July 17, 2005

By JEANNE MORRIS
Sunday News Staff

It's still a good time to buy a house, say New Hampshire real estate agents who strongly disagree with recent reports by economists that the market is over-heated and heading for a 5 to 25 percent price correction in late 2006.

Most agreed, however, that the days of double-digit appreciation are over — and sellers need to realize this.

Chip Maxfield, of Henry S. Maxfield Real Estate with offices in the Lakes Region, said, "The slow easing up on interest rates has brought our real estate market to a peak, which is a peak that I believe is sustainable."

Few see a market correction ahead, or a bubble. To the contrary, all said there is nothing now or on the horizon showing the market is about to enter a down cycle.

Many voiced concern, however, that a downturn might be sparked by all the recent media coverage about a housing bubble and predictions about its burst. This, they fear, might bring about a downturn by convincing buyers to hold off on making purchases.

Yet, all bets are off if interest rates spike to the 8 or 9 percent level.

Developer Jim Powers, of Northern Acres in Bedford said, "If the feds go to 9 percent real fast and hard, it would really put the real estate market in tough shape and all the folks tied to it."

Disagree with economists

None of the agents interviewed supported the economic models used by a variety of economists to predict that much of New Hampshire's housing stock is overpriced and likely to see a price correction beginning late 2006.

The economists made these forecasts based on traditional economic models that measure differences between buying a house versus renting one and the gap between the growth of income versus housing prices. Both measures found New Hampshire's housing prices had outpaced historic norms.

Russell Thibeault, of Applied Economic Research in Laconia, said Granite Staters' incomes cannot support more price increases. He said today's housing prices are being propped up in part by creative lending practices that allow more people to qualify for financing. These types of loans allow borrowers to make interest-only monthly payments and add extra years to traditional 30-year mortgages to lower monthly payments.

Tom Duffy, manager of Prudential Verani Commercial Realty of Londonderry, said the growth of "loosey goosey lending" has stretched people's finances.

"If you're looking for the thorn that might prick the bubble, it might be the lender practices. It scares me," Duffy said.

Party on

"Forty-year mortgages, interest-only mortgages, blanket mortgages — these are all the signs of people not counting their drinks anymore," Duffy said.

But he added, "As long as someone's putting liquor on the table, the party will continue."

Duffy, who specializes in commercial real estate sales and development, said these lending practices have just started to creep into commercial property loans. He said no one wants to miss out on the potential money to be made in the rebounding commercial property values, which started to take off about a year ago.

"Everyone wants the deal to happen, so little excesses like that start to build up. It's human nature," Duffy said.

Almost all agents agreed that wild appreciation rates seen over the past few years are over.

Powers, whose Bedford-based Northern Acres realty company specializes in buying and selling land in the central and northern parts of the state, said developers investing six to 18 months out have become very cautious.

"A lot of folks in the development business are cautious not to get behind the curve at today's price or value. They don't want to get trapped with tomorrow's price potential," he said.

Powers said the residential real estate market has flattened in the last few months.

"It has not gone down, but it's leveled off. I think you're going to see it at a lower percent or flat until everything else catches up. You're not going to see significant increases like you have," he said.

Maxfield also believes the residential market has hit its peak.

"I believe the residential market has definitely hit its top. Everything in all price ranges has pretty much leveled out. The high-end waterfront topped out about two years ago, with minor exceptions, and has been very steady and consistent."

Good sign

Like other agents, Maxfield characterized the topping-off as positive.

"You can't take everything up forever and not expect it at some time to level out," he said. "After significant increases you do need to have a period . . . where the market reaches its reasonable rate of return."

But some sellers are slow to accept this, many agents said.

Too often they will insist on listing properties with yesterday's high appreciation rates built in, they said. As a result, some properties are not selling, and sellers are having to lower their asking prices.

"If you price above where you should be, your property sits on the market," Maxfield said.

Ed Buczynski, president of Masiello Group, which comprises 29 offices in New Hampshire, Vermont and Maine, said, "The sellers right now have to understand where their values are. That the appreciation rate is not screaming like it used to be and they need to adjust to what the values are today to sell their property."

Few believe there will be any decline in values. Economists, too, believe values will hold steady, but foresee a decline sometime around late 2006 or early 2007.

Decline? What decline?

Real estate sales agents contend, however, there will be no decline. They say today's values are reasonable, despite years of double-digit appreciation because the market was overdue for strong appreciation following the real estate downturn in the early 1990s. Plus, they say there is no oversupply of housing and the economy is sound.

None have seen houses selling for less, despite sellers having to lower their expectations of gain.

Betty LaBranche, of Betty LaBranche Agency Inc. with offices in Portsmouth, Exeter and Hampton, said, "No one is selling for less than they paid or even what they paid a year ago. There's not one person I know of that bought even a year ago that didn't sell for at least 10 to 15 percent more."

