April 10th, 2014
Storm-free’ housing market for 2014
By Matt Sutkoski
No, you didn’t miss your chance to buy a house in Vermont when mortgage interest rates hit rock bottom last year.
And no, you don’t have to scramble in 2014 too quickly to still get a reasonable mortgage, or a decently priced home. Just take a deep breath, say Vermont real estate and lending experts, and embrace the state’s relatively stable real estate market.
Vermont’s real estate market is generally immune from the wide swings, the speculation, the booms and busts that have enriched some and impoverished many others across the United States.
“The highs in Vermont are not as high and the lows are not as low,” said Leslie MacKenzie, President and Owner of Coldwell Banker Hickok and Boardman Realty in Burlington. “We didn’t take any big hits.”
It’s true that home prices fell and foreclosures rose in Vermont during the Great Recession that started in 2008, but there wasn’t really a complete housing price crash, and even those who bought their homes at the peak of the 2000s pricing boom weren’t that far underwater by 2010. And most prices are now at or above pre-recession levels in Vermont.
In other words, it’s as good a time as any to buy or sell a home in Vermont.
Mortgage rates are expected to continue slowly climbing from the historic lows reached in the first half of 2013, but will remain at relatively subdued levels.
The rates were as low as 3.5 percent in 2013 and hovered around 4.3 percent by February, 2014. “But that still makes for very competitive rates,” MacKenzie said.
Lower interest rates in the past couple of years made Vermont homes more affordable. According to the Vermont Economy Newsletter, the share of the Vermont median family income needed to service the mortgage on a median priced home was about 19 percent in 2007. That figure fell to about 12 percent in 2012.
With mortgage rates now rising, the affordability of Vermont homes is probably decreasing slightly. However, MacKenzie and other home buying watchers in Vermont say mortgage rates will continue to rise, but only slowly, so buyers will likely be able to get good deals on loans and relatively affordable homes through the rest of 2014.
“I think it will be a good year,” said Michael Tuttle, President and CEO of Burlington-based Merchants Bank.
Moreover, if lenders became shy about obtaining new mortgage customers a few years ago, that shyness is definitely waning. “Lenders are anxious to make loans,” Tuttle said.
An improved economy and low unemployment help. “Vermont’s economy is relatively healthy and people are optimistic. In talking to Realtors, there’s a lot of activity out there,” said Greg Hahr, a mortgage manager for New England Federal Credit Union.
As people become more comfortable with the idea of buying a house, now that the recession has waned, more people are beginning to look for houses. “There is a lot of pent up demand,” Hahr said.
This could put some pressure on housing prices. Nationally, the median price for a home in the fourth quarter of 2013 was up 10.1 percent to $197,400, according to the National Association of Realtors.
Firm numbers for Vermont as a whole are a little harder to come by, but median single family home prices in the Burlington and South Burlington metropolitan area grew by 4.8 percent, less than half the national average. However, home prices, at least in Chittenden County, are higher than the national average.
Housing prices in Vermont are not rising so steeply, mainly because they didn’t slump badly after 2007. “Home prices in Vermont will continue to appreciate, but at a moderate pace,” Hahr said.
The expected uptick in prices is just another sign the housing market is regaining its composure. “Inventory levels are beginning to balance out,” MacKenzie said.
Generally, most people who buy houses in Vermont do so to obtain a primary residence, not “flip” a property seeking a quick profit.
That’s because Vermont’s real estate market has traditionally been stable, and that more or less continued through the depths of the financial crisis. Speculative real estate purchases aren’t nearly as common in Vermont as in some states, like Florida and Nevada, two states hit hard by the real estate blowout after 2008.
“We don’t have enough depth to our market to have a lot of speculative investing,” Tuttle said.
Prior to the recession, there was never much of an over-building problem in Vermont, so there wasn’t excess inventory to drive down home prices more than they would have otherwise.
Still, Tuttle is relieved the housing slump from 2008 to 2011—modest as it might have been —is over. “It was tough to hear the news and not be impacted by that,” Tuttle said. “Lenders were a little more cautious.”
The housing market in Vermont emerged from the recession more solid, and more predictable than in much of the rest of the market. That serves would-be homebuyers well, since prospective buyers can take a controlled, reasoned approach to finding a new home.
The last segment of the Vermont housing market to recover was in the luxury sector, but now that’s taking off. MacKenzie noted some relatively high priced new housing construction went on hiatus in recent years, but has restarted.
“I expect to see more growth in 2014,” MacKenzie said. “There’s a lot more consumer confidence.”
As more people are looking to buy, you want to be as efficient as possible to be ready to close on the home you want. The best way to do that is to obtain financial pre-approval from a lender. Mortgage lenders and Realtors are unanimous on that point.
Through pre-financing, you can eliminate any mistakes in your credit report before searching for a home. You can also ascertain whether you can afford a home in your desired price range. Most importantly, Tuttle said, people selling homes tend to be much more comfortable selling to people who are pre-approved, because the chances of complications are sharply reduced.
Another way to save money in the long run is to apply for a 20- or 15-year loan instead of a traditional 30-year loan. Or, if you already have a mortgage, try to refinance into the shorter term loans, Tuttle said.
Your monthly mortgage payment under these shorter terms might increase only slightly, if at all, and you will save a lot of money on interest payments over the years, Tuttle said.
Another option is to get an adjustable rate mortgage, Hahr said. Even if the rates go up, an adjustable rate mortgage would likely still be more affordable than a traditional 30-year mortgage, he said.
Hahr suggested working with local lenders, as they are likely more familiar with the quirks of the region and more accessible should questions arise.
Home buying activity tends to peak in the spring and early summer, as many families try to time their moves when school is not in session and the weather makes it easier to move from one place to another, Hahr said.
If you’re selling a home, try to make it as enticing as possible. “Enlist a professional to assess what it will take to prepare a house, to make the house more sale-able or improve the curb appeal,” MacKenzie said.
That often means staging the home’s interior to help put the house’s rooms and layout in the best possible light. Improved landscaping can also help curb appeal.
Overall the turbulence of the housing crisis has mostly subsided. Though nobody can predict when the next crisis erupts, signs right now indicate a pretty storm-free housing market in 2014.