by Ayla Yersel The housing market in Vermont showed further signs of recovery in 2013 as consumer confidence continued to grow in the aftermath of the housing bubble of 2008, with an increase in pending home sales and total housing transactions. According to the RE/MAX of New England February Monthly Housing Report, Vermont experienced a boost in total housing transactions, up 18.2 percent, while median price decreased 6.4 percent year-over-year. Pending sales were up 12.9 percent year-over-year.
The numbers reflect a growing trend in the Vermont real estate market, as consumer confidence grows, according to Eileen Townsend, a Realtor in the Greater Burlington and Chittenden County market.
“I definitely see more confidence, both among buyers and sellers,” she said.
Statewide, 5,310 single family homes were sold in Vermont in 2013, with new construction accounting for 181 of the reported sales in 2013 statewide. In the condominium market, there were 1,224 closings last year statewide, according to the Multiple Listing Service (MLS).
There are currently 6,208 single family homes for sale in Vermont, with 1,356 condominiums presently offered for sale, according to the MLS.
At the same time, Townsend said there is also a sense of urgency among buyers.
“It’s a balance between confidence and fear,” she said. “[Buyers] are more confident because they’ve got great interest rates, but they don’t know what’s coming along in another year or two, and so they want to get the process done.”
Charlotte Gardner, Realtor for the Burlington area, said that the number of days on the market has decreased 6 percent from 2012, with homes going under contract within 97 days as of January 2014.
According to NNREN data, limited inventory in Vermont paved the way for price increases in the state. Higher inventory shortages are anticipated for 2014. The total number of single-family transactions has increased 14.6 percent year-over-year, the largest increase in this category in New England.
Brad Dousevicz, 2013 Board President for the Home Builders and Remodelers Association of Northern Vermont, attributes this increase in single-family homes to a few causes – an improved market, and an increase in new construction inventory due to an increase in homebuilder confidence.
“I think what we’re seeing is a rebound in the new-home construction market,” he said. “I think a lot of builders were sitting to see how the market was going to respond, and home builders were starting to increase their inventories slowly in 2012 to test the waters from the market crash of 2008-2009.”
With more inventory to choose from, homebuyers might lean toward new construction more often, he said.
“Builders have more confidence that if they put up a spec home or start a new neighborhood, there will be more interested parties to buy those properties,” he said.
“I think what’s happening is that builders and developers may have sat on their projects for a couple of years, and then in 2012 and 2013 start to put those projects to market,” he said.
The housing market of late has been slowed by the long winter, in Vermont and throughout New England.
Across the region, winter snowfall and frigid temperatures significantly impacted the housing market. The RE/MAX report shows a drop in sales, year-over-year, in every state in New England except Vermont. On average, median prices throughout New England were up 1.3 percent in 2014 and pending sales rose to 28.3 percent.
“This is an expected trend in the height of the winter months,” said Dan Breault, EVP/Regional Director of RE/MAX of New England. “The good news is that month-over-month pending sales are up 26.4 percent. This is an encouraging sign and I anticipate March and April to be even stronger months as we turn the corner from winter to spring.”
Overall, construction activity in Vermont has increased from 2012 to 2013. Nonresidential contracts increased from 2012 to 2013 by 62 percent, while nonbuilding contracts increased by 10 percent, according to data released by McGraw Hill in its FW Dodge report.
However, Vermont’s construction jobs decreased from 2013 to 2014. The state, which reported having 13,800 in January 2014, lost 800 construction jobs between January 2013 and 2014, a 5.5 percent decrease, the largest percentage decline in New England, according to a statement released by the Associated General Contractors of America (AGCA).
Gardner said housing prices are starting to rebound, but are not yet back to the pre-recession prices.
The market activity increased once the recession eased, she said.
Charlotte Gardner said, “2013 saw a noticeable decline in available inventory in many market areas.”
“The second home market always takes longer to recover from recessionary events, so counties which have a heavy second home market are taking longer to rebound,” she said.
These changes are affected by a multitude of factors including the local economy, the supply and demand ratio, the changes in housing needs due to personal circumstances, including marriage, divorce, birth, death, job improvements and job loss, as well as state and federal actions, she said.
As an example, when the Federal government shut down last fall, there was a decline in market activity due to the unpredictable results of the shut-down.
“And of course, the value of our dollar on the global market has an impact,” Gardner said.
Chittenden County seems to be the most active area of the state with only 7 percent of the single-family inventory as active and 21 percent of the reported closed listings in 2013. Of the 5,310 single family homes sold statewide in Vermont in 2013, 1,120 were sold in Chittenden County, Gardner said.
Carol Audette, Realtor for Chittenden, Addison, Franklin and Grand Isle Counties, reported that the median price in the counties of Chittenden, Franklin, and Grand Isle is up 4.4 percent from 2012.
In Chittenden County, 335 homes are for sale, with an average of 45 to 60 days on the market, Audette said.
In contrast, Grand Isle currently has 122 homes on the market, with a wait time of 189 to 202 days, and Franklin County has a total of 395 on the market, with an average of 180 to 250 days on the market, she said.
In Rutland County, there are currently 782 single family homes listed, with 27 pending sales, said Laurie Mecier, a Realtor in Rutland County. The average sale price in Rutland over the past 6 months is $184,000, she said.
Rutland saw an increase from 44 sales to 54 sales between January and March 2013 and January and March 2014, she said.
The average days on the market in Rutland is still hovering at about 187, but well-priced homes are selling at a much more rapid rate.
“It is all about price and condition in this marketplace,” Mecier said.
Mecier said the market over the winter was steady and there has been an increase in activity in online tracking.
