Driven in large part by the pandemic, NH’s residential real estate market has been red hot, but it won’t last forever, says Matt Neuman, owner and operator of Absolute Title in Bedford.
As the economy adjusts to the Biden administration, Neuman anticipates the market will slow down and mortgage rates will increase in the fall.
That prediction is bolstered by a recent report from the National Association of Realtors (NAR) that shows pending home sales dipped for a second straight month in February in each of the four major U.S. regions. The Pending Home Sales Index, an indicator of home sales based on contract signings, dropped 10.6% in February. Year-over-year contract signings fell 0.5%.
“The demand for a home purchase is widespread. Multiple offers are prevalent and days-on-market are swift, but contracts are not clicking due to record-low inventory,” says Lawrence Yun, NAR’s chief economist. However, Yun says, even with rising mortgage costs, he expects rates to remain relatively low at no more than 3.5% in 2021.
Neuman says 2021 will still be a great year, adding 2020 was unusual as there was tremendous volume just as the economy was beginning to shut down in March. “We saw our numbers literally explode,” he says. “At the start of the pandemic you had people stuck at home saying, ‘Hey I’m not really happy here, maybe it’s time to upgrade.’”
Historically low interest rates also helped fuel a seller’s market and put even more pressure on an already low inventory, driving up prices and competition. “You get into a bidding war. Buyers are willing to accept that it’s not going to appraise for the sales price and come to closing with additional money over and above what they’re borrowing,” Neuman says. “We see that situation happening all the time over multiple offers.”
While new homes are coming on the market and new construction remains strong, that sector is running into some risk, he says, adding, “The cost of materials has skyrocketed. In a recent transaction, I saw a 40% increase from when the original contract was signed nine months ago to where we are now.” Shortages and other supply chain issues could slow projects even more.
Neuman says the federal government will have to adjust interest rates at some point, and it is likely to happen in the fall.
“The U.S. economy can’t maintain these rates forever. I think it is a matter of time before we see them climb back up into the high fours or low fives,” he says., “I don’t think we’ll see them back up to 18% like they were in the 80s.”
Over the past 15 years, Absolute Title has handled more than 34,000 transactions, says Neuman, and there has always been regional migration from New York and New England, people buying second homes or completely relocating to NH.
“People are trying to escape the urban areas, and the second home market has just exploded,” he says. “The pandemic has shown many different industries that it is possible to work from home and for their workforce to be productive, so it makes New Hampshire even more attractive.”
For more information, visit absolutetitle.com
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