Lending reports

Recent Reports Document New Hampshire’s Struggle With Home Affordability

New Hampshire’s Housing Affordability Index fell to a record low in September, and two new reports — one from the NH Association of Realtors and the other from real estate data curator ATTOM — show the difficulties associated with the opportunity to purchase a single family home or residential condominium in the Granite State.

The September NHAR report showed the statewide affordability index was 69 for a single-family home, an all-time low; it was 87 for a residential condo.

The third quarter 2022 ATTOM report shows that homes in New Hampshire’s four largest counties by population (Hillsborough, Rockingham, Merrimack and Strafford) have become increasingly unaffordable over the years. This report showed that it is more difficult to buy a house in Merrimack and Rockingham counties than in Strafford or Hillsborough counties.

The measure is called the Housing Affordability Index. A value of 100 indicates that a typical median-income family has exactly enough money to qualify for a home. Any value below 100 means a family may have difficulty qualifying for a mortgage on a home in a particular area. The lower the value, the greater the struggle to pay the mortgage.

According to ATTOM, a California-based nationwide real estate data curator, the third-quarter affordability index in Merrimack County was 70, while the index was 71 in Rockingham County. In Strafford County it was 73 and in Hillsborough 74. The national average was 76.

It has not always been so. As recently as 2020, the Affordability Index was comfortably above 100 in these New Hampshire counties and the state, meaning home buyers in these areas on average had more than enough income. to qualify for a mid-priced home. For example, in the third quarter of 2020 – just two years ago – the accessibility index in Merrimack was 107, Rockingham was 103, Strafford was 104 and Hillsborough was 106. In October 2021, according to data NHAR, the state accessibility index was 109 for a single family home and 134 for a condo.

The Affordability Index is determined by calculating the amount of income needed to meet the major monthly expenses of owning a home – including mortgage (at prevailing rates), property taxes and insurance – on a single-family home at the median price. It assumed a down payment of 20% and a maximum “initial” debt-to-income ratio of 28%. This required income was then compared to annualized average weekly wage data from the US Bureau of Labor Statistics.

Median home prices are down, but they are still much higher than they were, and as prices moderate, mortgage rates are rising. They push towards 7% the highest rates since 2008.

“At this point, we need incomes to rise, not interest rates,” said NHAR Chairman Adam Gaudet, owner/broker of 603 Birch Realty in Concord. when asked what needs to be done to make homes more affordable.

He also said he “is noticing an increase in price reductions, signaling that sellers need to be realistic when pricing their homes. Buyers are spending more time looking at homes, and they’re expecting more of what their dollar will bring them. Sellers are getting fewer offers, and the offers they are getting are akin to asking for home inspections. We also don’t see any buyers offering to cover a potential valuation gap. The playing field has evened out a bit. »

Interest rates are a national factor.

“Homeownership remains largely unaffordable for the majority of buyers in the majority of markets across the country,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “Although house prices have fallen slightly quarter over quarter, they are still higher than a year ago and interest rates have almost doubled. Many potential buyers simply cannot afford the home they were hoping to buy, and in many cases they no longer qualify for the mortgage they need.

It’s a mirror of what’s happening in the Granite State, where the real estate market has been on an absolute tear for the past few years.

“We are seeing many more price reductions. We are seeing fewer multiple offers than last year,” said Chris Ware, owner/broker of Ware Group, affiliated with Keller Williams Realty Metropolitan, Bedford. “It’s slowing down considerably and it has a lot to do with interest rates. We have buyers who can no longer afford what they could before.

In New Hampshire’s least affordable county, Merrimack, for example, the median home price of $400,000 would require an annual salary of $61,542 to pay a monthly mortgage of $2,264, according to the ATTOM report.

According to ATTOM, higher interest rates, rising inflation, high fuel costs and a volatile stock market are straining the finances of potential buyers and threatening to stall or reverse an almost relentless rise in home values ​​that started when the market started to recover in 2012. Great Recession of the late 2000s.

Meanwhile, prices for family homes and residential condominiums continued to moderate in September, according to the latest report from the New Hampshire Association of Realtors.

Home prices peaked in May and June at a record median price of $460,000, and have been falling ever since: $450,000 in July and August, and $440,000 in September.

Although that’s $20,000 less than it was at its peak in the spring, it’s still 10 times higher than it was in September 2021 and the NHAR says it’s the highest median price on record for September.

The median year-to-date price also remains historically high, according to the NHAR. At $445,000 in the first nine months combined, that’s 13% higher than the same period in 2021, which had been the highest on record so far.

Condo prices also peaked in the spring/summer at $350,000 in June. They have since moderated to a median of $345,000 in September, but again still higher than they were a year ago by 15%.

The most expensive county in the state in September remained Rockingham, according to NHAR data, with a single-family home priced at a median of $549,900, up 6.8% from a year ago.