Housing Market Update Dean J. Christon, Executive Director New Hampshire Housing Finance Authority October 19, 2016

The Housing Environment Significant economic and demographic shifts The state is growing much more slowly than in the past Younger residents - improving job prospects but… high levels of student debt, delaying household formation, and unsure of the benefits of homeownership vs. mobility. Seniors will occupy a growing proportion of the State’s housing Not the largest, but the fastest growing, and they want to age-in-place as long as possible, but… Service needs

The Housing Environment Current housing supply is poorly aligned with preferences of both older and younger age groups Mismatch between smaller household sizes and larger homes, not near urban amenities and services Lack of rental units Retrospective land use regulations, are not geared towards evolving market needs. Regional differences are more evident North vs. South The Housing Environment

Homeownership

Sales volume has been rising At 2,099, Sept 2016 sales were 7.7% above the prior year. The statistics used in this analysis are based on information from NNEREN for the period January 2003 through August 2016 for all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of NHHFA and not that of NNEREN. This analysis excludes land, interval ownership, seasonal camps/cottages, multi-family property, mobile/manufactured homes and commercial/industrial property.

Housing inventory declining A shortage in some markets, especially below $300,000 Sept. = 7 mo. An inventory of less than 6 months indicates a sellers market. The statistics used in this analysis are based on information from NNEREN for the period January 2003 through August 2016 for all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of NHHFA and not that of NNEREN. This analysis excludes land, interval ownership, seasonal camps/cottages, multi-family property, mobile/manufactured homes and commercial/industrial property.

Coos Grafton Carroll Merrimack Cheshire Hillsborough Rockingham Sullivan Belknap Strafford County Inventory (Months) Coos 17.2 Sullivan 12.4 Grafton 11.2 Carroll 10.6 Belknap 9.8 Cheshire 8.5 Merrimack 6.5 Strafford 5.8 Rockingham 5.6 Hillsborough 5.4 Inventory varies widely from North and West to South and East. Southern counties are suffering shortages in hot markets. The statistics used in this analysis are based on information from NNEREN for the period January 2003 through August/September 2016 for all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of NHHFA and not that of NNEREN. This analysis excludes land, interval ownership, seasonal camps/cottages, multi-family property, mobile/manufactured homes and commercial/industrial property.

Median prices have reached the peak from the early 2000’s Sept 2005 = $249,000 Sept 2016 = $245,900 The statistics used in this analysis are based on information from NNEREN for the period January 2003 through August 2016 for all towns in the State of New Hampshire. All analysis and commentary related to the statistics is that of NHHFA and not that of NNEREN. This analysis excludes land, interval ownership, seasonal camps/cottages, multi-family property, mobile/manufactured homes and commercial/industrial property.

New vs. Existing Homes A lack of new single family construction $344,200 $312,500 - 2006 $225,000 $245,000 - 2007 Source: 1990-2014 - NH Dept. of Revenue, PA-34 Dataset, Compiled by Real Data Corp. Filtered and analyzed by New Hampshire Housing. 2015-16 - The Warren Group. Filtered and analyzed by New Hampshire Housing. The gap between new and existing has grown. New is now 53% higher than existing, but… New home sales are only 2.5% of the market. New Home sales in the Northeast are down 25.8% from last year. Source: Mortgage New Daily.

Some increase, but single family building permits are at 1962 levels CY 2015 2,424 1,927

Foreclosures are continuing to decline slowly 2016 total is Projected to be 13% lower than 2015

NH’s foreclosure initiations, delinquencies and foreclosure inventory are all lower than NE or US NH = .25% US = .32% NE = .40%

NH’s foreclosure initiations, delinquencys and foreclosure inventory are all lower than NE or US NH = 3.95% US = 4.64% NE = 4.72%

NH’s foreclosure initiations, delinquencys and foreclosure inventory are all lower than NE or US NH = .91% US = 1.64% NE = 2.12%

Ownership Market Summary Homeownership market has largely recovered from the recession Upward pressure on prices due to limited supply Despite record low interest rates, limited supply and other barriers to first-time buyers continue to exist Ownership Market Summary

Rental Market

Rental costs continue to climb 12% in the last three years $1,206 $1,076 Results of New Hampshire Housing’s 2016 Residential Rental Cost Survey are consistent with those found on a national level.

Highest Rents are closest to the Boston labor market Coos $790 Grafton $1,134 Carroll $986 Merrimack $1,120 Cheshire $1,045 Hillsborough $1,278 Rockingham $1,321 Sullivan $965 Belknap $996 Strafford $1,083 Monthly Median Gross Rental Cost 2016 Median Monthly Gross Rent For 2-Bedroom Units Less than $900 $900 to $1,100 $1,100 to $1,200 More than $1,200 Highest Rents are closest to the Boston labor market

Coos $790 Grafton $1,134 Carroll $986 Merrimack $1,120 Cheshire $1,045 Hillsborough $1,278 Rockingham $1,321 Sullivan $965 Belknap $996 Strafford $1,083 Monthly Median Gross Rental Cost 2016 Median Monthly Gross Rent For 2-Bedroom Units Less than $900 $900 to $1,100 $1,100 to $1,200 More than $1,200 Most of the rental units in the state (77%) are located in Hillsborough, Rockingham, Merrimack and Strafford Counties

Grafton is the exception… For 2016, no rental cost increases in most rural counties No Increase Increased Rental Costs Coos Grafton is the exception… Hanover/ Lebanon Grafton Carroll Belknap Sullivan Merrimack Strafford Hillsborough Rockingham Cheshire

Vacancy is the lowest since 2002 All 1.8% 2 Br 1.5%

Low Vacancy Impact Higher rents Harder for low income households to find homes Few available and landlords have a choice Competition for limited units Need search assistance Increase in “doubling up” Some increased construction of multi-family units, but at the high end of the market Low- to moderate-income renter households paying a greater percent of their income on housing costs. Low Vacancy Impact

Affordability Half of all households in rental units earn less than $40,800 per year and the percentage of market rate units that are affordable to them is low.

Renter Households By Age Group and Those Paying 30% or More of Household Income for Housing 44% of the state’s renter households are overpaying That’s 66,300 of New Hampshire’s 150,900 renter households Overpayment affects all age categories.

High levels of student debt (highest in the US). $36,101 per graduating student (2015) 76% graduate with debt Difficulty acquiring down payment (influencing factors – job quality and high rents). Competition with older buyers (who have equity) for smaller starter/down-size homes. Demographic and social factors. Delayed relationships (HH formation, careers/mobility, jobs) Challenges for Renter Households – Impeding their ability to achieve ownership

Some renter household income growth Possibly due to the barriers to “buy-out” of the rental market. May indicate the strengthened influence of factors other that income in the decision to buy.

Questions For The Future Will home purchase prices/market recovery level off? When millennials form households, will they eventually create more demand for ownership? (and free up rental units) Will community services be available for seniors, especially as “Family” renters become “Senior” renters? Will the market respond to the need for more rental housing? How severe will local resistance (NIMBY) be when or if there is the a resurgence of new construction? Will a shortage of affordable housing constrain the State’s economic growth (given our <3% unemployment rate and our very low vacancy rate)? Questions For The Future