SPRING HOUSING MARKET - IN REVIEW
Updated: Jul 8, 2019
There’s no denying it—this spring has been a hot one in the housing market. Homes are selling for more than ever and are flying off the market before you can even say, “Sold.” With multiple offer situations and homes selling within a few days for $10k, $20k, $30k over asking price, passersby are left scratching their heads and asking, “What is going on??”
Since 2012, the median sales price for a single family home in New Hampshire has risen every single year, while the length of time that homes sit on the market has decreased. Compared to 6 years ago, it takes only half as long to sell the average house in the great Granite State.
Now, why? Well, the housing market is multi-faceted. There’s many, many factors that are contributing to this boom. We’re going to take it back to high school economics and talk about good ole supply and demand.
S U P P L Y
If you take a drive through your home town, chances are you’ll see some kind of construction. Houses, condominiums, and apartment buildings are being built—but the key is the rate at which they’re being built. Now several years after the recession, we see less than half the amount of single family homes being constructed, compared to pre-recession times. Some estimates report as low as 40% of the amount of homes built pre-recession are being built now, post-recession. To put it simply, construction has slowed. Now, why is that?
The rising cost of materials—steel, wood, asphalt, concrete—has been no help. It is getting more and more expensive to built quality homes with quality materials.
Another factor is the labor shortage. According to a study conducted by the Associated General Contractors of America, 79% of contractors are unable to hire enough workers to meet their customers’ demands. This understaffed workforce means that homes take longer to build, in turn increasing construction costs.
Perhaps the largest (and most obscure) influence in the housing supply is the regulatory barrier. In New Hampshire, the residential construction industry is worth hundreds of billions of dollars annually. Despite the huge revenue generation, the state takes a hands-off approach and leaves regulations and procedures to be implemented at a town level. But hey, live free or die.
Because building codes, land zoning, environmental rules, etc are enforced at a town level, they vary from place to place and make it difficult for housing construction to be standardized, thereby increasing costs. A builder in Goffstown is subject to entirely different regulations compared to a builder in Hampton. Same goes for Bedford vs North Conway. The list goes on and on.
There’s also the ever controversial attitude towards growth. Many of the zoning laws we have today were first created in the 60s and 70s, when the state began seeing an influx of immigrants from the faraway land of Massachusetts. Trying to protect the rural nature of the state, 2-acre and even 5-acre zoning limits became a common practice to limit this expansion. Faced with these minimum lot sizes, builders could no longer build inexpensive starter homes if the sales price needed to cover the cost of 2 or even 5 acres.
D E M A N D
Statewide, there has been a 2% population increase from 2012 to 2018. Not very much, right? Looking further into demographics, however, we also see a smaller household size. Families of 4, 6, 8, or more people once lived under one roof—parents, grandparents, children, in-laws lived in one household. Today, we no longer see that. A family of 4 can now occupy 2 or more households, as children move away from home to follow careers, passions, and opportunities—in turn creating a greater need for additional housing.
Perhaps most interesting, is New Hampshire’s median age—43.1—one of the oldest in the country and on track to increase. The increasing number of empty-nesters are beginning to downsize, trading their 5 bedroom and 3-car garage for something smaller and easier to maintain. As this population begins house hunting, they are put in direct competition with first time home buyers. But with better credit and financial positions, they are more apt to offer above-asking prices with fewer monetary contingencies than the first time home buyers. This increasing demand (for starter homes in particular) has caused housing prices to skyrocket and days on market to decrease dramatically.
Starter homes are now breaking the $300k threshold—something we never thought we’d see 2 years ago. But, no matter if you have a starter home or a high end estate. Across the board, homes are selling—and faster and for more money than (possibly) ever before. If you’re thinking of selling, now may be a great time.
