire with an income over $100,000 a year.

One of the things that might encourage a potential home buyer later this year is that the ratio of median home value to median household income has returned to close to or below 4 for every county for which we have data. This suggests that home values are returning to the more normative condition where families could buy a home for about four times their annual income.

Mortgage lenders, who understandably have been a trifle skittish lately, are more comfortable when the home price to household annual income is 4 or below.  The combination of a well-above-average number of higher income households and more affordable home prices here suggest that, in the absence of any additional Wall Street financial debacles, more households in New Hampshire are likely to decide later this spring or summer that now is the time to buy.

First Quarter 2008 NH residential (non-condominium) sales

 Source:  Northern New England Real Estate Network (NNEREN).  Statistics are based on information from NNEREN for the respective periods shown for the respective regions in the State of New Hampshire or all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of the New Hampshire Association of REALTORS® and not that of NNEREN.Note:  Chart I data and county median income data, where available, is from Census Bureau.
  
  
 The Real Estate Market Trends newsletter is provided for the benefit of the members of the New Hampshire Association of REALTORS®, Inc.  ©Copyright 2007 New Hampshire Association of REALTORS®, Inc. All Rights Reserved.Reprinted with permission of the NHAR and Peter Francese.
 

There’s no lipstick big enough to put on this ugly bear market.  During the past two months we’ve had the most miserable weather, darkest economic news and an awful real estate market.  The stock market swoon, massive credit market problems, and falling consumer confidence have produced a truly extraordinary decline in real estate transactions throughout our state as well as the nation.
 
 
        
Sales volume during the first two months of this year for all New Hampshire properties was down 30 percent, residential was off 28 percent and condominium sales volume was 34 percent below the same period last year. It doesn’t get much worse than that.  Median residential home prices dropped just 7.5 percent despite a 24 percent drop in units sold while condominium median selling price edged down only 2.4 percent, even though units sold were off 24 percent. 
 
   
There is no doubt that New Hampshire Realtors®, right along with many of the home owners they serve, are feeling a great deal of financial pain because of this unforeseen convergence of bad news and events.  During January and February, the dollar volume of real estate transactions in our state was $187.5 million below the same period last year.  That’s a drop of over $3 million a day.

At the same time, the nation’s largest financial institutions have been experiencing home mortgage related securities losses in excess of $150 billion, according to the Wall Street Journal.  And they will soon be writing off billions more in bad home equity loans.  Clearly, something had to be done at the national level, and that’s exactly what’s happening.

First, the Federal Reserve Bank is dropping their discount rate like a rock, buying billions of dollars worth of mortgage-backed securities, and saving Wall Street firms such as Bear Stearns from default.  Second, the Federal Housing Administration (FHA) that guarantees home loans is greatly expanding its role and is signing up ailing mortgage lenders who would have been unable to make any new loans without such guarantees.    

This will enable a great many homeowners to refinance their adjustable rate mortgages and avoid foreclosure, something that was unavailable to them just a couple of months ago.  It’s also noteworthy that Freddie Mac and Fannie Mae, which had become more risk-averse, are now preparing to buy a lot more home mortgages.

Third, and I think most important, is we are just now beginning to see articles in investment publications suggesting that this is the time to consider buying a home.

The best example of this is Jonathan Clements March 12 column in The Wall Street Journal: www.wsj.com.  I urge every Realtor® to get a copy.

Mr. Clements column, “Getting Going,” is widely read and highly respected.  In that March 12 column, he talks about three reasons to buy a house this spring: to trade up, to buy a second home, or to buy one for your adult children.  Each of those reasons has relevance here in New Hampshire, where there are so many second homes, and a huge number of older couples with adult children who may have been unable to afford a home here. 

There has been an incredible amount of bad news of late, and there is no doubt that consumers are feeling at least as poorly and risk-averse as the mortgage lenders.  But the Federal Reserve Bank, FHA and other federal agencies are pulling out all the stops to improve financial market conditions as well as consumer confidence and increase the ability of average Americans to buy a home.

