How Inflation Impacts Lakes Region Housing Prices

Inflation and housing prices

I was out with a friend this week on Squam Lake, and we were talking about the effect of inflation on housing prices in the Lakes Region. All of us know that inflation is spiraling. The Government reported in June that inflation registered at 9.1%, the highest recorded since 1981. Wow, that’s 41 years ago, and I remember that year vividly. Interest rates were at record highs, and the real estate market was in turmoil. Between 1978 and 1981, existing home sales fell by 50% nationally, from 3.99 million homes in 1978 to 1.99 million homes in 1981. It took almost two decades, or until 1996 before home sales exceeded the 1978 level of 3.99 million units nationally.

If rising inflation worries you about the housing market, you are not alone. Generally speaking, owning a primary or second home is looked upon as a good asset when we go through periods of inflation. The main reason is because a home’s value will usually rise with the inflation rate. Part of the reason is that the home is a leveraged asset with a mortgage in place in most instances. If you have a reasonable fixed interest rate that does not change, the leveraged aspect of the investment will increase over a long period of time. So, if you’re putting down a 20% down payment, for example, the increase in value is based on the home’s value, not the down payment made. When you apply an inflation rate of 8.5% as of July 2022, you generally are ahead of the game if your fixed rate mortgage is at 5.47% (today’s average rate for a 30-year fixed rate mortgage.) The reason is because you would be making a payment in inflation-adjusted dollars. In other words, you are paying less for the loan than when you started the loan because inflation has boosted your return.  

Inflation, however, can negatively affect housing prices if interest rates make the asset too expensive to borrow. As a result, fewer buyers will commit to borrowing mainly because of high rates, which can ultimately depress housing prices. We are not at that state like we were in 1981 when variable interest rates were around 17% for a 30-year mortgage in the Lakes Region. Yes, the current rate of 5.47% will likely increase as we head towards the new year; however, over the last 30 years, the average has been over 7%. So even today’s rates hovering around 5-5.75% are still a good deal by comparison.

The big picture

Yes, we do have real estate cycles that go up and down like the tides in the ocean. That’s what my friend and I talked about on Squam Lake this week. Both of us were blown away when we talked about a few examples of properties we sold back in the day and what they are worth today. Over time inflation always wins, and over the long-term, values will increase.

Examples we talked about

  • In 1977 on Big Squam Lake, I sold the West Wind Resort. The property included 8 acres with 426′ of shorefront, sandy beach, docking for 15 boats, 21 large housekeeping cottages, and a lovely owner’s residence for $209,500!

In August 2020, just one of the 21 cottages not even on the water sold for $650,000, and in June 2018, Roche Realty Group sold the same cottage for $467,000 (an increase of $200,000 in just two years)

In September 2022, a 0.61-acre island property on Ithaka Island with a 1,102 square foot cottage built in 1910, a gazebo, and a boathouse slip on the Squam Channel sold for $3,225,000! This is an excellent example of what inflation does to real estate.

  • Around 1980, I sold the original parcel of land to the developer of Samoset Condominiums on Lake Winnipesaukee in Gilford. The property included 850′ of shorefront with 22 acres and spectacular views. The purchase price was $250,000.

130 individual townhouses were built on the site. In the last 2 years alone, there have been 24 resales of the individual townhouses, with the average price at $577,311. The highest sales price was $829,000! How’s that for inflation?

  • In 1979 I sold Edwards on Wentworth Resort in Wolfeboro for only $500,000. The parcel included 50 acres with approximately 1 mile of shorefront on Lake Wentworth, Crescent Lake, and the Smith River. It included a colonial Inn, a scenic barn, a multitude of nice cottages, and a beautiful sandy beach.

The development turned it into a 44-lot subdivision with cottages, and today the individual lakefront homes sell in the $1,000,000+ range each…another example of inflation.

  • In 1980, I sold the Chanticleer Motor Inn and Cottages on Lake Winnipesaukee in Gilford to the developer of Broadview Condominiums for $500,000. The property included 640′ of shorefront on 10 acres with a 32 slip rock cribbed marina, an inn, and multiple cottages.

50 townhouses with attached garages were constructed on the site. In 2021 one of the 50 units on the upper level sold for $655,000, and a waterfront unit would sell for much more today.

  • In 1976, I sold Lakeport Landing Marina for $428,000. It included 600′ of waterfront, 154 covered and uncovered slips, 55,000 square feet of storage buildings, a storeroom, gas docks, a repair shop, and a towner’s residence. Today the marina is worth well up in the high millions. Inflation does its thing.
  • In 1978, I sold Whispering Pines Resort on Lake Winnipesaukee for $195,000 with 550′ of shorefront, 10 cottages, and a house. Ledgecroft Resort for $200,000 and the White Oak Motel for $188,000. In 2021 just one seasonal cottage out of 11 at Whispering Pines sold for $404,000.
  • In 1984, I sold 75 boat slips at Bayshore Yacht Club in Meredith on Lake Winnipesaukee that I converted to condos for the owner. They all sold in 3 weeks in the range of $8,000-$15,000 for a covered slip. Boat slip #13 Sold in 2021 for $179,900. A nice increase due to inflation.

