2008 Uppver Valley Market Update

Upper Valley Market Update

By Gerry Stark

01/15/2009

2008 Trends

The number of home sales throughout NH dropped by 20% from 2007 and the Upper Valley followed suit with a 17% drop. However, with its low unemployment and stable economy the Upper Valley should be one of the first areas to rebound. Even though Forbes Magazine listed Lebanon, NH as one of the "Most Least Vulnerable Towns to be hit by the downturn" we are not completely out of the woods yet. Statewide the average sales price dropped about 8%. The good news is, in the Upper Valley we actually saw a 1% increase in the average sales price and an 8% increase in the median sales price. However, a higher than normal inventory along with an increase of the "Days on Market", the average number of days it's taking a home to sell is a sure sign of a buyers market. So you might ask, if the average sale prices have gone up, why can't I sell my house? The answer is "asking price, time and the economy". We must also take into consideration that right now in the Upper Valley those same homes took on average 5+ months to sell and almost all of those homes sold started at a much higher asking price. When looking at homes buyers are being cautious and conservative, looking at homes priced well under what they can actually afford. We also have buyers moving in from other areas who had to sell at a loss and can no longer afford a similar home in our area. These people tend to rent or worse they decide not to move because they can't afford to live in the Upper Valley.

In Vermont vacation home sales have slowed to a crawl most likely due to the stock market collapse, although home prices in these sectors have not fallen nearly as far as other second home communities in New England. New construction has also stalled; the high cost of materials and permitting has forced these homes to be priced well out of the range of the typical Upper Valley home buyer.

The foreclosure phenomena!

My biggest concern going into 2008 was the potential that foreclosures would have a wide spread negative impact on the overall market. State wide foreclosures more than doubled in 2008, which sounds horrific, until you realize this translates to only about 1% of all homes in NH. Still, foreclosures will continue to have a strong impact on home sales and pricing well into 2009. First time home buyers predominately made up of buyers looking for homes priced in the $100,000 to $200,000 range are increasingly inquiring about foreclosed homes. RE/MAX Country Properties of Amherst NH recently reported that 90% of the registrants on their web site specifically asked for more information on foreclosed homes. Although, the central core of the Upper Valley, Lebanon/Hanover/Hartford has not seen a great number of foreclosures we are not immune to its effects. Nor are we immune to buyers who want the perceived great deals they can get buy purchasing such a home. Unfortunately, many of these buyers learn quickly that they are not going to get a $500,000 house for $100,000. The majority of foreclosed homes are being sold in "AS IS" condition and usually wouldn't make the cover of Better Homes and Gardens. Typically these homes are winterized with no running water or electricity and unless you are willing to pay to have the utilities turned on you won't know much about the house until the day you buy it. So depending on the buyer a foreclosure may not be such a good deal in the end. A strong housing market will not return until all of these homes are sold and the perception of a revitalized economy has returned in the eyes of the public.

Opportunities, opportunities!

Rumor has it that only the wealthy with platinum credit scores and 20% down are able to get a loan in today's real estate market. While it is true that you need decent credit above 580 there are tremendous opportunities for buyers. FHA has programs requiring as little as 3.5% down with fixed rates at or below 5% with plenty of money to loan out. The Federal Housing Assistance Tax Act of 2008 is a great incentive for first time homebuyers which give tax credits of up to $7500. Sellers are still allowed to participate with paying some of the buyers closing costs even if the property is a foreclosure.

Self Directed IRA. A little known investment tool called a self directed IRA is an excellent method for investors who are shell shocked from the stock market and are sick of getting a meager ½% return from their IRA money markets. The self directed IRA allows you to take advantage of the current low real estate prices by investing in real estate. In many instances without the need of mortgage your money can earn anywhere from 5 to 10% depending on the property. These investments are a little complicated but well worth it so if you are interested please schedule an appointment with one of our professionals.

The Luxury Market

The graph below shows the trend in homes selling above $750,000 has dropped to just below the 2004 levels. However, it is still very strong as compared to the beginning of the decade. The blue line is the number of homes sold in this category, the black line is the "trend line". The data used for this graph is for Grafton and Sullivan counties in NH and Windsor and Orange counties in VT. Currently there are 203 homes for sale in this price range which represents about a 3 year supply.

What was the highest MLS Sale Price in all four counties combined?

Answer: $3,000,000 for a 28 room colonial on 84 acres in Barnard VT originally listed at $3,600,000 it took 23 months to sell.

So what's going to happen in 2009?

What goes up must come down. So, how far down is down? The first quarter appears to be poised for a continuation of 2008, however, I'm extremely optimistic that with the spring will come an increase in consumer confidence and with it a more stable and predictable real estate market. I'm not foreseeing, nor do I really want to see, the rapid uptick in home prices we had in 04 and 05. Instead, after the dust clears I'm counting on a leveling of the market. Unfortunately, home sellers are constantly playing catch-up, starting high with a series of price reductions until finally selling their homes. In most cases, I've found if sellers priced within the range that the market dictated in the very beginning they just might have beat the declining market and got more for the house in a much shorter time. However, I've been preaching this since 1987 and very few have heeded my advice.

How do we sell in today's market?

There are two essential skills required to sell real estate in the future: One being an effective marketing plan the other is the strategic use of the internet. Innovative marketing is the key in today's changing real estate environment. The trend for many companies has been to cut marketing while history has shown us that companies that strategically increase marketing are best poised to help their clients and customers. At RE/MAX Upper Valley we're committed to increasing our marketing by investing in the internet and providing superior customer service. REMAX.com and Realtor.com are the top two real estate web sites nationally; along with our own site UvMaxRe.com we are continually trying to showcase our listings on the net. Namely with professional photography, paid internet advertising, virtual tours, mapping and other tools which will provide the buyer with everything they need to make an informed decision. Of course we are not abandoning our traditional methods of print marketing, just enhancing our services so that our clients and customers receive the highest level of marketing and representation possible.

If you are considering the sale or purchase of a home in 2009 please call one of our sales representatives for a no obligation buyer or seller consultation.

Gerrry Stark, Principal Broker/Co-Owner

RE/MAX Upper Valley Partners

Gerry has been a Realtor for more than 22 years. He is the 2005 Upper Valley Boards "Realtor of the Year" and teaches the Realtors ethics course. He is the 2010 President Elect of the Upper Valley Board of Realtors and is licensed as a real estate Broker in both New Hampshire & Vermont. Designations include the Certified Buyers Representative, a certified mentor for the Buffini & Company, A member of the Lebanon Chamber of Commerce, the NH Better Business Bureau and a NH Notary Public as well as the past Chairman of the Enfield Zoning Board.