What if it’s not a bubble?

Housing Bubble

It’s a mad mad mad world of real estate right now.  The frustrations of buyers and the skyrocketing prices have led many to assume that we are living through a 2008-style cycle of boom and bust. There’s almost a presumption that in the coming months we will see a massive “correction’ of the Lakes Region market and prices will drop.  Agents, mortgage providers, buyers, and interested observers seem to all be on the same page about this.

What if they’re wrong?

History tells us that the torrid increase of home values and miniscule days-on-market can’t continue, but there are ample reasons to be confident in the relatively long-term health of the market.  First, the demand for new homes is being driven by qualified buyers subjected to more stringent loan regulations than they were in the early part of this century.  In addition, these buyers are not the speculative buyers of years past, they are “end-use” buyers, millennials and others who are qualified and ready to enter the market. Changing demographics and the relative youth of many in the “First Generation Wealth” category also play a role in the burgeoning demand.

Secondly, it is important to remember that the increasing values are being driven by an incredibly low inventory of existing homes and the high cost and regulatory hurdles inherent in building new ones.  If anything, we are experiencing a “housing vacuum” that almost literally sucks up new listings within a few days.  One statistic, days-on-market, tells the story: In Belknap County in the 1st Quarter of 2021 single family homes spent an average of 45 days on the market, a 43% decrease from the previous year. The condo market was even more robust, with an average of 36 days on the market, a reduction of over 50%.

One of the most important fundamentals in the real estate market is the historically low interest rates.  It is expected that they will rise in the relatively near future, especially as government policies increase the potential for inflation.  However, they would have to raise substantially to impact a noticeable number of buyers.   Marcie Gowen-Nobley of Woodsville Guaranty in Plymouth agrees, saying “I don’t foresee an increase in interest rates in the next six months and any potential increase would be so moderate as to not affect the buying market.”

What about the mortgage forbearance due to COVID and the possibility of a flood of foreclosures when those programs end?  That shouldn’t be an issue for the vast majority of affected borrowers who have seen the value of their homes rise dramatically in the last 12 months. Most of these homes will be put on the market that can easily absorb their addition.

So, as I asked at the beginning, what if it’s not a bubble? What does the future hold? In my opinion we will see a plateauing of local real-estate values in the relatively short term followed by a more rational increase.  This is the “New Normal” and we have to accept the good and bad that comes with living in a place that others want to make their home.  

The takeaway:

  • Buyers should feel confident that the investment they are potentially making is well placed.  
  • Sellers should know that while this is certainly a great time to sell, that there is no rush, and no reason to catch an imagined wave that will leave them behind.  
  • Builders should be confident that qualified buyers will be there as they pursue long term developmental opportunities. 

There are obvious potential externalities that could alter things.  War, calamity, pandemic, natural or man-made disaster, we have seen them all before and one day we will again. But short of that, we need to remember why we live here and understand that the great quality of life in New Hampshire’s Lakes Region will continue to draw seasonal and full time homeowners in ever-growing numbers. And while we need to listen to the lessons of the past, ultimately the future is what we make of it. 

Jeremy Avery, Realtor at Roche Realty Group, Inc. with offices in Meredith and Laconia, NH

JEREMY AVERY IS A REALTOR IN THE LACONIA OFFICE OF ROCHE REALTY GROUP. HE SPECIALIZES IN NEW CONSTRUCTION AND WATERFRONT PROPERTIES. HE CAN BE REACHED AT 603-481-2657 OR BY EMAIL JAVERY@ROCHEREALTY.COM OR THROUGH HIS WEBSITE WWW.JEREMYAVERYHOMES.COM


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