When those efforts start to pay off, things will likely improve in the New Hampshire real estate market and elsewhere.  But we now have a new element to think about.  Given the amazing rapidity with which news and information travels on the web, I think the turnaround will happen a lot faster this time than in the pre-internet era of the late 1980s. 

While it’s not a good idea to drive a car just by looking in the rearview mirror, an occasional glance backwards at least tells you where you have been.  Looking back at the past two months in the chart below is, for the most part, just a sad reminder of how bad things have been.  But given the relatively greater strength of the New Hampshire economy and the New Hampshire Advantage, we have a better-than-even chance of seeing more positive numbers in future months.

January and February 2008 Residential Sales-(non-condominium)

Source:  Northern New England Real Estate Network (NNEREN).  Statistics are based on information from NNEREN for the respective periods shown for the respective regions in the State of New Hampshire or all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of the New Hampshire Association of REALTORS® and not that of NNEREN.

The Real Estate Market Trends newsletter is provided for the benefit of the members of the New Hampshire Association of REALTORS®, Inc.  ©Copyright 2007 New Hampshire Association of REALTORS®, Inc. All Rights Reserved.
Reprinted with permission of the NHAR and Peter Francese

That’s the big question. Even the Chairman of the Federal Reserve Bank, who has access to databases we can only dream about, says he doesn’t know.  Perhaps it’s vain of us mere mortals to even ask the question.  But we’re going to, anyway.
 
 
As to when we will see the bottom of the market, we are probably awfully close to it right now. 
 

 
There are several factors that will determine when housing demand will start to rise such that prices will firm and sales will happen more quickly.  High on the list of them is consumer psychology.  Right now consumers in general are not very optimistic about the future.  But if the buying public thinks that 2009 will be a better year than this one, then demand for dwellings will likely rise.
  
   
The fact that this is a presidential election year, the major theme of which is “change,” suggests that there’s a better-than-even chance during this year that consumers will become more optimistic about the future.  But regardless of the public’s mood, interest rates and the availability of credit will either get in the way of home sales or facilitate them.  So far, interest rates are low enough to encourage more home sales, but lenders have become, for the most part, way too risk-averse.

This is probably because mortgage lenders can’t pawn off those loans quite so easily anymore.  What is likely to open up the credit markets and make mortgages easier to obtain is a positive move by Fannie Mae and Freddie Mac to increase liquidity, calm the mortgage-backed securities markets and get that system working again.  Given the incredibly huge amounts of money involved, something like that is likely to happen soon.

Here in New Hampshire, the housing market has always looked better than in other states because we avoided nearly all of the mortgage fraud, speculation and other excesses that created so many problems in the hyper-growth areas of the South and Southwest.  But we have our own “issues” to contend with.  And the most serious of them is the lack of growth.  Chart I (below) shows how the flow of people to our state from other states has markedly slowed over the past seven years and is now negative.

Population growth is one of our key drivers of housing demand.  Fortunately for us, it’s not the only driver, but lack of growth will have an impact if it doesn’t turn around soon.  One reason for this slowing growth is the lack of affordable rental units for young adults.

Communities don’t want them, in large part because of the irrational fear that they will increase school enrollment and thus drive up property taxes.  For a bigger discussion of this issue, please look for our book, Communities & Consequences, in your nearest library or bookstore, watch for the film of the same name on New Hampshire Public Television, or visit the project website, http://www.communitiesandconsequences.org/.

Chart II shows the average sales price for residential homes and condominiums for the past year and is about a flat a curve as anyone should expect to see, given current market conditions.  But Chart III shows that it is taking significantly longer to sell a home in New Hampshire – an average of almost five months.

So the bottom line as to when we’ll see the bottom of this market is that we are probably awfully close to it right now, at least in terms of price.  But coming off of that bottom and seeing a more robust market for home sales may take some months.  The consumer needs to get in a better mood, towns in our state need to feel more positive about workforce housing, and mortgage lenders have to feel better about making new home loans.

Sure there are risks that none of those things will happen.  But our state is in the best economic position of any state in this region to benefit from improving conditions.  In any event, we will enjoy a better future when we are willing to be more welcoming toward young people by providing them with affordable places to live.

