Download Housing Market Update July 2016

Housing Market Update
July 2016
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 discounted housing inventory and
continued low interest rates may have a unique 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.
While not declining as rapidly as once anticipated, 2015 cumulative foreclosure deed recordings
declined 17 percent when compared with 2014 and are down more than 55 percent when compared
with 2010, the peak of the foreclosure crisis. Foreclosures are expected to continue to decline
this year. This is most likely the result of continued economic progress and price increases in the
state 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 percent, while the median rent for a two-bedroom apartment, including utilities, is at $1,206,
an increase of 4.1 percent 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 stable or shrinking 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 retard improvements in the broader economy.
Economic Growth
The New Hampshire economy is growing again. The pace of growth since the recession, however,
is lagging behind Massachusetts (currently the fastest growing state in New England) and slightly
behind the U.S. in total. Other New England states are not doing as well as New Hampshire.
Employment and Labor Force
New Hampshire’s labor force is nearly as large as it has ever been, at about 749,000, and total
employment at 729,000 is now above the past peak reached in 2008. New Hampshire’s labor
force participation rate, which reached a peak in early 2000, has declined steadily ever since.
The decade-plus decline in the labor force participation rate can be attributed to both the depth
of the recent 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-Institutionalized Population
Labor Force = Employed + Unemployed
Jobs lost in manufacturing and construction have been replaced by jobs in leisure and hospitality,
education and health services, and professional and business services. In addition, government
employment has declined since the end of the recession. 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 May unemployment rate of 2.7 percent is the lowest rate
in New England and is the second lowest state rate in the nation. Based on this measure, NH has
returned to its pre-recession level of unemployment.
Housing Permit Activity
Permit activity is now showing signs of steady 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.
Mortgage Interest Rates
Interest rates for 30-year fixed rate mortgages remain low at 3.6 percent in April. They have increased less than one percentage point since their low point of 3.35 percent in December of 2012.
New Hampshire Home Prices
New home prices are 62 percent above existing home prices, and the gap has been widening. New
homes now make up less than 3 percent of all home sales between January and April of 2016.
Source: 1990-2014 – NH Dept. of Revenue, PA-34 Dataset, Compiled by Real Data Corp. Filtered and analyzed by New
Hampshire Housing. 2015-16 – The Warren Group. Filtered and analyzed by New Hampshire Housing.
Continued Increase in Home Sale Prices
Based on MLS1 sales in New Hampshire, the May 2016 median price of $238,000 is unchanged
from the median price in the prior month, but an increase of over 1 percent from May 2015. The long
term trend continues to be upward, with an increase of more than 22 percent since May of 2012.
In 22 of the past 24 months, prices have shown an increase when compared with the same
month in the prior year.
The statistics used in this analysis are based on information from NNEREN for the period January 2003 through April 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
Closed sales in April of 2016 totaled 1,517, an increase of 20 percent from the same month in 2015.
Cumulative sales for all of 2015 are 14 percent above the total sales volume in 2014. This level of
increase in sales activity suggests a significant increase in demand in the housing market.
Declining Surplus Housing Inventory
At seven months, the May 2016 inventory has increased from the seasonally low point experienced
in January, February, and March. The overall trend reflects an increase in the number of active listings and a steady level in demand.
Improvement in Foreclosure Numbers
The cumulative total of foreclosure deeds for 2015 is 17 percent below the total for 2014, and
the lowest annual total since 2006. As of the First Quarter 2016, there were 390 foreclosures in
New Hampshire. This is a 27 percent decline when compared to the same time last year and 65
percent below First Quarter 2010, the peak of the foreclosure crisis. Foreclosures are anticipated
to decline in 2016.
There is a correlation between unemployment and mortgage delinquency, since most households
with mortgages that experience a job loss will fall behind in their payments once savings have
been exhausted. 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 remain above their prerecession level.
