By KAREN SPILLER, Telegraph Staff

Published: Sunday, Mar. 6, 2005

Staff photo by Don Himsel Real estate agent Mary Beth Gustitus, right, holds Isabella Olsen, 2, while her brother, Isaac, 4, and mother, Nicole, look over a home for sale in Nashua on Thursday. Home prices in the city increased nearly 11 percent from 2003 to 2004.

Janice Pack is tired of renting an apartment.

So, for the past two years, the single mom has been looking to buy her own home in Hudson.

The problem is, she hasn't found anything in her price range.

The 44-year-old works two jobs, but has been prequalified only for a $170,000 mortgage. And she hasn't seen one single-family home on the market in Hudson for that price, she said.

The average sales price of a home in Hudson was $245,519 last year, up about 36.2 percent from $180,281 in 2001, according to the Northern New England Real Estate Network.

Pack, a project manager and Pilates instructor, is forced to consider things she never wanted to do - uprooting her young daughter from her friends and the school they've come to love in Hudson, settling for a condo or continuing to pay rent.

Pack's plight is not unique. That's because the average house price in the Nashua-Manchester area has increased a whopping 75 percent in the past five years, according to figures released Tuesday from the Office of Federal Housing Enterprise Oversight.

"It is crazy," Pack said."I don't feel like I should have to move to a whole different town just to afford a home."

Just last week, a 41-year-old Merrimack salesman started looking for a home in Nashua for himself, his wife and three young children. They have been paying a little more than $1,000 a month in rent for a house with two bedrooms and an office in Pepperell, Mass.

He wants to buy a three-bedroom home in a quality neighborhood that's also an easy commute to Merrimack. He's looking in the $250,000 range.

"It's tough, I'm telling you, the market is just horrible," said the man, who asked that his identity be kept private."The quality of home isn't there. We're seeing a lot of homes in undesirable neighborhoods, or overpriced for what you're getting. It's cheaper in most cases, so far, to rent."

Part of the reason for the inflated real estate market is that people aren't getting raises even as housing prices increase, he said.

"It's just lower (interest) rates out there keeping this market going," he said.

Housing prices in New Hampshire have risen about 35.6 percent over the past three years, from $186,398 to $252,723, according to figures from the Northern New England Real Estate Network.

But wages in the state have risen only about 6.4 percent over the past three years, according to the Bureau of Labor Statistics.

In the last year, the average price of a home in New Hampshire climbed about 9.9 percent, according to NNEREN.

Dave Moran, a former builder who is now a real estate agent for The Masiello Group in Nashua, said the low interest rates are a driving factor in this hot real estate market. So is the fact that inventory is limited.

In February alone, his office sold 35 homes. Normally, one home each day of the month is a good number, he said.

The real estate market is so hot that Rick Stoudt, co-owner of RE/MAX Properties in Nashua and Hollis, is adding 12,000 square-feet of space and about 80 agents in south Nashua.

RE/MAX Properties completed 1,635 real estate transactions in 2004 with an average selling price of $265,109. Those figures are up from 1,472 transactions the previous year, when the average selling price was $248,600.

Still, things have slowed down the first two months of this year, Stoudt said.

"It's every single year about this time," he said."March, April, May, June comes, and we just explode."

Prices are climbing at a rate of 12.7 percent each year, and there are no signs of it slowing, local real estate agents say.

"I'm very hard-pressed to think that house values are ever going to drop in value, like they did in the early'90s," Stoudt said.

In the Nashua area, the median purchase price for a home has nearly doubled since 1990, when it was $126,900. In 2004, the median purchase price was $240,000, according to the New Hampshire Housing Finance Authority, a nonprofit corporation that gives low-interest mortgages and other financing to low- and middle-income families.

Apartments in the Nashua area aren't cheap, either. In 2004, the median gross rent (including utilities) for a two-bedroom apartment was $1,042, up from $1,012 in 2003. Rent for a three-bedroom apartment averaged $1,262, while a one-bedroom had a median rate of $664.

After Moran left the building business 10 years ago, condos that were selling for $65,000 have almost tripled in value to $180,000, he said.

Moran gave an example of a condo on Rodean Drive that has appreciated from $50,000 in 1995 to $120,000 today.

Sales of the more expensive homes have tapered off a bit, Moran said, but they're still selling.

In the south end of Nashua, homes in and near the Maplewood development off Conant Road are"just cranking right along," he said.