Source:  U.S. Census Bureau

Source:  Northern New England Real Estate Network

Source:  Northern New England Real Estate Network

Source:  Northern New England Real Estate Network (NNEREN).  Statistics are based on information from NNEREN for the respective periods shown for the respective regions in the State of New Hampshire or all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of the New Hampshire Association of REALTORS® and not that of NNEREN.

 Reprinted with permission from the NHAR and Peter Francese

The national headlines could hardly be scarier: “Credit crunch!” “Widespread foreclosures!” “Plunging home values!”  It’s enough to make even the most cool-headed REALTOR® a trifle anxious.  And then the word “recession” is thrown around just to frighten us some more.
  
 
The next time you hear those phrases, please keep this in mind:  It’s always the most frightening leads that get the biggest TV and print audiences – something national media firms need to survive in their hyper-competitive industry.We know that New Hampshire real estate and economic conditions are much better than other parts of the nation, but that reassuring story has trouble competing with those that forecast imminent doom.  To be fair, we certainly have economic issues to be concerned about, but succumbing to fear won’t help us solve them. 

  
In sharp contrast to the above, on Dec. 10 the New Hampshire Housing Finance Authority quietly published an excellent report on the extent of subprime mortgages and foreclosures in New Hampshire.  No hype, just the facts.  I recommend it to every reader of this column.  It’s titled: “Mortgage Delinquency, Foreclosures, and Subprime Lending in New Hampshire. How Big is the Problem?” 

The report’s conclusion is simply this: “For those individual households the [foreclosure] process is traumatic and the economic loss is real, but their numbers are not so large as to pose a direct threat to the overall New Hampshire economy.  At present more than 95 percent of New Hampshire mortgagees are current in their payments and almost 30 percent of owner occupied housing has no mortgage at all.”

The Housing Finance Authority report, however makes the disturbing forecast that, “adding more properties to the inventory on the market will continue the downward pressure on prices.”  It reports that from the peak in 2006, median home prices declined only 2.5 percent by mid-2007.  But then they show a chart indicating that median prices may drop as much as another 5 percent before this correction has run its course.

The only problem with that chart is that REALTORS® don’t sell medians, they sell homes, often unique homes at a wide variety of price points.  New Hampshire’s economy and demography have changed radically from the time of the last housing downturn in the early 1990s.  That has meant a greater variety in the types of home buyers, many of whom have no need of a subprime or any other type of mortgage.

Each month, this column provides a small table showing the latest NNEREN data on average home prices and number of sales by county.  Beginning this month, we will also show median prices.  Medians are preferred because occasionally averages can be distorted by a few extremely high prices while medians are less subject to that.

Whatever statistics are shown, however, there is no doubt that the real estate market in New Hampshire over the next few years will be more complex and less predictable that at any time in the past.  This will create the need for tracking very detailed information about every segment of home buyers — salaried workers, self-employed workers, retirees, about-to-be retired Baby Boomers, second-home owners, and/or real estate investors.

Each market segment has different housing needs or wants, may have different financial resources, and are likely to expect a different level of service from their respective REALTORS®.  The slowdown in the pace of home sales creates the mandate to get a deeper understanding of this complex and changing residential real estate market.

The best antidote to the fear mongering we see around us is real and more detailed  market knowledge — we need a lot more of that.

Speaking of market knowledge, NNEREN now provides median price of sold homes as well as the average.  Both are shown below for the first 11 months of 2007.  It shows that the number of homes sales, not including condominiums, are an average of 10 percent below 2006 for the state and have declined in every county.  Rockingham County has done the best:  Home sales there are only 1 percent below last year.

Both the median and average sale price of homes have edged down statewide, but not in all counties. Belknap, Grafton and Sullivan sale prices are above the same period for last year on both measures, while Cheshire and Carroll average home prices went down but median home prices went up, indicating price declines only on the most expensive properties.  The opposite was the case in Coos County where the median and average home price went in opposite directions, suggesting more price pressure on the less expensive homes.

