At the start of 2015, Vermont’s housing market is benefiting from some positive local and national trends, including historically low mortgage rates and an improving employment market. While there are reasons for optimism, some issues remain as an overhang from 2014, which resulted in an uneven year for Northwest Vermont’s real estate market, with a slowdown during the winter and summer months followed by a pickup in fourth quarter sales.
While the country is in its fifth year of economic recovery, the recession of 2007-2009 continues to linger in some respects. Employers are again hiring, driving down the national unemployment rate, but wages have largely failed to budge, putting pressure on consumer spending.
Nationally, GDP rose in both the second and third quarters of 2014, reversing a 2.1% dip in the first quarter. While fourth-quarter GDP hasn’t yet been released, economists believe the economy also expanded at the end of the year, and are also predicting growth of about 3 - 5% in 2015.
Locally, last year’s mixed results in our real estate market come after two very strong years, when sales volume rose 15.2% and 16.6% in 2013 and 2012, respectively. In 2014, Northwest Vermont posted a 0.7% decline in sales volume, while the median sale price rose 0.9%.
Without a strong surge in fourth-quarter transactions, sales volume for 2014 would have been lower, as difficult weather conditions and overhanging economic worries kept buyers on the sidelines earlier in the year.
One major constraint on our market in 2014 has been resolved: the future of IBM’s Essex Junction semiconductor plant. Concerns that an impending sale would lead to the plant’s closure or layoffs put a damper on real estate transactions throughout the region. However, by October, buyer GlobalFoundries said it would keep the plant open and had no plans for layoffs, easing fears from would-be homebuyers and sellers.
On top of that, Governor Peter Shumlin’s announcement in December that the state wouldn’t move forward with plans for a single-payer health-care system was a relief to some businesses that had concerns about the potential financial impact and which may have been holding off on hiring as a result.
Yet other issues remain, including rising property taxes across the state, which have eaten into the buying power of home purchasers. With wage growth still lagging, that’s increasing affordability problems for many, especially first-time homebuyers. The importance of first-time purchasers can’t be understated, given they historically have accounted for about 40% of purchasers. Recently, that has declined to less than one-third of the market because of affordability issues and the high load of student debt carried by younger generations.
Despite these concerning economic issues, we do expect to see an improvement in our real estate market in 2015. The National Association of Realtors is predicting that existing home sales across the nation will rise 8% while prices are expected to gain 4%. In Vermont, we at Coldwell Banker Hickok & Boardman Realty expect a positive, although more tempered year, with a 5% rise in sales volume and moderate price appreciation.
Mortgage rates are still at historic lows, although they are expected to rise when the Federal Reserve boosts interest rates. Economists now expect the Fed to raise rates in the summer of 2015, which could spur homebuyers to take action before rates rise even more. Additionally, mortgage giant Fannie Mae recently loosened its lending restrictions and is allowing purchasers to buy with a 3% down payment, which could spur more purchases.
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.