Housing market boom prices out middle-income Granite Staters
Some buyers are waiving home inspections in order to have a chance at closing the deal in a very competitive market. (Getty Images)
Late in 2019, Brandon Zalinsky had what seemed to be stability: a manufacturing engineering job in Manchester a year out of college, a partner with her own engineering career, an apartment in the city, and a strong desire to stay in New Hampshire and put down roots. It was time for the next step: a house.
Zalinsky and his girlfriend started looking around, prioritizing listings in the under-$300,000 range just south of Manchester. But the New Hampshire housing market proved less than hospitable to new buyers in that price range. And it was about to get worse.
As the early months of the COVID-19 pandemic – and the shutdown of restaurants and non-essential businesses – took hold, real estate agents worried that the economic standstill would tank the state’s housing market and send prices and home values plummeting.
It did the opposite. A wave of wealthier buyers, some from out of state, crashed into realty firms, driving up prices and bringing the stock of available homes in the state to record lows. Lower-income buyers in New Hampshire found themselves in a constant state of battle over every listing. Well-heeled purchasers crowded out competitors through cash purchases, sometimes buying houses sight unseen and without inspections. Open houses became bonanzas, and the time allowed for typical house tours dropped from 45 minutes to 15.
Zalinsky realized the next life milestone was going to be a lot harder than he’d thought.
“It’s just every single place: We bid 15 percent over asking, and we lose by $30,000,” he said. “And they waive inspections. It’s extremely frustrating and disheartening.”
Two years after starting the housing search, Zalinsky and his partner have made offers on 25 houses. They’ve been outbid on all but one, and that home had serious structural problems that forced them to pull out. They are still looking, but with far less confidence.
“I have money to spend to live here, and I just – I can’t do it,” he said. “It’s impossible. And the only way I can do it is by taking on an absurd amount of financial risk on the biggest purchase of my life.”
As the pandemic-driven surge nears its second year, there are some signs that the mania may be starting to diminish, housing experts say. But the factors keeping the market tight and prices high remain.
“It’s been characterized as going from ‘red hot’ to just ‘really hot,’ ” said Ben Frost, managing director of policy and public affairs at the New Hampshire Housing Finance Authority.
Low supply, historic demand
While housing stock has diminished over the years, the number of houses available in New Hampshire fell sharply this year.
At the end of July 2021, only 1,737 single-family properties were on the market, according to numbers from the New Hampshire Association of Realtors.
July 2019, in comparison, saw 5,609 houses listed, and July 2015 saw about 11,000.
The market was even tighter in February 2021: 1,062 single family homes were on sale that month.
Winter months typically see notable reductions in homes being put on the market. Sellers are less likely to want to move out during the school year, holiday months, and bad weather. But February 2015 saw around 7,500 homes open and on the market, a strong contrast.
Real estate agents and analysts are also looking at another metric: how fast the homes are selling. This year, they hit a record. In July, a single-family home took an average of just 18 days to sell from its listing date to an accepted offer. In past years, such as 2015, that average hovered around 75 days.
Those forces are driving up the price of homes, too. In 2021, the average home price hit another record – $400,000.
The numbers make one thing clear: New Hampshire’s historically low housing supply is causing demand to surge. But there are other factors at play, too.
Mortgage interest rates across the country, currently at 2.17 percent for a 15-year fixed rate, are the lowest they’ve been in 49 years, according to Freddie Mac. That gives buyers significantly more power to take risks on properties that might have been out of their grasp with less favorable financing, real estate agents note.
“It helps because it makes the same priced home more affordable,” Frost said. “For a cash buyer, it doesn’t make any difference.”
But more buying power also benefits sellers, who can raise the prices in turn. The dynamic means even if the low borrowing rates somewhat even the playing field, some buyers can still find themselves priced out.
These days, the magic number in many parts of the state is $300,000. Try to buy a home for any less than that and you will likely struggle to find a home and be outbid on it if you do.
“I think at that low price point, there will always be a demand that’s outpacing the inventory,” said Adam Gaudet, a Realtor at 603 Birch Realty in Concord and the incoming president of the New Hampshire Association of Realtors.
The pandemic elevated two factors fueling the tight market: out-of-state buyers and cash purchases. When interest peaked in escaping urban environments during the early stages of COVID-19 lockdowns, many took their interest – and dollars – to New Hampshire.
“I think the messaging in the country’s gotten out that there are states in the U.S. that don’t have income taxes,” Gaudet said. “Not everybody knew that, and I think some people were like: ‘Oh my gosh, it’s a year where I can work from home, and maybe now is the time to capitalize.’”