Decline in Foreclosure Auction Notices
Foreclosure auction notices declined to under 200 per month. Comparing the cumulative
foreclosure auction notices for all of 2015 with 2014 shows a 23 percent decline in activity. There
were 240 foreclosure notices issued in June. The 1,257 foreclosure notices issued in the first six
months of 2016 is 10 percent lower than the number of foreclosure notices issued during the same
time-frame in 2015.
Mortgage Delinquency Rates Continue
to Improve
Based on the Mortgage Bankers Association National Delinquency Survey, the first quarter 2016
delinquency rates remained declined in the U.S., New England, and New Hampshire. The first
quarter delinquency rates are consistent with first quarter declines in this data series since 2010.
In addition, these are the lowest delinquency rates since 2006. In light of these improvements,
delinquency rates are now approaching their prerecession levels.
Rental Housing Market
Half the counties in the state show vacancy rates at well below 2 percent. A rate this low is viewed
as just turnover rather than true vacancies. Most industry experts consider an average vacancy rate
of 4 percent to 5 percent a balanced market. Below 4 percent constitutes a “landlord’s” market and
above that rate it is a “renter’s” market. In comparison, the national vacancy rate fell to 7.1 percent
in 2015, which was the lowest rate since 1985.
Seven of New Hampshire’s ten counties have lower vacancy rates than last year. Vacancies are
significantly lower in the state’s most populous southern tier, where the bulk of New Hampshire’s
rental housing is located. Hillsborough, Merrimack, and Rockingham counties all have vacancy rates
below two percent and are lower than their 2015 rates.
Background
The state has seen almost a 15 percent increase in rents including utilities for two-bedroom apartments since 2011. Over the past five years, the southern tier as well as Grafton and Coos counties
have experienced double digit increases in monthly median gross rental costs. Grafton County’s
rent figures are driven largely by the Hanover/Lebanon economy and related housing market. In the
southern part of the state, these changes are due to an early economic recovery in Massachusetts
that is now evident in Southern New Hampshire. This year the statewide median gross rent (including utilities) for two-bedroom units increased by 4.2 percent to $1,206 from $1,157 in the prior year.
The survey also demonstrates that renter household incomes are not keeping pace with the steady
increase in rents. A renter would have to earn 124 percent of the median income, or more than
$46,000 a year, to be able to afford the statewide median cost of a typical two-bedroom apartment
with utilities, but renter incomes actually declined by 4.3 percent from 2009 to 2014. Housing Needs
in New Hampshire, a 2014 study commissioned by New Hampshire Housing, found that almost half
of renters in the state pay more than 30 percent of their income on rent, and low-income families
are particularly likely to be overpaying for their housing.
Results of New Hampshire Housing’s 2016 Residential Rental Cost Survey are consistent with those
found on a national level. The recent State of the Nation’s Housing report published by Harvard
University’s Joint Center for Housing Studies revealed that other housing markets across the country
are also seeing a tightening of the rental market. Again, like New Hampshire where we have seen
increased construction of multi-family units that demand rents at the high end of the market, the
national scene shows a similar trend with many low- to moderate-income renter households paying
a greater percent of their income on housing costs.
Not surprisingly, the highest median gross rents in the state are in Rockingham and Hillsborough
counties, closest to the Boston metropolitan area. Most of the rental units in the state (77 percent)
are located in Hillsborough, Rockingham, Merrimack, and Strafford counties.
Rental Affordability
Affordability for renter households remains a problem in most areas of the state. Rental housing
affordability is limited to 14 percent of the housing units surveyed statewide and less than 10 percent of the units in five of New Hampshire’s ten counties. Only in those counties with the highest
median income are 15 percent or more of the surveyed units affordable.
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 Housing Data/Planning page.
Have questions about our data? E-mail [email protected].
32 Constitution Drive, Bedford, NH 03110
Mail: P.O. Box 5087, Manchester, NH 03108
www.nhhfa.org
www.GoNewHampshireHousing.com