New Hampshire Real Estate Blog

The New Hampshire Association of REALTORS just came out with their July’s Market Trends

Where’s the money when we need it?
-by Peter Francese

Mortgage lending isn’t what it used to be, and that’s a problem for New Hampshire REALTORS®. Except for a couple of cave dwellers (to whom we need to sell a home), everyone knows that the secondary market for home mortgages has taken an extended, but not well-earned, vacation.

Now that lenders have to hold on to the loans they make, extreme caution is the order of the day. It’s clear that lack of financing is preventing a lot of home sales here in New Hampshire that would have occurred when there were looser lending standards and a robust secondary market for mortgages.Now that lenders have to hold on to the loans they make, extreme caution is the order of the day. It’s clear that lack of financing is preventing a lot of home sales here in New Hampshire that would have occurred when there were looser lending standards and a robust secondary market for mortgages.

“Residential home prices have edged down only 1 percent statewide.”

During the first seven months of this year, for example, about 1,000 fewer homes (including condominiums) were sold in the state compared to the same period last year. That represents a 10 percent drop in sales and a total sales volume loss of over $310 million. But despite the large number of properties on the market (close to a year’s supply of inventory, on average) residential home prices have edged down only 1 percent statewide and have actually stayed steady or risen in four of our 10 counties (see table below).The biggest drop in average residential price was in Rockingham County, which has the highest priced homes in the state. There, the average home sold this year went for $367,400, which was $16,200, or 4 percent, less than the same period last year. By contrast, statewide condominiums prices rose 1 percent ($2,600) to an average price of $210,200 and remained at about 2006 levels in Rockingham County ($241,700).

Perhaps one reason for the general absence of big price declines is that many homeowners who wish to sell are in the unfortunate situation of having negative equity in their home if they sold at much below their asking price. This means that at closing, it’s the seller, and not the buyer, who must bring the sizable cashier’s check to the table. That’s a bitter pill that not many people are willing to swallow.

Yet it is difficult to imagine a scenario where average home prices are likely to rise back to mid-2005 levels anytime soon. Interest rates are too high and lenders are way too risk averse for that to happen. In any case, the median home price in New Hampshire in mid-2005 was six times the average wage paid in the state, probably an unsustainable level in more normal times. By mid-2007, that ratio had dropped to just 5.5, but it is still quite a bit above the 4.5 it was in 2001.

According to Northern New England Real Estate Network, the average non-condominium in New Hampshire sold for almost $310,000 in July 2007. For the home-to-income ratio to get close to the 4.5 it was six years ago, that average home would have to sell for between 10 and 15 percent less than it does now. The last time that such a big a price drop occurred was between 1990 and 1992. But the probability of that large a price drop today is far less likely, since the income and assets of many New Hampshire homeowners is now so much higher.

But it suggests that prices may drift somewhat lower before stabilizing and that any homeowner wishing to sell may need to have a great deal more patience and realism than in the past few years. The best thing that can happen for homeowners and REALTORS® alike, however, is for the financial markets to regain confidence in mortgage-backed securities and buy them again. It would be a good start if Fannie Mae were to raise the limit on the size of mortgage they will buy.

Considering what is going on in the rest of the nation, things look fairly good here in New Hampshire. The table below shows that the number of sales is declining over last year in every county except Rockingham. But prices are dropping much more slowly than sales and are even rising or stable in four counties.

Finally, as a prime location for second homes, New Hampshire just got a big boost when Nicolas Sarkozy, the president of France, chose to vacation here. It may not happen immediately, but he might be the first of many distinguished foreign visitors to come here.

Nearly all second homes in the state are now owned by someone from the U.S. But we should not lose sight of the vast number of people from France or other nations who just might be convinced to buy a vacation home here. Given the present value of the dollar compared to the Euro or the Pound, real estate in New Hampshire probably looks like a bargain from over there.

[TABLE=4]

Popularity: 8% [?]