Joanie McIntire, a real estate agent with Coldwell Banker J. Hampe Associates, agreed.
“If you have somebody coming from Connecticut, and they see a house for $700,000 . . . that’s a lot of house for not a lot compared to what they can get in Connecticut for the same money,” she said.
However, while agents here talk about swarms of out-of-state plates and phone calls, numbers from the Housing Finance Authority suggest the impact of out-of-state buyers has been less than perceived. The share of houses bought by New Hampshire residents dropped from 75 percent to just under 70 percent since 2019, but Massachusetts buyers did increase by about 5 percent since the pandemic began.
Either way, the intense attention this year caused a feeding frenzy, agents say, and one that benefited buyers with large amounts of cash. Those buyers, who didn’t need financing, could swoop in with offers that priced everyone out.
To Gaudet, the cash purchases signify a notable, if short-term, shift in how wealthier people view their living situation during COVID.
“To get into a home, especially in a state like New Hampshire, cash is king,” Guadet said. “I’ve been in real estate seven years . . . but I’ve had more cash deals this year than, combined, the other six years.”
For her first 14 years in real estate, McIntire had an unofficial rule: She never sold a house where the buyer waived a home inspection.
Buyers always had the option to do so. But McIntire, who is based in the Sunapee area and is also Zalinsky’s aunt, would strongly dissuade them from doing so, and for 14 years her clients listened.
“I think they understand that,” McIntire said. “When you tell a first-time homebuyer what the consequences of waiving inspections could mean, they’re generally going to understand that.”
But that changed this year, McIntire says. In this new reality, where cash offers have become some buyers’ weapon of choice, waiving inspections can be the only way for buyers of lesser means to get an edge.
And many clients are now taking that option, she said. “I have written offers that have waived inspections,” she said. “People have signed a waiver.”
It’s a dangerous game to play, McIntire warns.
“If you’re at the top of your price range at say $300,000, and you move in and a week later your septic backs up into your basement, what do you do?” she said.
The tactics sometimes kick in late, even when a property doesn’t seem to have as much competition to start, McIntire said.
“As soon as I let other agents know that I have an offer, then the incoming offers . . . escalate to a crazy offer,” McIntire said. “Cash, no inspections, closing two weeks.”
McIntire, for her part, will counsel a client if they are interested in waiving inspections. She has a keen understanding of what repairs cost, knows the price of a boiler replacement or a well treatment. She can give estimates to allow buyers to factor in a worst-case scenario for the property.
Still, the tactic can just as often be used against her clients, she said. And the effect can be demoralizing for the buyers who aren’t interested in skipping the home inspection and watch the offer disappear.
“I think that the consumer is still (saying): ‘Oh my gosh, we’re not going to get this one, this is another one we’re not going to get,” McIntire said.
Zalinsky said waiving home inspections is not something he and his partner are considering – even if it puts them at a disadvantage.
The two are also not interested in pushing themselves into debt and overextending into a price range they can’t afford, despite the low interest rates.
But that prudent approach has taken its toll. Zalinsky and his partner have seen houses of all kinds – those they love and those they would settle for – get snapped up before their eyes.
“Now we’ll walk in and it’s like, you go to an open house and there’s 45 cars at the house,” he said. “Like, do we even bother? There’s no point.”
Despite the low supply, there are little signs that the market could be nearing a turning point. The average number of days that house listings are active has ticked up slightly, as has the number of houses available, Frost noted. And agents are seeing changes on the ground, too.
“I think if you checked in with me two months from now, it could be different,” Gaudet said. “. . . Out-of-state buyers that would normally be calling me have called less. And at things like open houses, you don’t have nearly as many Connecticut, New Jersey, Massachusetts, Vermont plates.”
McIntire has also seen signals. Where earlier this year and last year 20 people might show up at a house viewing, these days that number has dropped to four or five, she said.
Still, McIntire urged caution. Even with less interest, those buyers who do show up still fight just as hard to get the house, and many still employ the same hardball tactics – from waiving inspections to paying with cash.
“There has been some cooling,” she said. “But it would be very slight.”
Gaudet said any shift, even if small, could help buyers like Zalinsky.
“I think it’s good when New Hampshire natives have a chance of actually buying New Hampshire properties,” Gaudet said. “So I’m seeing more of an evening out in that regard. So I think it’s shifting back in favor of New Hampshire buyers.”
Zalinsky is not so sure. After two years of bidding wars, he and his girlfriend are taking a break from intensively searching for a home. They aren’t giving up, but they are hunkering down and waiting for conditions to improve.
“It is really kind of miserable, because all I want is to live here, in a house,” he said. “And it’s just impossible for me.”
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