The New Hampshire Homebuyer’s Strategic Playbook for 2023 – 2024
Last week, Sydney Lake published House poor is back: ‘the new normal for the foreseeable future in Fortune. The article highlighted some hard truths.
The Hard Truths: Mortgage and Earnings Statistics
- The current 30-year fixed rate mortgage is at 7.18%, a significant increase from the sub-3% rates during the early pandemic days.
- Monthly mortgage payments have surged by 60% year-over-year, with the average monthly principal and interest payment now exceeding $2,300.
- More than half of homebuyers now face a monthly mortgage payment of at least $2,000, and a quarter are paying $3000 or more. This is concerning given that the average U.S. monthly earnings in July 2023 were just $4,600.
- Experts suggest first-time homebuyers could be spending more than 40% of their income on housing, which is considered unsustainable. The long-term average is closer to 30%.
- The article concludes that until there’s a more fundamental shift in the economy, the current level of mortgage payments might be the new normal for the foreseeable future.
The Seacoast Rental Market: A Local Perspective
In the Seacoast of New Hampshire, average rents range from $2,400 to $2,600 for one bedrooms or studio apartments. With less than 1% of apartments available at any given time, the rental market is incredibly tight. So, if you are contemplating whether to rent or buy, consider this: you might already be paying a mortgage-like rent but without the long-term benefits of home ownership.
The Work-from-Home Factor
Lake didn’t touch on the work-from-home trend, but the trend is an important factor to consider. Zoom, Google, Elon Musk and the like are moving away from the work-from-home paradigm, (I think in part because they need to justify their ownership of commercial real estate, but just my opinion there). Some more local-centric companies—Portsmouth Atlantic, Liberty Mutual to name a couple—are fully embracing work-from-home. This opens up the possibility of moving to the outskirts of the Seacoast area for more frugally priced homes, or even moving out into the boonies for cheap cheap homes. If your job allows for it, why not take advantage of this flexibility.
Navigating the First-Time Homebuyer’s Journey
Lake rightly points out the challenges for first-time homebuyers. However, there are ways to navigate this. The New Hampshire Housing program offers various first-time homebuyer incentives—even the potential of a $10,000 grant specifically for down payment assistance. These programs often have more funds available at the beginning of the year, making January an ideal time to buy if you’re looking into some of these programs. Plus, winter typically finds us in a less competitive market, thus improving your odds of landing a good deal.
The Art of Compromise: Price, House, Location
One of the phrases I’ve been hearing in the real estate world is that if you are buying now, expect to compromise in at least one of three areas:
- Price. The compromise: plan paying more than what you want to spend. This of course only works if you have the available spending power.
- House. The compromise: plan on a smaller house than what you want or need. Homes with only two bedrooms or only one bathroom tend to be cheaper than the three bedroom two bath.
- Location. The compromise: maybe you want to live in Portsmouth or Dover, but affordability increases the farther out you move. Think Farmington, Barnstead, etc.
A Strategic Approach to Homeownership
I don’t know how much I really believe in compromise though. I do, however, believe in process. And getting what you want or need sometimes takes time, work, and patience.
Buy small, buy cheap. Use programs like new Hampshire Housing and low down payments. And on that first house, you are certainly compromising. But this is not your forever home you are purchasing here. You are moving through a process of growth. After two to three years, with the equity you have built in the first house, purchase a multi-unit with 3 or 4 apartments. Owner occupy the multi, and rent out or sell the house. In two to three more years, buy the home you want. And, and, and if you want a dream vacation home, you can do that in another three to five years with the equity you’ve built across all your properties. When you’re not using the vacation home, AirBnB it for additional income.
While Lake paints a challenging picture of the current real estate market, and I’m certainly not saying buying a home is easy, it’s crucial to remember challenges also bring opportunities. By understanding the local market, taking advantage of specific mortgage programs, and not going it alone, you can navigate these turbulent waters. Buying a home might be about having a roof over your head, in this market you really need to think strategically and long-term.
In one of my recent newsletters, which you can sign up for here—content you just can’t get on the blog—we had a robust conversation about lifestyle choices. Do you go for the beater car or the tricked-out Mustang? Your immediate choices can have a significant impact on your current home purchasing power, but also your long-term financial goals.