So, using just a few examples above, you can see how inflation impacts property values. It only adds fuel to the fire, causing prices and mortgage rates to rise further, a double whammy where consumers’ dollars have less buying power and loans get more expensive. During my career, the trajectory has always been up, and you will see the normal cycles where prices correct, just like the stock market, and timing is critical. However, in the long run, with rising inflation, it only means that cash now holds more value than it will in the future, assuming inflation continues to rise.

Frank Roche, President of Roche Realty Group, Inc. with offices in Meredith and Laconia, NH

This article was written by Frank Roche. Frank is president of Roche Realty Group with offices in Meredith and Laconia, NH, and can be reached at (603) 279-7046. Please feel free to visit www.rocherealty.com to learn more about the Lakes Region and its real estate market.

winter Snowmobile

Real Estate in a Winter Wonderland

As I drove around the other day with my kids, I was looking at some ...
Read More →
Roche Realty Group Host Annual Toys for Tots Drive, Invites Community Participation

Roche Realty Host Annual Toys for Tots Drive

As the holiday season approaches, Roche Realty Group is excited to announce the kickoff of ...
Read More →
Small Business Saturday New Hampshire

Small Business Saturday: Living Gratefully in New Hampshire

We have so many things to be thankful for here in New Hampshire: plenty of ...
Read More →
Annie Brown Joins Roche Realty Group

Annie Brown Joins Roche Realty Group

Meredith — Frank Roche, President of Roche Realty Group, Inc., with offices in Meredith and ...
Read More →
Gunstock Mountain in Gilford, NH

Gunstock Upgrades for Winter as Real Estate Shows Resilient Growth

As the leaves of New Hampshire’s forests transition from the vibrant hues of fall to ...
Read More →
Preserving New Hampshire's Lakes

Preserving New Hampshire’s Lakes: A Community Effort

With over 250 lakes and ponds throughout New Hampshire’s Lakes Region, there are unlimited outdoor ...
Read More →
Home Inspections — The Uninspected Abode: A Spine-chilling Tale of Regret and Terror!

The Uninspected Home: A Spine-chilling Tale of Regret and Terror!

One night, not many years ago, in a quaint, somber town nestled amidst the haunting ...
Read More →
Interest Rates

Interest Rates Impacted by Treasury Yields

It looks like the national picture for housing stats has not improved in recent months; ...
Read More →
Local Housing Crisis: Challenges and Solutions

Local Housing Crisis: Challenges and Solutions

Our communities are facing a shortage of both residential and commercial properties, a scenario that’s ...
Read More →
Fall Splendor In New Hampshire

Fall Splendor in New Hampshire

New Hampshire in the fall is akin to stepping into a live canvas painting — ...
Read More →
Samoset Condominiums on Lake Winnipesaukee

Condominium Sales Surge in New Hampshire’s Lakes Region!

As we start entering October’s bright fall colors, I thought I’d take a look at ...
Read More →
Empowering your offer

Empower Your Offer in a Sizzling Real Estate Market!

As a seasoned real estate professional, I often consider the market conditions to keep myself, ...
Read More →
Reviews of New Hampshire's Lakes Region

Reviews of New Hampshire’s Lakes Region

We’ve had a great summer in New Hampshire’s Lakes Region, and we’re approaching the brilliant ...
Read More →
Waterfont Sales Activity Wolfeboro, New Hampshire

Waterfront Sales Activity in the Lakes Region

As we head into September, I have compiled data and insight into what is happening ...
Read More →
Labor Day Weekend

Labor Day Weekend in The Lakes Region

Labor Day Weekend has arrived, and the weather forecast for the Lakes Region looks fantastic, ...
Read More →
Interest Rates

The Mortgage Interest Rate Dilemma

This past week, we saw an increase in mortgage rates following a rise in bond ...
Read More →
Best State To Live In — New Hampshire at #3

New Hampshire 3rd Best State To Live In!

WalletHub just released its rankings of the best state to live in for 2023. It’s ...
Read More →
City/Town Comparison can make the research process easier

City/Town Comparison For Your Move

Some studies place moving to a new location as one of the top ten most ...
Read More →
New Hampshire Real Estate Lacks Inventory

New Hampshire Real Estate Inventory Crisis

A Multifaceted Analysis of Rising Interest Rates and Beyond New Hampshire is currently facing a ...
Read More →
Peaks of New England

Exploring the Peaks of New England

In my younger years in school, I always loved geography. Living in New Hampshire, there ...
Read More →
Climate Exodus: Insurance Companies Seeking Refuge from High-Risk Sates

Climate Exodus: Insurers’ Fleeing High-Risk States

Flooding, Forest Fires, Heat Waves, Tornados, oh my! The recent stretch of weather has certainly ...
Read More →
Real Estate News Headlines - Lakes Region NH

Real Estate Tidbits to Consider

Here are a few real estate tidbits I’ve pulled to keep you up to speed ...
Read More →
Roche Realty Group Sells out Lakeside at Paugus Bay

