Interest rates may indeed start to drop through the rest of 2024 and into 2025, maybe not to the historic lows of less than 3% in 2020-21, but lower than the current average interest rates have been so far this year.
That would certainly help the residential real estate market in New Hampshire, which is starved for inventory. But it’s not the ultimate fix the market needs, according to Joanie McIntire, president of the New Hampshire Association of Realtors (NHAR).
One issue, said McIntire, is that many current homeowners have low mortgages and they are reluctant to put their homes up for sale when they themselves have to finance a new home at a higher rate.
“There is no arguing that interest rates are a piece of the affordability puzzle. However, with 50% of current mortgages under 4%, it is easy to see why these owners are reluctant to sell their homes and give up those great rates,” said McIntire. “Seventy to 80% of sellers are buyers, so if they do decide to sell they will be faced with very low supply and high demand on the buy side.”
As she’s been saying all along during her 2024 tenure as president of the NHAR, a key solution to the housing supply question is new construction and less restrictive zoning.
“There is no silver bullet to New Hampshire’s housing shortage but a good starting point is to make the path to development less challenging,” said McIntire, an associate broker with Coldwell Banker J. Hampe Associates in Concord. “Re-examining and altering long existing and outdated zoning rules will go a long way to creating more affordable homes. This in turn will allow for the workers we need for a strong economy to find homes in the truly great state of New Hampshire.”
There are all manner of predictions as to the future of mortgage interest rates. They’re all keyed in on the Federal Reserve and how quickly — or slowly — it moves on its benchmark borrowing rate.
Since July 2023, the Fed benchmark rate has hovered between 5.25%-5.50%. It has kept rates relatively high — peaking in mid-2022 at around 7% — as a hedge against inflation.
A decision by the Fed on possibly lowering the rate could be made this month. When and if the rate is reduced, it has a ripple effect, lowering not mortgage rates but rates for refinancing, autos and credit cards as well.
Current mortgage interest rates stand at about 7% as the average 30-year fixed rate. With Fed action to lower its rate, Fannie Mae predicts that the average rate will be 6.4% by the end of 2024 and 6% in 2025.
The key indicator on the state of New Hampshire real estate for McIntire is supply — how much inventory of single-family homes and residential condominiums/townhouses to satisfy buyer demand. With too little supply against high demand, prices increase.
“What I continue to see as a major roadblock for buyers is supply. Increased supply will go a long way to meeting the demand of all buyers but especially those first-time buyers who make up 32% of all sales,” said McIntire.
The August trends report from the NHAR shows the measure of supply has vastly improved over a year ago.
August showed a supply of 2.3 months of inventory, compared to 1.8 in August 2023, a 28.8% improvement. The number of homes for sale in August was 2,329, a 27.9% improvement over last year.
The months supply of residential condos showed similar gains — 29.4% better for a months supply of 2.2, and 32% better with 718 units for sale.
Prices, however, remain high, even with the uptick in supply, keeping it a seller’s market.
The median sales price for a single-family home in August was $535,000, just shy of the record-setting $540,000 that was recorded in June and 9.2% more than a year ago.
The median price of a condo stood at $406,089, well below the $445,000 high water mark established in June but still 4.1% more than last year.
“What I continue to see as a major roadblock for buyers is supply. Increased supply will go a long way to meeting the demand of all buyers but especially those first-time buyers who make up 32% of all sales,” said McIntire.
In the state’s most expensive market — the Seacoast region — the number of listings in August was the highest it’s been in a while, according to the Seacoast Board of Realtors report for the month.
It reported the most house listings in two years, based on the data it takes from its sample communities of Exeter, Greenland, Hampton, Hampton Falls, New Castle, Newfields, Newington, North Hampton, Newmarket, Portsmouth, Rye, Seabrook and Stratham.
The median sales price there for a single-family home was $830,000, up 4.4% from last year, but well behind the all-time high of $922,500 recorded in June.
It also reported the most condo listings since October 2023 and a median price of $535,000, which is down 6.1% from 2023.
“Increased inventory is becoming an important factor in our market,” said Lynn Lagasse, president of the Seacoast Board of Realtors. “I think everyone is anticipating the potential mortgage rate cut and how that might lead to an active fall market.”
New valuation information from the city of Portsmouth shows the median home value there is $762,600. The updated values covered the following residential properties: single-family homes, condos, two- and three-family homes, and mobile homes or manufactured housing.
According to information presented to the Portsmouth City Council, manufactured home values have increased by about 85%, condominium values have gone up 61.9%, single-family homes 60.7%, and two- to three-family homes increased 45.8%.
Here is the county-by-county breakdown (in alphabetical order) of median home prices in August. Rockingham rings in as the most expensive and Coos as the least expensive:
Belknap $553,250
Carroll $482,500
Cheshire $383,715
Coos $250,000
Grafton $450,000
Hillsborough $550,000
Merrimack $510,000
Rockingham $644,000
Strafford $550,000
Sullivan $404,500
Here is the breakdown of median condo prices with Coos recording the most expensive price and Grafton the least expensive:
Belknap $420,750
Carroll $487,000
Cheshire $338,000
Coos $730,000
Grafton $285,000
Hillsborough $385,000
Merrimack $300,000
Rockingham $490,000
Strafford $403,000
Sullivan $424,000
Affordability of a house remains a challenge as shown by the NHAR’s affordability index in August of 58.
The index is based on 100, in that the average homeowner has exactly enough money to afford the costs associated with buying a house. The lower the index, the less affordable the real estate is to buy.
An affordability index of 58 shows that a median household income is only 58% of what is needed to afford a median-priced home.
The affordability index for a condo was 76.
There was a spike in the second quarter nationwide in residential lending activity, according to ATTOM, a national curator of real estate data. Its data shows 1.62 million mortgages secured for residential property (1 to 4 units) in the United States during the second quarter, a 23.2% increase over the prior three-month period.
The Manchester-Nashua municipal statistical area saw new mortgages in the second quarter of 2024 numbered 923, a 66.9% increase over Q12024.
“The mortgage industry got one of its biggest boosts in years during the second quarter, supported by a combination of the usual springtime home-buyer demand coupled with more attractive mortgage rates,” said Rob Barber, CEO at ATTOM.
“However, a cautionary note is warranted, as we shouldn’t read too much into one great quarter. A similar trend occurred last spring, with lending dropping off significantly later in the year. But with interest rates settling down and projections for more cuts from the Federal Reserve over the coming months, it wouldn’t be surprising if business increased even more for lenders over the rest of 2024, or at least didn’t drop significantly.”
