Sunday, October 30, 2005
By CHLOE JOHNSON
Staff Writer
Realtors and economists say housing prices are beginning to fall as the real estate market stabilizes.
The supply of housing has increased by 20 to 25 percent since 2004, and demand essentially has been met, said Russ Thibeault, president of Applied Economic Research in Laconia.
"It's a more normal market," he added.
Buyers can take their time shopping and make offers below the asking price, he said.
The change comes after years of soaring property values, with New Hampshire's home prices doubling since the late 1980s, Thibeault said. He also said rising interest rates have driven prices lower, a trend that could continue.
He wouldn't predict future prices, but called the current cost of homes an impediment for buyers and a factor in the market shift.
New Hampshire's housing prices rose by 12.4 percent from the second quarter of 2004 to the second quarter of 2005, according to the Office of Federal Housing Enterprise Oversight. Nationally, the change was 13.4 percent, the highest increase in more than 25 years. Maine's increases were nearly identical to the national average.
But now, parts of New Hampshire that were recording double-digit increases in appreciation are heading back toward the single digits, said Sean Darby, a Hooksett-based real estate appraiser. He described the decline as "rapid."
David Jensen of Region Appraisal in Merrimack said new housing construction still is occurring, but homes now tend to spend months on the market.
Ross Gittell, a professor with the University of New Hampshire's Whittemore School of Business and Economics, said housing prices eventually will rise again after they decline. But he predicted the rate of future increases would not match recent spikes.
Gittell, who is also vice president of the New England Economic Project, said industries based on real estate will see a decline in employment, including construction, mortgage banking and real estate sales. He also said sales of large appliances such as refrigerators will go down. The ability of homeowners to refinance their mortgages based on appreciating house prices will lessen, providing less money to fuel consumer spending and lowering retail sales, he said.
Darby agreed, saying foreclosures are rising. Increasing prices created equity for homeowners, establishing new collateral for them to borrow against. Many people took advantage of that and refinanced their mortgages several times as their home values rose, Darby said.
He added that he has reappraised some of the same houses several times in recent years.
As property values decrease, some people may end up owing more on their mortgages than their houses are worth, he said.
Rising interest rates also can drive up monthly payments on variable rate mortgages, possibly stretching finances too thin for some homeowners. Catastrophic events or economic stresses like rising oil prices then can more easily drive such people into the red, he said.
Jensen said homeowners who took out equity lines of credit likely will face higher payments as interest rates rise. Rising interest rates also will have an affect on the availability of money to consumers, making loans less readily available because their debt-to-asset ratios have changed.
Bankruptcy law is changing as well, making it more difficult to escape debt, Darby added.
"It's going to hit home with people," he said.
The changes in the market haven't quite been reflected throughout the entire property sales pipeline. Leo Lessard, Strafford County Registrar of Deeds, said there were nearly 200 more deeds issued in the first nine months of this year than in the same period last year — 4,210, up from 4,013.
Still, he said, refinancing is down. He reported about 500 fewer new mortgages so far this year than in the same period last year. He also reported an increase in foreclosures during the period, from 20 to 29.
© 2005 Geo. J. Foster Company