Roche Realty Group — 6 Months in Review

Closed sales for the first 6 months of 2023 have been impressive at Roche Realty ...
Read More →
Newfound Lake

Lakes Region Waterfront Sales Activity 6 Month Comparison

Below you will find data and insight into what is happening in sales activity on ...
Read More →
Buying Land

Buying Land in New Hampshire — Comprehensive Guide

New Hampshire, also known as the Granite State, offers a diverse landscape that includes picturesque ...
Read More →
Weirs Beach: A Tale of History, Community, and Natural Beauty

Weirs Beach: A Tale of History, Community, and Natural Beauty

As we celebrate the 100th anniversary of the oldest bike week in the country, let’s ...
Read More →
First Five Months of Lakes Region Real Estate

Five Months of Lakes Region Real Estate Activity

The month of May’s real estate statistics just came out for New Hampshire, and it ...
Read More →
A bird's eye view of Long Bay on Lake Winnipesaukee

South Down Shores and Long Bay on Lake Winnipesaukee — Its History

When construction started in 1981, Laconia’s South Down Farm offered a picturesque setting for condominium ...
Read More →
Memorial Day — rows of gravestones with flags in military cemetery

Memorial Day Weekend Arrives in the Lakes Region!

The long-anticipated Memorial Day weekend has arrived after a long winter, and the Lakes Region ...
Read More →
Unlike the dandelions new listings aren't popping up in the Lakes Region

Will Listings Start Bloom Like Dandelions?

Will Real Estate Listings Bloom Like Dandelions? During my rides around the Lakes Region, I’ve ...
Read More →
boat launch

Public Boat Launches in the Lakes Region

New Hampshire’s Lakes Region is a paradise for boating enthusiasts and we are now entering ...
Read More →
Real Estate Scams

Real Estate Scams to Be Aware of

One of my Realtors® received a call today from a gentleman purporting to be the ...
Read More →
Brant Point Lighthouse, Nantucket overlooking the ocean

From the Lakes Region to Nantucket

I spent a few days on Nantucket Island this past week for a quick getaway. ...
Read More →
Lakes Region Real Estate Is Still Hot

Lakes Region Real Estate Market is Sizzling

The real estate market in the Lakes Region and the state of New Hampshire is ...
Read More →
Lake Winnipesaukee Kayak

Buying a Lake House — Where to Start?

Owning a waterfront home in New Hampshire’s Lakes Region is a treasured experience. For many ...
Read More →
Home improvements

Home Improvements Before You Sell

One question I commonly get asked is, “What type of projects or improvements should I ...
Read More →
Single-Family units are down

How’s the Lakes Region Market Looking?

We’ve already passed the first quarter of 2023 for real estate sales in New Hampshire’s ...
Read More →
Moving into new home young happy couple celebrating toast Champagne

Buying a Home? Follow These Tips & Tricks

Spring has officially arrived and launches the beginning of our spring selling season for real ...
Read More →
Marketing

How Marketing Real Estate Has Evolved

Back in the year 2000, the world was at the beginning stages of a major ...
Read More →
Mount Washington, New Hampshire

New Hampshire — 30 Reasons to Move Here!

With lakes, beaches, mountains, forests, rivers, and the ocean for people who enjoy the outdoors, ...
Read More →
New Hampshire Ski Resort

Ski Resorts in New Hampshire Are Ready for Spring Skiing!

It’s been a good week, and mother nature hit our region with a blanket of ...
Read More →
Market Trends

Real Estate Market Trends to Follow

I’ve been pulling up some current research on the real estate market on a national, ...
Read More →
Carol Mattice

Roche Realty Group Welcomes Carol Mattice

Meredith — Frank Roche, President of Roche Realty Group, Inc, with offices in Meredith and ...
Read More →
Kevin Shaw - Roche Realty Group

Kevin Shaw of Roche Realty Group is Top Producer for 2022

Laconia— Frank Roche, president of Roche Realty Group with offices in Meredith and Laconia, recently announced ...
Read More →
Lisa Lewis

Lisa Lewis Joins Roche Realty Group

Meredith — Frank Roche, President of Roche Realty Group, Inc, with offices in Meredith and ...
Read More →
Wanda Keenan

Wanda Keenan Joins Roche Realty Group

Meredith— Frank Roche, President of Roche Realty Group, Inc. with offices in Meredith and Laconia, ...
Read More →
Land for sale

Buy Land in New Hampshire — They’re Not Making it Anymore

The science is in and the more trees a state has, the happier and less ...
Read More →
The Price of Real Estate

Did The Price of Real Estate Increase in Your Town?

Everyone’s always interested to see how their real estate values have performed over the past ...
Read More →
Laid off employee in recession

Are We Headed into a Recession?

It’s pretty big news lately; Microsoft, Amazon, and other tech companies have laid off more ...
Read More →
Price Reduced

2022 vs. 2021 — Is The Lakes Region’s Frenzied Market Over?

It’s that time of year to provide all of you with an update on real ...
Read More →

Leave a Comment