There's a large influx of Indian people, many of whom are engineers, who are buying and, as a result, many are purchasing homes in the $375,000-to-$450,000 range, Moran said.

"Right now, the problem is that a starter home in Nashua today - if you're looking for a desirable neighborhood - you're talking over $200,000," Moran said.

Moran pointed to an average home on Pine Hill Road, near the Nashua Airport, with a 25-year-old roof that needed replacing. The home also needed siding and paint inside, among other things.

Asking price" $210,000.

"But somebody bought it," Moran said,"because it's Pine Hill Road," which falls in the Birch Hill Elementary School district.

Even if interest rates were to tick up, people will still come to Nashua, experts say.

"I just think there's too many reasons for people to come into Nashua and not enough reasons for people to leave right now," Stoudt said, noting the favorable tax base and lack of sales and income taxes.

But Moran warned of something that often happens in a hot market: Sellers overprice their homes and they don't sell.

"When nobody makes any offers for a period of time, then you've got to have a clue that there's something wrong with it," Moran said.

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Click to Enlarge

In one recent instance, Moran said, a seller wanted $259,000 for his single-family home on Arlington Street. No offers came in, and Moran convinced him to lower the price $5,000, then another $5,000 to $249,900.

Then it sold.

"Little houses that were selling for $100,000 five years later are $200,000," Moran said."Everybody said it was going to stop. It hasn't."

With prices that continue to skyrocket, young couples, low-income families and first-time buyers get knocked out of the market completely.

And that's something that has Clara Monier, executive director of the New Hampshire Housing Finance Authority, very concerned.

"We are freezing out young people, the 20-to-40-year-olds, out of the housing market. It's having a negative impact on economic growth in New Hampshire," she said.

Last year, the NHHFA helped 1,600 first-time buyers in New Hampshire get reduced mortgages or helped them with down payments. But those who get help can't always make their payments.

"What we're seeing is that people have to purchase houses to the maximum of their ability, so if there's a crisis, a major health issue or if they lose a job . . . they're forced into bankruptcy," she said.

In the past year, two dozen people had to turn back the property after they bought it because they couldn't afford their mortgage, Monier said.

"Let me tell you, most people try to make their mortgage payments," she said."Whatever they have to do - borrow from the family, borrow from the neighbors, whatever they have to do, because they need a place to live."

As a result, some schoolteachers, police officers and others move elsewhere. Others turn down jobs in New Hampshire because of the high housing costs, Monier said.

And that's a problem, she said.

"These young people are what we need to grow the (economy) in New Hampshire," Monier said.

Monier is hoping communities look to provide what she calls"balanced housing." She said too many towns want 55-and-over housing.

"That concerns me," she said.

It's also a concern for Nashua real estate developer John Stabile, who has seen rising prices for 30 years. The founder and chairman of The Stabile Cos. built his first starter homes on Beauview Avenue in Nashua in 1973. Back then, they went for $32,900. The same homes today cost $350,000.

Stabile said the municipalities and the state must look at how to make houses affordable. They can designate areas that are zoned specifically for affordable housing and waive fees for town employees, such as police, firefighters and others.

Home prices continue to rise not only because of economic factors, but also because the price of land has increased, Stabile noted. In many cases, land will be 20 percent to 30 percent of the cost of the house.

And while the economy in the Nashua area remains strong, there's little land left, Stabile said.

"If you do find any land in Nashua, it probably has to start at $125,000 a lot," he said.

Still, the demand for new construction is there, mainly because baby boomers are downsizing, but not downgrading, Stabile said.

Nationally, 1.9 million houses are being built per year, and some 69 percent of Americans own a home or a condominium. Six years ago, only 62 percent were homeowners, according to the National Association of Homebuilders.

Stabile is building homes in areas where he hasn't built before. In Amherst, he's building 80 single-family homes with 2,000 square feet priced at $360,000 to $380,000. A similar 70-lot development in Milford will have homes in the $340,000 range.

"We are now in one of the longest housing recoveries we've ever had," Stabile said.

Depending on whom you ask, the fate of the Nashua housing market is cut and dried.

As Stabile sees it, the market won't maintain its frantic pace.

"It's a matter of when," he said,"not if."

Moran, on the other hand, doesn't see that happening any time soon.

"As much as people say it's horrible, Nashua's a city - it grew and developed as a city," Moran said."And you're not going to be able to change it."