Realtor forum assesses slower N.H. real estate market
New Hampshire’s Seacoast Region remains a bright spot compared to the rest of the state and nation in real estate sales and prices, according to John Rice, president of the Seacoast Board of Realtors.
Rice and other experts in banking and housing briefed a group of some 40 real estate brokers Feb. 6 during a panel discussion in Portsmouth.
“Downtown Portsmouth is a hot market for residential real estate,” Rice told the group. He pointed out that homes there are generally on the market for days, compared to weeks or months in other parts of the region. Other factors boosting local sales and values include lower mortgage interest rates and a relatively small inventory of unsold homes.
Rice also indicated that his firm recently has seen an increase in sales activity, but conceded that the Seacoast market is relatively slow compared to the boom years of the last decade.
“Yes, we have a dramatic decrease in sales from 2007, but we also have a dramatic increase in pendings, and I’m calling that the interest rate dividend.”
Jim Lyons, president of the New Hampshire Association of Realtors, said that New Hampshire’s residential real estate market can’t be compared to the rest of the country, adding that the state has experienced a modest correction, in comparison to recent years, when sales and prices escalated.
“While the national media would have us believe that the housing market is falling apart, the reality is that New Hampshire is nothing like that. The fact is that the median price declines have been less than 2 percent,” said Lyons.
Lyons said that, compared with other sections of the nation, New Hampshire has fared better in real estate values. At the same time, he conceded that sales volume has declined more dramatically, more than 10 per cent over the last year. That compares, he pointed out, to the national decline of nearly 18 per cent over the same time period.
Jay Gibson, president of Piscataqua Savings Bank in Portsmouth — with some 35 years of experience in banking — keeps a close watch on the real estate market. Gibson said that he blames the decline in the real estate market on the proliferation of subprime loans. “A year ago, we were in the early stages of recognizing the magnitude of this subprime mortgage crisis,” Gibson said. “We became aware of the extent to which high-risk mortgage loans had been made across the country,” Gibson said, adding that the loans “ignored a variety of traditional underwriting standards.” Gibson said.
Gibson said that, nationally, subprime loans have represented a significant percentage of loans originated in the past 18 months.
“New Hampshire, on the other hand, had much lower levels of subprime lending activity. Lending practices were generally more traditional and prudent.”
Gibson also pointed out that income levels in New Hampshire, and the Seacoast in particular, are higher than in most areas of the country.
“Furthermore, we had not built a large inventory of speculative housing, so there was less demand for subprime products.”
A recent New Hampshire Bankers Association study found that 30 per cent of new mortgages written between 2003 and 2007 were subprime. It also found that many mortgages that remain continue to be subprime.
“The study provided an objective analysis of subprime lending,” Gibson said. “It served as a basis for New Hampshire banks, regulators and legislators to have a realistic expectation for anticipating delinquencies and foreclosures.”
Gibson concluded by saying that subprime lending practices will continue to have a negative effect on the 2008 housing market in New Hampshire. Some of that impact, he said, will be mitigated by state and federal Legislation that restricts activity in the subprime industry.
“Looking ahead, mortgage money will be readily available, subprime products have basically dried up, but traditional lending remains very strong.”
Another expert on the panel, Peter Stanhope, president of the Stanhope Group, a real estate appraisal firm, noted that most of the subprime lenders in New Hampshire “are not with us anymore.”
In fact, Stanhope said that of the several subprime mortgage companies still operating in the state, only one remains active, First Franklin Financial.
“It’s my understanding that they are an affiliate of Merrill Lynch, and their window is effectively closed. We have eliminated those borrowers who were consuming single family dwellings out of the supply side using the sub-prime mortgage product to buy”
New Hampshire’s housing market, isn’t likely to be affected by overbuilding, according to economist Dennis Delay, deputy director of the New Hampshire for Public Policy studies, who also was on hand for the forum.
“Clearly we were headed for an overhang in the real estate market back in the ‘80s, when some 18 thousand housing units were built annually. If you look at 2007, you’re looking at a more moderate level in line with past expansions. We’ve seen the decline that really started a couple of years ago.”
Still, Delay pointed out, there is still an issue of affordability for housing in the Seacoast and New Hampshire that is affecting the real estate market.
Nevertheless, looking ahead, Rice said, he is “cautiously optimistic” for a residential real estate rebound.