NH Legislature: NH Real Estate Update January 2010 Russ Thibeault Applied Economic Research Research Support Provided By:

Applied Economic Research2

Conclusions The worst of the real estate downturn has passed Markets are generally stable, but at far lower levels than we would like to experience The outlook is for a gradual improvement during 2011 provided: – The number of new foreclosures drops somewhat – The state and national economies do not double dip – Interest rates don’t rise dramatically 3Applied Economic Research

Sales Show Modest Recovery, But Remain Well Below Their Peak In 2010, about 12,500 homes sold. Sales were down slightly from 2009 levels 2010 is down 45% from peak levels 4Applied Economic Research

Prices Are Stable Median price averaged $205,000 in 2010 Up about 1% over 2009 Down 27% since peak in Matches or exceeds price drops in early 90s downturn 5Applied Economic Research

Inventory Remains High 15,000 Unsold Units at Year End Has Been Dropping at a Very Modest Rate Since 2007 Twice the Level of Earlier in This Decade 6Applied Economic Research

Effective Inventory Would Take 15 months to sell off the units listed in the MLS system Not getting worse, but improvement is modest. 6-9 months is normal— supporting reasonable price increases Remains a buyers’ market 7Applied Economic Research

Housing Recoveries Are Slow Boats Took nearly a decade for NH prices to get back to peak levels in the last major downturn Job growth was strong then Real recovery has yet to surface this time 8Applied Economic Research

Primary Factors Driving the Market The overhang of foreclosed properties Job and Income Growth The Pace of New Construction Interest Rates/Credit Availability Affordability Consumer Confidence 9Applied Economic Research

Foreclosures Are a Problem—Wet Blanket on This Market 2010 will be a record year with about 4,000 foreclosure deeds 10 times normal level Represents about 25% of the properties sold in the MLS system 10Applied Economic Research

NH Economy is Improving, Reversing Recent Pattern 11Applied Economic Research

Few New Units Being Built: A Mixed Blessing Fewer than 2,000 units added in 2010—lowest pace in 40 years. Helps keep unsold inventory from growing. But: Extreme hardship for the building community 12Applied Economic Research

Mortgage Rates Remain Very Low 13Applied Economic Research

Affordability Is Dramatically Better 14Applied Economic Research

Rental Market Conditions— No Dramatic Rent Change, But Vacancies Have Risen Rent Increases Have Moderated Vacancy Rate Has Increased 15Applied Economic Research

Outlook Improving economy should help stem new foreclosures. Improved affordability helps marketability, adding liquidity to the market. Most economists anticipate higher interest rates, which will keep the housing recovery modest. 16Applied Economic Research

Prediction Patriots will win the Superbowl! 17Applied Economic Research