Housing Market UpdateJuly 2016

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.

An Overview

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 ForceNew 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.

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.

Labor Force Participation Rate = Labor Force/Civilian Non-Institutionalized Population

Labor Force = Employed + Unemployed

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 ActivityPermit activity is now showing signs of steady improvement. However, construction activity re-mains 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 RatesInterest rates for 30-year fixed rate mortgages remain low at 3.6 percent in April. They have in-creased 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 PricesBased 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 SalesClosed 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 InventoryAt 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 list-ings and a steady level in demand.

Improvement in Foreclosure NumbersThe 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 delinquen-cies remain above their prerecession level.

Decline in Foreclosure Auction NoticesForeclosure 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 ImproveBased 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.

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.

Rental Housing Market

The state has seen almost a 15 percent increase in rents including utilities for two-bedroom apart-ments 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 (includ-ing 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.

Background

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 per-cent 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.

Rental Affordability

32 Constitution Drive, Bedford, NH 03110Mail: P.O. Box 5087, Manchester, NH 03108

www.nhhfa.orgwww.GoNewHampshireHousing.com

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 kmoran@nhhfa.org.