As we approach the end of 2014, Vermont’s Housing Market is, in many aspects, reflecting what we see nationally. Now, over 4 years past the bottom of the recession and after 2 robust years of recovery, we have seen a pullback in 2014.
Nationally, the 1st Quarter 2014 saw a dip in GNP of 2.1% and much of the country especially the Northeast felt the impact of difficult weather conditions, including Vermont. In 2014, Northwestern Vermont has posted a 5% decline in sales volume and a 0.84% rise in the median sale price.
However, that follows two very strong years. In 2012, sales volume in Northwestern Vermont (Chittenden, Franklin, Grand Isle and Addison Counties) grew by 16.6% over the prior year. In 2013, sales volume grew another 15.2%, with the median sale price flat and up 2.35% respectively.
Increases during the past few years were fueled by improved affordability including: stable property values, historically low interest rates (approximately 3.98% in 2013 and 3.66% in 2012) and continued very low rental vacancy rates (.9% in Chittenden County). At the same time we saw unemployment drop and consumer confidence improving.
Much of the increased demand over the past few years, both locally and nationally, has come from investors who capitalized on the factors noted above and have been very active in the market. It is important to continue the return to a healthy Real Estate market with increased participation from both first time home buyers and move up buyers. Historically, first time home buyers have accounted for approximately 40% of purchasers. In recent years, first time buyers have accounted for less than 1/3 of the market. As the employment outlook brightens and income levels rise, we hope to see a repayment of student debt (at an all time high) and better positioning of first time home buyers. However, the low number of young people in Vermont continues to be a concern; only Chittenden County and Burlington in particular tend to buck that trend.
A key factor affecting the local market is the rising property tax burden. Property owners who do not benefit from property tax adjustments (rebates) will see a state wide tax increase of 6.4% this year, not reflecting their local changes. We continue to hear great concern from both purchasers and local home owners about this tax and how it impacts housing affordability.
Although 2014 has seen declines and there are some economic factors of concern, we do expect to see improvement in 2015 and a return to a more “normal” market place.
The National Association of Realtors projects a 6.0% increase in sales volume for 2015. In Vermont, assuming there are no substantial changes in key factors (i.e. rise in unemployment rate) there is likely to be moderate growth in both sales volume and in housing prices.
Affordability continues to be at among the highest levels in recent years. Household formation is seeing growth, renters are now considering the cost advantage of purchasing and move up buyers are recognizing that at today’s interest rates and current home values that this may be an optimum time.
As always, it remains that both sellers and buyers need to reflect on their personal situation. Utilizing the local knowledge within this report and the advice of your agent – you can make an informed decision about your next move.