Income, employment rising in NH;
Will home prices follow?

By Peter Francese 

Well, here we are in the fifth year of a home price slump that has hung around way too long.  The first quarter home sales 2011 data in the table below shows pretty clearly that, aside from a couple of exceptional counties, median selling prices are lower than they were in the first quarter of 2010.

What’s going on?  The state’s median household income is over $60,000/year and rising, unemployment is a low 5.6 percent and falling, and the number of people with a job is growing.  Under normal circumstances, those things would increase demand for homes and prices would rise.  But these times are obviously not normal.

Here are a few items that may partly explain the lack of first quarter home price appreciation.  First of all, it was a nasty winter here.  It’s real hard to display the value of a nice home when there are a couple feet of snow and ice all over it.  But winter is over, so moving forward, that excuse will no longer work.

Second, and more importantly, too many consumers remain in a bad mood.  If they own a home, they may be quite angry that it won’t sell for anywhere near what they think it’s worth, particularly if they were counting on the equity to buy their next home.  Buyers who have read about all the foreclosed homes nationwide may be expecting to buy at an unrealistically low price.  And rising gas prices are adding to the gloom.  We can only hope this bad mood lifts as spring unfolds.

But there is a third problem that is more long-term and structural, and that is this: New Hampshire has an aging population.  Whereas nationally, 60 percent of household heads are age 45 or older, in New Hampshire that number is 65 percent.  So the part of growth in home sales that comes from young, first-time home buyers is likely to be somewhat weaker here than in states where there are more young adult households.

The flip side of that coin is that New Hampshire has proportionally more Baby Boomers ages 45 to 64 than nationwide.  Older Boomers are known to be heavy buyers of second homes and may even be looking for a retirement home as well.  Note in Table I below that home sales jumped 29 percent in Carroll county, where almost half of all homes are second homes.  And median selling price rose 2.4 percent, despite falling 4.8 percent statewide.  Baby Boomers may be getting old, but they have assets.

The 2010 Census data that has been published so far shows that New Hampshire households (which the Bureau defines as any housing unit that is occupied year-round) increased 9.3 percent from 2000 to 2010, which is slightly below the national rate of 10.7 percent but above any other New England state.  The number of vacant units jumped 32 percent.  Nearly two-thirds of them were vacation or second homes or other kinds of homes that are not occupied year-round.

The 2010 Census revealed a 7.2 percent decline since 2000 in number of children in New Hampshire, a drop of 22,000 children.  Since birth rates didn’t drop that much, a sharp decline in the number of children in every New Hampshire county suggests that there was insufficient affordable housing for their young adult parents.

The bottom line is that for robust growth in future home sales, New Hampshire needs more young people who will become first-time home buyers.  This will only happen if more towns permit workforce housing for young families than they have in the past.  We probably can’t bring back the young people who left in the past, but perhaps we can do more to encourage a larger share of new college and high school graduates to stay by providing them with more housing options.

  **In these counties, second homes were 24% or more of all dwellings.
  Source: Census Bureau 2010 Census

Table I: Residential home sales/median price first quarter 2011

County

Units sold Q1

% change 2010-11

Median $ Q1

% change 2010-11

% second homes

Belknap

 126

6%

$174,750

-3%

29%

Carroll

 138

29%

$182,250

2%

42%

Cheshire

 93

6%

$145,000

-9%

8%

Coos

 42

-26%

$60,000

-40%

25%

Grafton

 106

-15%

$168,500

-1%

24%

Hillsborough

 492

1%

$201,950

-7%

1%

Merrimack

 234

3%

$170,000

-11%

5%

Rockingham

 443

1%

$240,000

-5%

3%

Strafford

 167

-9%

$179,900

-5%

4%

Sullivan

 51

-19%

$135,000

2%

13%

Statewide

 1,892

0.1%

$197,000

-5%

10%

Peter Francese is an Exeter-based demographer and columnist for the
NH Association of REALTORS®.  He can be reached at peter@francese.com.