Article by Frank Roche, President of Roche Realty Group.
Real Estate activity for the first eight months in the Lakes Region has been very robust. I have spoken with many Realtors® in our market area; they have all indicated the same trends. There is a lot of buyer interest with a limited amount of inventory for specific sectors of the market. This is the theme in many major markets throughout the country. The Lakes Region generally lags what is happening on the West Coast and in major cities in the Northeast such as Boston and New York. In the past, I have usually seen our trends start to follow the above markets within a two-year time frame. Based on the results I have seen this year to date, we appear to be following that rule of thumb. Here is insight on what I have seen happening recently in the Lakes Region:
During the first three quarters of 2019, the Lakes Region experienced an increase in market activity. For the eight towns surrounding Lake Winnipesaukee, the total closed sales volume of residential properties was $270,349,953 and represented an 8.3% increase over the same eight-month period of 2018. The median sales price increased by 5.6% to $299,950, whereas the average selling price went up 7.3% to $495,146. (Keep in mind that these numbers are inflated because they include waterfront sales within the residential homes category.)
The numbers above look good, considering we had a significant lack of homes for sale available compared to the previous year.
For the first eight months of 2019 waterfront properties in the eight towns surrounding Lake Winnipesaukee showed a closed sales volume of $122,373,700, which represented a 5.8% increase over the same period in the previous year. It is interesting, however, that the median selling price of $997,000 dropped 3.3% compared to the average selling price of $1,390,610, which increased by 14.3%. Several factors caused this disparity: The number of listings sold (88) dropped 7.4% compared to 2018, whereas on the high end of the market involving sales over $2 million, 17 properties sold in the first eight months of 2019 versus only 9 in the first eight months of 2018. This is a substantial increase.
The sales volume for properties in the $2 million range amounted to $56,980,750. This represents a 126% increase in sales volume compared to the same eight-month period of 2018.
It’s hard to say what caused this spike in high-end sales during the first eight months. My guess is the stock market provided many investors with substantial returns over the past ten years. A number of them pulled some money out of the market and acquired a lakefront home as a vacation property to diversify their portfolios. We also found some business owners sold off their companies and used some of the proceeds to acquire a second property. This significant increase surprised me considering the new tax law changes regarding the deductibility of property taxes and mortgage interest limitations.
As I said earlier, the Lakes Region market seems to lag the west coast and other significant markets. According to Redfin, sales of homes priced at $1.5 million or more fell 5% in the United States in the second quarter of 2019. There is nearly a 3-year supply of luxury listing in Aspen, CO, and The Hamptons in NY. Sales of properties over $2 million on Lake Winnipesaukee preformed utterly different than the national trend. Lake Winnipesaukee sales soared during the first eight months for properties over 2 million from a percentage standpoint.
Among the towns bordering Lake Winnipesaukee, seasonal homes represent more than 30% of all housing units in seven out of the eight towns. Respectively, Moultonborough has 60% seasonal homes, Tuftonboro has 53%, and Alton has 45% seasonal homes. Laconia was the lone exception with seasonal homes accounting for approximately 25% of the housing inventory. Second homes have shaped the Lakes Region into a very attractive mecca for the entire Northeast. We are New England’s playground — consistently growing as a haven for seasonal homes. The Lakes Region is a premier destination for affluent professionals seeking to vacation or semi-retire to a slower pace of living amid excellent recreational and cultural opportunities.
All types of properties have sold this past season. There was an extreme demand for starter homes for first time home buyers. However, finding homes priced under $200,000 has been increasingly difficult. Presently there are only 40 homes available in the eight towns surrounding Lake Winnipesaukee. There is a need for more affordable housing in our region. Unfortunately, the cost of new construction is so high it makes a resale product the only possible choice. The City of Laconia and some of the outlying towns have been solid choices for first time home buyers.
We have seen an increase in the upper price point of the non-waterfront residential market. Homes in the $350,000-$700,000 price range have seen some increases compared to previous years when the sales momentum was slower at this price point.
Water access communities such as South Down Shores and Long Bay on Lake Winnipesaukee have seen incredible demand this past season. Properties have been snapped up at a rapid pace and days on the market have dropped considerably. There are so many water access and condominium communities located on the various lakes that have been in significant demand. Listings are not plentiful this year, which has caused multiple offers in several sales. We have seen an increase in escalation clauses where buyers have been willing to pay a certain amount over the asking price.
The aging population and demographics of Baby Boomers continue the demand for semi-retirement properties scattered throughout the Lakes Region. This segment of the market is looking to downsize with master suites on the first floor and a more favorable low maintenance environment. The recreational resources and natural beauty of our region are drawing extreme interest from this segment of the market.
Today’s consumer is benefiting from a low-interest rate mortgage environment presently at 3.72% +/- for a 30-year fixed-rate mortgage and a 3.09% rate for a 15-year fixed-rate mortgage and healthy gains in the stock market during the past ten years. It is still a Seller’s Market out there. However, we are starting to see a gradual increase in new listings coming on the market.
Sales of commercial properties have finally started to show a gradual increase after a lag of activity for about eight years. At Roche Realty Group, we have produced some significant sales, from an array of buildings in the Lakeport area of Laconia along with office buildings and large commercial buildings on Union Ave. We have sold major storage and office buildings in Meredith and a few restaurants and a nightclub in the Weirs Beach area and Gilford. There was a major expansion of marina boat storage buildings throughout the region as well as self-storage buildings constructed. New businesses and medical facilities are opening, and residential builders and commercial contractors have been out straight this past year.
Looking ahead, we should be cautious and factor in similar market trends we have seen in the past. As a 43-year veteran of selling Lakes Region real estate, I have witnessed four major cycles with considerable volatility. There are many global concerns out there which could light a fuse and disrupt the market. It is crucial to stay educated on major events that are occurring and see how they will influence real estate trends. Ongoing trade wars, Brexit, central bankers, and political uncertainties worldwide could be of influence. You have to watch the bond yields which have been heading south and the negative yield curve.
I feel consumers and businesses have responded conservatively this time around unlike the last housing boom. Homeowners have not been using their homes like ATMs where many of them fell underwater as a result. There have not been as many cash-out refinances, and savings have increased significantly since the recession. Homeowners are presently sitting on a good amount of home equity and are not tapping it out like in the past. The low mortgage rate environment is helping, and the consumer is little more disciplined this time around. The Lakes Region has benefitted from the strong economy in New Hampshire and the Greater Boston market which has performed exceptionally well. We are in a good place right now. Let’s hope 2020 provides stability and a continuance of our positive real estate trends!
Frank Roche is the president of Roche Realty Group with offices in Meredith (603-279-7046) and Laconia (603-528-0088). You can learn more about the company and research a wealth of Lakes Region real estate information at: www.rocherealty.com