Quarterly Housing Market Update

Quarterly Housing Market Update

An Overview New Hampshire s current housing market performance, as well as its overall economy, is slowly improving, with positives such as increasing employment and rising home prices. One indicator of New Hampshire s housing market recovery is rising prices in key areas of the state, specifically in Hillsborough and Rockingham counties. On a statewide basis, the inventory of homes for sale has decreased and the pace of home sales has increased. Those New Hampshire households that are willing and qualified to take advantage of continued low interest rates may have an opportunity to get into homeownership. However, borrowers must still have an adequate down payment and excellent credit to qualify for a mortgage under the tighter credit requirements in place since the Great Recession. Furthermore, the inventory of homes selling for under $300 thousand is very limited in those key areas of the state and there is little new construction. The 1,024 cumulative foreclosures in New Hampshire, for the first eight months of 2016, were 10% below the same period in 2015 and 65% below the eight months of 2010, the peak of the foreclosure crisis. Foreclosures are expected to continue to decline this year. This is the result of continued economic progress, that reduces delinquency, and price increases that allow owners to sell their property rather than face foreclosure. However, New Hampshire s housing market continues to pose challenges for renters. New Hampshire Housing s annual residential rental cost survey, which canvasses market-rate units across the state in order to gauge the condition of the rental market, found that vacancy rates dropped while rents increased a continuation of a long-term trend. The state vacancy rate fell to 1.5%, while the median rent for a two-bedroom apartment, including utilities, is at $1,206, an increase of 4.1% from 2015. Demand for rental housing remains strong and has spurred some production of new units that are offered at the high end of the market. Rental housing, as a commodity, is a good investment; but, as affordable housing, rental housing now demands a higher percentage of renter household incomes. Growth in New Hampshire s housing market is directly related to broader economic conditions. New Hampshire s unemployment rate is one of the lowest in the region, but given that economic growth will depend on the availability of more labor, a lack of affordable housing (both rental and ownership) can impede improvements in the broader economy.

Economic Growth New Hampshire s economy continues to grow. The pace of growth and economic activity since the Great Recession has paralleled that of the United States. In the last several years, however, Massachusetts economic growth has accelerated faster than the U.S. and New Hampshire, but the southern part of the state now sees the benefit of that growth.

Employment and Labor Force New Hampshire s labor force is as large as it has ever been, at about 754,000, and total employment at 733,000 is now above the past peak reached in 2008. New Hampshire s labor force participation rate, which reached a peak in early 2000, declined steadily until the spring of this year. The decadeplus decline in the labor force participation rate can be attributed to both the depth of the Great Recession and the beginning of the baby-boom generation s exit from the workforce. A rebound, while early to predict, will signal a growing participation by the millennial generation. Labor Force Participation Rate = Labor Force / Civilian Non-Institutional Population Jobs lost in manufacturing and construction have been replaced by jobs in leisure and hospitality, education and health services, and professional and business services. Incomes rose in urban centers but incomes in rural areas were flat or only slightly increased. More importantly, many of the jobs recovered since the end of the recession have been of lower average wage than the jobs lost.

Unemployment New Hampshire s seasonally adjusted September 2016 unemployment rate of 2.9% is the lowest rate in New England and is tied with South Dakota for the lowest state rate in the nation. Based on this measure, New Hampshire has returned to its pre-recession level of unemployment.

Housing Permit Activity Permit activity is now showing signs of improvement. However, construction activity remains at only half of the level of a decade ago. New Hampshire and New England continue to lag behind the U.S. on average. In addition, while New Hampshire produced more than 1,100 units of multi-family housing per year (most of which is rental housing) between 2012 and 2015, this is about half of the multi-family housing production per year recorded between 2002 and 2006, and may not be adequate to keep up with the current demand for rental housing. Mortgage Interest Rates Interest rates for 30-year fixed rate mortgages remain low at 3.4% in September. They have increased less than one percentage point since their low point of 3.35% in December of 2012.

New Hampshire Home Prices New home prices are 53% above existing home prices, and the gap has been widening. New homes now make up less than 3% of all home sales between January and August of 2016. $312,500-2006 $344,200 $225,000 $245,000-2007

Home Price Index Shows Regional Improvement Home prices in New Hampshire increased just over 6% between the 2nd quarter of 2015 and 2nd quarter of 2016, recovering most of the total 21% decline in prices from their most recent peak in 2005 to their trough in 2012. Throughout much of this series, New Hampshire and New England out performed the U.S. as a whole. However, since the end of the recession, New Hampshire and New England have under-performed the nation.

Continued Improvement in Home Sales Prices Based on MLS 1 sales in New Hampshire, the August 2016 median price of $249,900 is up less than 2% from the median price in the prior month, but represents an increase of over 8% from August 2015. The trend has been upward, with an increase of more than 23% since August of 2011. 1 The statistics used in this analysis are based on information from NNEREN for the period January 2003 through August 2016 for all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of NHHFA and not that of NNEREN. This analysis excludes land, interval ownership, seasonal camps/cottages, multi-family property, mobile/manufactured homes and commercial/industrial property.

Strong Pace of Home Sales Sales volume has been rising. At 2,099, September 2016 sales were 7.7% above the prior year 1. Declining Housing Inventory At nearly eight months, the August 2016 inventory has increased from the expected seasonal low points in January, February, and March 1. However, the overall downward trend reflects an increase in closed sales and steady demand. That demand is concentrated in the southern and eastern counties of the state.there is a shortage of inventory below $300,000.

Rental Affordability Half of all households in rental units earn less than $40,800 per year and the percentage of market rate units that are affordable to them is low. Rent overpayment affects all age categories. Renters older than 65 are disproportionately impacted, paying over half of their income on rent. However, only one in five of the households that are overpaying is a senior household.

Improvement in Foreclosure Numbers The cumulative total of foreclosure deeds for 2015 was 17% below the total for 2014, and the lowest annual total since 2006. The 1,024 cumulative foreclosures in New Hampshire, for the first eight months of 2016, were 10% below the same period in 2015 and 65% below the eight months of 2010, the peak of the foreclosure crisis. Foreclosures are anticipated to continue to decline through 2016.

Decline in Foreclosure Auction Notices Foreclosure auction notices have now declined to an average of under 200 per month. Comparing the cumulative foreclosure auction notices for all of 2015 with 2014 shows a 23% decline in activity. There were 150 foreclosure notices issued in September of 2016, a 32% decrease over the prior month. The 1,700 foreclosure notices issued in the first nine months of 2016 is 19% lower than the number of foreclosure notices issued during the same time frame in 2015. There is a correlation between unemployment and mortgage delinquency. Steady improvement in New Hampshire s unemployment rate since the end of the recession has contributed to improvements in the mortgage delinquency rate; yet delinquencies still remain somewhat above their pre-recession level.

Positive Regional Foreclosure Trends New Hampshire s foreclosure initiations, delinquencies, and foreclosure inventory are all lower than the U.S. or New England.

Interested in finding out more about the state of housing in New Hampshire? Foreclosure, housing market, and demographic data can be found on our website, www.nhhfa.org, on the Studies, Publications, and Presentations page. 32 Constitution Drive, Bedford, NH 03110 Mail: P.O. Box 5087, Manchester, NH 03108 www.nhhfa.org www.gonewhampshirehousing.com