Spring is coming, with more buyers

—By Peter Francese

Before we can look forward we have to look back, even if we would rather not. During the first two months of this year, fewer than 1,000 residential units were sold and year-to-date sales volume ($214 million, not including condominiums) was half of what it was three years ago.  Condominium sales volume ($39 million) was 70 percent lower than in 2006.

Whatever the weather, this could turn out to be the coldest winter on record for New Hampshire Realtors.  We can only imagine how bad it must be in other states where the economy is in so much worse shape than it is here in the Granite State.

Our state has by far the lowest unemployment rate in New England (See Chart I) and one of the ten lowest rates in the nation.  Our state also has the fourth highest index of economic activity, according to the Federal Reserve (See Chart II).  The problem, in terms of consumer confidence, is that these indicators of the substantially better economic conditions here in New Hampshire are unknown, except for a few savvy real estate investors.

Tables I and II at the end of this piece show the county level details of home sales from NNEREN for the first two months of this year.  But the last column on Chart I also shows a very important indicator: the ratio of median home value to median household income.

Historically that number, which is one measure of general housing affordability, has usually been at 4.0 or below.  When it rises above 4.0, too many buyers are not able to purchase a home.  When it returns to 4.0 or below, it signals a time when many more potential buyers will think that a home they would like to buy is within their reach.

Potential buyers, however, must also have some level of confidence that better economic times are in the near future.  And lenders need to feel more confident, too.  So far, that confidence has not shown itself.  But early believers in its imminent return will be able to buy one, or maybe even two, very reasonably priced homes.

What is important to keep in mind, however, is that the median sales price figures in tables I and II below are very heavily influenced by foreclosed and short sales.  While it is true that home foreclosures are less than one percent of all owned homes in New Hampshire, they can be, and often are, a much larger fraction of all sales in a county, particularly when there are so few transactions.  This distorts the perception of home values.

When the number of foreclosures starts to decline, which it must do fairly soon, then home prices will at least stabilize and lenders will feel more comfortable writing mortgages.  But in the meantime, it would be helpful if we could separate out foreclosure sales from all others.

We can only do that from data collected on the New Hampshire Realtor survey, which you can fill out for each transaction.  So please go to the survey site by clicking here and answer a few quick questions to tell us about your recent sales.  We will report the results next month.

Source: Bureau of Labor Statistics

Source: Federal Reserve Bank of Philadelphia

Table I:  Residential (non-condo) unit sales for Feb. 2009 and income to price ratio

Table II:  Residential (non-condo) unit sales for first two months of 2009

Source: NNEREN and US Census Bureau household income estimates