Many people have grown accustomed to mortgage interest rates holding steady for the last several years, but that may give buyers a false sense of security.
Regional manager John MacGilvary of Prudential Verani Realty’s office in Londonderry said buyers putting off shopping for a new home may find interest rates on the rise in the near future.
“What people forget is that historically, interest rates have been around the 8 percent mark,” MacGilvary said. “The interest rate you can get today will probably begin to rise in the next year, making now one of the best times to buy.”
While the Northeast in general saw a 10.9 percent decrease in sales, according to the National Association of Realtors, New Hampshire saw a modest decrease of 4.3 percent in February, but a whopping 55.9 percent increase in pending sales for March.
“Each market has to be looked at separately because each area or region has felt a different economic impact from job losses and the recession,” MacGilvary said. “Towns like Exeter were not hit with the economic fall like the community of Nashua. Sales in Rockingham County are doing well.”
Home prices are holding steady in Rockingham County and have for the last year, which makes it a great time to buy and to sell a home. Most homeowners thinking about selling now talk themselves out of it because they feel they will get less for their home than a few years ago. What they overlook is that the new home they will purchase will also be priced lower.
“It is all relative,” MacGilvary said. “Homeowners need to decide if it is worth it to stay in a home that perhaps does not fit their needs any longer, in hopes of getting a higher asking price down the road, or finding a home that meets their needs and will increase in value as well. Most cases it is a wash and it is worth it to find a home that fits your needs and makes you happy.”
Buyers have an excellent chance of watching the equity in their new home grow steadily over coming years. Over the last 50 years, home values have historically increased an average of 6 percent per year.
So with all that said, is it still a buyers market? Yes, but inventory is shrinking. With the current market showing that if sales continue as they are, there are only about 12 months of inventory left on the shelf. This number fluctuates from month to month, depending on demand from buyers and new listings. A normal market experiences five to seven months of inventory, so it is a great time to sell as your competition is waning, while demand is increasing.
With new construction still moving very slowly toward recovery, there will be a growing demand for more pre-existing homes for new buyers. About 40 million baby boomers are getting ready to downsize their homes. MacGilvary said new construction is producing smaller homes for empty nesters. However, with 80 million people just starting to buy their first home, it means there could be a large shortfall of inventory for the future.
“We are actually seeing multiple offers again,” MacGilvary said. “It has been about four years since we have seen this, but it is back.”
So what does this mean for prices? Rockingham County has seen home prices stabilize over the last 12 months. It is taking slightly less time to sell, with average days on the market dropping 2.7 percent from last year. Though sales were said to be a challenge in the Northeast in the first quarter, sales in Rockingham County were down only 1 percent, which is fairly insignificant compared to the increase in pending sales recorded in March.
All trends imply the market is improving. What is an agent’s toughest challenge now? MacGilvary said it seems to be getting buyers to realize prices are solid and on the rise, and also finding the right home to fit a buyer’s needs in a market that is lacking inventory.
“Our challenges have shifted, but in a very good way,” he said. “Not long ago, we had to explain to sellers why their home was worth less. Now sellers are somewhat understanding, and many buyers still think they can offer much lower than the asking price and get a deal. I think everything is coming back into balance, slowly, but it is coming.”
Margherita Verani is president of Prudential Verani Realty, which has local offices in Portsmouth, Exeter, Hampton and Epping.
Column appeared in The Porstmouth Herald April 18, 2011