The statewide difference between the median and average home sale price is about $44,000, but that varies between a high of $128,000 in Belknap County and a low of only $20,000 in Strafford County.  This suggests that sales of very expensive properties are a bigger share in Belknap, where the top sale was $3.5 million, versus Strafford, where the most expensive property in 2007 sold for just $1.4 million.

January-November 2007 NH residential (non-condominium) sales

   Source:  Northern New England Real Estate Network (NNEREN).  Statistics are based on information from NNEREN for the respective periods shown for the respective regions in the State of New Hampshire or all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of the New Hampshire Association of REALTORS® and not that of NNEREN. Reprinted with permission of Peter Francese and NHAR.

Fewer homes will be sold this year in New Hampshire compared to last year, perhaps 1,000 to 1,200 fewer. But average residential sale price is off less than one percent, and that’s a whole lot better than other parts of this region or the nation.

According to the latest figures from the New England Economic Partnership, New Hampshire’s economic growth, while not great, still continues to outpace the rest of the region, as it has for many years.We have done better than our neighbors, and while that’s fine, there are good reasons for us to be careful not to allow some of the stuff that has happened in other places to stifle our economic growth.One of the main reasons our state has enjoyed its above average growth has been the many highly skilled people who moved to our state during the past two decades. But that in-migration has now slowed to near zero, in part because our supply of housing has not kept pace with demand. As any reader of this column knows by now, there are at least three big legs that support housing demand in our state: workers, retirees and second-home owners. But most other states in the region have those same three legs, particularly Maine and Vermont. Why don’t they have something closer to our economic growth?It’s too easy to say the reason is that they have what we do not – a state income and sales tax. But lots of states with both such taxes and still have robust economic growth. Perhaps the reason has more to do with attitude than with taxes. There are other places in New England (that shall go nameless) that have the attitude, for example, that it’s OK to more heavily tax second-home owners even though those part-time homeowners demand fewer public services. Those who engage in such practices have their reasons (“Hey, they can’t vote here, and besides, they can afford it.”) but choose not to see how much it stifles growth, lowers property values and weakens one of their housing demand legs.Workers represent by far the biggest source of housing demand, however. States and communities that welcome new families and view them as a critical part of workforce will always do better than places that are more interested in stopping growth and preserving the status quo. New Hampshire communities used to be a lot more welcoming of young families than they are now, as evidenced by the recent rapid growth of child-proof housing. So during this Thanksgiving season, let’s be thankful that our housing market has weathered the nationwide downturn so much better that other places. But perhaps we should be mindful that the recovery which we expect and we hope will happen early next year will only occur if we return to our past, when we welcomed new families with children and did not view them as something we need to exclude. October sales figures (please see table below) show that on a year-to-date basis, unit sales are down 9 percent, which represents almost 1,000 fewer units than the same period last year. There were about 500 fewer condominiums sold as well. Taken together, those lost sales meant an average sales volume loss of about $41 million a month. It may be a lot worse elsewhere, but it’s clearly not been a good year for New Hampshire REALTORS®. The table below is sorted by number of units sold year to date. Rockingham County had the smallest decline in sales due in no small part to the higher demand for Seacoast area residences. Prices seem to be holding up better in the more rural and northern parts of the state, even though the number of sales is down quite a bit.Belknap County, where about one in four homes is a vacation home, has the second highest sales prices in the state, and considering the times, a rather large 10 percent jump in average price. This suggests that the ability of second-home buyers to afford the vacation home of their dreams is undiminished. That leg of our housing demand seems to be holding up better than expected, so far.But let’s not forget that about 60 percent of all homes and all home sales in the state take place in the top three counties on the list below, where about 64 percent of New Hampshire residents live. The number of people annually moving to those three counties has dropped 78 percent since 2000. Has their welcome mat has been rolled up? January-August 2007 NH residential (non-condominium) sales

Source: Northern New England Real Estate Network (NNEREN). Statistics are based on information from NNEREN for the respective periods shown for the respective regions in the State of New Hampshire or all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of the New Hampshire Association of REALTORS® and not that of NNEREN.