“People tend to look online for several weeks before ever stepping into a home, so with this increase in interest we believe it will parlay into more showings and sales,” she said.
Prices are still staying about the same in Rutland County, but as buyers come into the marketplace and listings sell, inventory will decrease, which is beginning to drive prices higher, she said.
“It is all about supply and demand,” she said. “Right now folks aren’t in a hurry as they want to see everything in their price range. Once folks miss out on a home they like and there is less from which to choose, the decision making will happen more quickly.”
This pressure tends to cause prices to increase over time, she said.
In Caledonia County, there are 325 single family homes currently on the market, John Biondolillo, President of BCK Real Estate said.
The sales dollar volume is up 9.27 percent year-over-year, and although the number of transactions is virtually the same, the dollar volume is higher, Biondolillo said.
“The median price year-over-year in Caledonia County is 28 percent higher ($173,150 compared to $134,500),” he said. “This is not because prices are higher, it is because houses in the higher price ranges are starting to move.”
There were six new homes sold in the MLS in Caledonia County in 2013, compared to only three in 2012. The highest sale price on a new home in 2012 was $300,000, Biondolillo said.
“Certainly these numbers are too small to draw too many statistical conclusions,” he said, “But the new construction market seems to be mirroring the sale of existing homes with an increase in volume and higher end sales.”
Homes sales have been slowly picking up steam in Caledonia County over the past two years, which Biondolillo attributes to a boost in buyer and seller confidence.
“I have never seen a market like this that has so many opportunities for both buyers and sellers,” Biondolillo said. “Buyers have low interest rates and a good inventory, and sellers have stable prices so they can sell today without worrying about leaving money on the table by selling now versus later.”
For the past several years, Biondolillo reported that it has been a buyer’s market, but that it is much less so today.
“Both buyers and sellers are jumping in, so it is keeping the market quite balanced.”
Biondolillo said he doesn’t see interest rates moving up appreciably until after the mid-year elections.
“If you are a move-up buyer who is selling a home and buying a larger home, it may be the greatest time in history to do that,” he said. “I just did that myself and I have been in the real estate business in some form or fashion for 30 years.”
Audette reports that 2014 is looking like a “great year” for the Vermont housing market, with many renters now able to get into home ownership, and new construction now booming.
“We are now in our prime selling season,” she said.
Move up buyers will also now be able to sell their homes and move up, she said.
“We are expecting our market to be similar if not a little improved in sales due to the forecast that rates will rise above 4 percent by the fourth quarter of 2014,” Audette said.
Audette attributes this forecasted rise in sales to the fact that new construction did very well last year and at this time new developments are getting great activity and many “to be built” properties are being sold.
She said that the cold weather impacted the Vermont market this year, and sales were slower in January and the first part of February.
Greg Hahr, Mortgage Manager at New England Federal Credit Union, reported that while interest rates are higher than they were back in 2012, they still remain near historical lows.
The vast majority of the lending from 2013 consisted of refinancing activity; 78 percent of loans originated in the period from January to June were refinances, 22 percent purchases, he said.
The overall mortgage volume in Vermont for the year 2013 decreased approximately 20 percent from 2012, he said.
“Buying a home is still one of the great investments that you can make,” he said. “Affordability is very strong, with long term fixed rates still around the low to mid fours.”
The beginning of 2013 was much like the end of 2012, in that interest rates in 2013 were at all-time lows, and the 30-year fixed rate mortgage was at 3.25 percent with zero points, he said.
“Beginning in May, the Fed began to talk about winding down its policy of bond and mortgage-backed securities (MBS) buying,” Hahr said. “This caused the financial markets to adjust.”
Between May and June, interest rates on 30 year mortgages jumped by 1.25 percent from 3.25 percent to 4.5 percent. This jump in interest rates caused a reduction in mortgage origination volume, specifically in the area of refinancing, he said.
Purchase activity increased 33 percent over the second half of the year, as buyers took the signal from the Fed that the period of low interest rates was likely to be coming to an end, Hahr said.
Refinancing activity declined by 57 percent at this time, as many potential borrowers had either refinanced or believed that they had missed their opportunity, he said.
The realignment of purchase versus refinance activity over the second half of the year was reflected in the breakdown being evenly split 50-50 between July and December.
Two new programs extending affordable home financing to more Vermonters have been introduced by the Vermont Housing Finance Agency (VHFA), according to a statement released by the organization.
These programs, introduced in time for the beginning of the peak home buying season in Vermont in 2014, include two new first mortgage programs, Mortgage Credit Certificates (MCC), and Advantage. They reduce the amount of federal taxes owed each year by home buyers.
Through the MCC program, which recently opened up to qualified Vermont home buyers, borrowers can take up to 20 percent of the interest paid on their first mortgage during the year as a credit, rather than a deduction, therein increasing the long-term affordability of buying a home. The other 80 percent of the interest paid by the home buyer would then be considered a mortgage interest deduction.
“Advantage,” a new first mortgage program also unveiled by VHFA, provides VHFA first-mortgages to Vermonters who don’t fulfill the requirements for traditional programs. With the Advantage program, there is no first-time home buyer requirement or limit on purchase price. These mortgages are available to three or more person households that make up to $118,000, and single- and two-person households that make up to $93,000.
“The goal of the Advantage program is to maximize the number of Vermonters with affordable fixed-rate mortgages,” VHFA Executive Director Sarah Carpenter said in the VHFA statement. “At the same time, MCCs are a great tool for increasing affordability and we know that the market has been looking for this resource.”
Ayla Yersel is a freelance writer from Burlington.