Vermont Real Estate: Half-empty or Half-full?
Existing national home sales are up over 9% from 2011 to 2012 with the highest volume since 2007. A relatively stable growing economy, low mortgage rates, pent-up demand, increased investment demand and compelling values contributed to the robust increase. Another indicator, available inventory, continues to decline, with a 22% decrease in 2012, leaving only a 4.4 month supply of homes at the current sales pace. This is the lowest housing supply since May of 2005. Finally, the median sales price was up 6.3% in 2012 from 2011--the strongest annual price gain since 2005.
Increasing sales volume, less available inventory and rising prices is an ideal scenario for homeowners, especially after having experienced the past recession. This trending market will put some pressure on potential buyers.
On a national level, 2013 should reflect the improved housing market of 2012. Reasons for the improving picture remain intact from this past year and real estate, as an asset class is relatively attractive compared to cash, commodities, stocks or bonds. The investment community has been increasing real estate exposure through REIT's, homebuilder stocks and home improvement retailer stocks. More than a few of the more notable investment gurus are bullish on the real estate market.
The picture in Vermont is somewhat different. Overall, the real estate market improved in 2012. The number of sold listings rose 16% with a dollar volume increase of 12%, surpassing the national numbers. New listings were up 6% year over year. The increase in sold listings having outpaced the increase in new listings suggests an improving inventory picture, also reflecting the national trend.
Where Vermont differs from the national picture is the continued pressure on home prices, created by what remains a large inventory. In 2012, the average sales price declined 4% and the median sales price declined 2 %, compared to a 6% gain nationally.
Nationally, the inventory to sales ratio is just over 4 months. In Vermont, that rate is approximately 1.5 years in homes priced at less than $250,000 and exceeds 4 years in homes priced in excess of $750,000. Translated, it is projected to take between 1.5 years and 4 years to deplete the inventory listed for sale in respective price categories.
Within the state, there are variations statistically from county to county, second home to primary residential communities, and the greater Burlington market to the more rural areas of the state.
However, there are significant variations in the price categories. In the under $500,000 category, which represents a majority of the Vermont residences, sales increased 18% from 2011 to 2012. In the category between $500,000 and $1,000,000, year over year sales improved just 2%. In residences in excess of $1,000,000, sales declined 10% in the same time frame.
The sales volume statistics combined with the inventory to sales ratios paint an interesting picture within the state. The traditional residential market is healthy and robust. The bulk of the second home market is relatively flat, and the luxury or higher end of the market is in decline in terms of sales volume and most likely sales price.
This market dichotomy presents opportunities and challenges for both buyers and sellers in 2013. Being a buyer or seller means different things from one market to the next. In approaching the market it is important to have an understanding of the national market; however, what may be happening in your local market might be entirely different. Vermont is not a market or an economy within itself. The state is very dependent on the Northeast region and the Northeast region is dependent on the balance of the country. The Vermont real estate market tends to lag the national market by 12 to 18 months.
As Vermont's inventory continues to be absorbed, the pressure on the prices will be reduced, and the market will continue to improve-- half-full and half-empty!
Richard Montague is the owner of Vermont Country Properties, a real estate firm based in Manchester.
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