Asked if Seacoast properties will continue to appreciate at a rate of 10 to 20 percent, LaBranche said she didn't know, but suspects rates to stay around 10 to 15 percent.

Kathy Walsh, of Kathy Walsh Real Estate Inc. covering sales in the Seacoast area, said first-time homes selling between $180,000 to $300,000 are remaining very strong. But instead of appreciating at 14 percent or more, the appreciation is about 5 to 8 percent.

Staying strong

Walsh expects the market to continue strong and steady so long as interest rates remain below 8 percent. "If we get to 8 percent, you could see a real slow down," she said.

Walsh, who also is on the board of directors for the New Hampshire Housing Finance Authority, said there is no oversupply of housing.

That observation seems to be supported by recent sales figures from Andrew Werry, executive director of Northern New England Real Estate Network, which tracks MLS sales.

Werry noted very little change in the time it takes a single family house to sell in Hillsborough and Rockingham when comparing the second quarter of this year to the second quarter of 2004. In Hillsborough, houses sold in 66 days this year compared to 63 days last year. In Rockingham, properties sold in 78 days compared to 80 days last year.

Normal supply

Dick Badger, of Badger Realty, with offices in North Conway and Jackson, said, there is no oversupply of housing or a lot of speculative building in the market. The supply and demand are well balanced, he said.

One way Badger gauges housing prices is by comparing the selling price of an existing home to the price it costs to rebuild that home. By that measure, existing homes are underpriced.

"An existing house costs less than a replacement house, even when factoring in depreciation, at least in Mount Washington Valley areas," he said.


	July 17, 2005 By JEANNE MORRIS Sunday News Staff It's still a good time to buy a house, say New Hampshire real estate agents who strongly disagree with recent reports by economists that the market is over-heated and heading for a 5 to 25 percent price correction in late 2006. Most agreed, however, that the days of double-digit appreciation are over — and sellers need to realize this. Chip Maxfield, of Henry S. Maxfield Real Estate with offices in the Lakes Region, said, "The slow easing up on interest rates has brought our real estate market to a peak, which is a peak that I believe is sustainable." Few see a market correction ahead, or a bubble. To the contrary, all said there is nothing now or on the horizon showing the market is about to enter a down cycle. Many voiced concern, however, that a downturn might be sparked by all the recent media coverage about a housing bubble and predictions about its burst. This, they fear, might bring about a downturn by convincing buyers to hold off on making purchases. Yet, all bets are off if interest rates spike to the 8 or 9 percent level. Developer Jim Powers, of Northern Acres in Bedford said, "If the feds go to 9 percent real fast and hard, it would really put the real estate market in tough shape and all the folks tied to it." Disagree with economists None of the agents interviewed supported the economic models used by a variety of economists to predict that much of New Hampshire's housing stock is overpriced and likely to see a price correction beginning late 2006. The economists made these forecasts based on traditional economic models that measure differences between buying a house versus renting one and the gap between the growth of income versus housing prices. Both measures found New Hampshire's housing prices had outpaced historic norms. Russell Thibeault, of Applied Economic Research in Laconia, said Granite Staters' incomes cannot support more price increases. He said today's housing prices are being propped up in part by creative lending practices that allow more people to qualify for financing. These types of loans allow borrowers to make interest-only monthly payments and add extra years to traditional 30-year mortgages to lower monthly payments. Tom Duffy, manager of Prudential Verani Commercial Realty of Londonderry, said the growth of "loosey goosey lending" has stretched people's finances. "If you're looking for the thorn that might prick the bubble, it might be the lender practices. It scares me," Duffy said. Party on "Forty-year mortgages, interest-only mortgages, blanket mortgages — these are all the signs of people not counting their drinks anymore," Duffy said. But he added, "As long as someone's putting liquor on the table, the party will continue." Duffy, who specializes in commercial real estate sales and development, said these lending practices have just started to creep into commercial property loans. He said no one wants to miss out on the potential money to be made in the rebounding commercial property values, which started to take off about a year ago. "Everyone wants the deal to happen, so little excesses like that start to build up. It's human nature," Duffy said. Almost all agents agreed that wild appreciation rates seen over the past few years are over. Powers, whose Bedford-based Northern Acres realty company specializes in buying and selling land in the central and northern parts of the state, said developers investing six to 18 months out have become very cautious. "A lot of folks in the development business are cautious not to get behind the curve at today's price or value. They don't want to get trapped with tomorrow's price potential," he said. Powers said the residential real estate market has flattened in the last few months. "It has not gone down, but it's leveled off. I think you're going to see it at a lower percent or flat until everything else catches up. You're not going to see significant increases like you have," he said. Maxfield also believes the residential market has hit its peak. "I believe the residential market has definitely hit its top. Everything in all price ranges has pretty much leveled out. The high-end waterfront topped out about two years ago, with minor exceptions, and has been very steady and consistent." Good sign Like other agents, Maxfield characterized the topping-off as positive. "You can't take everything up forever and not expect it at some time to level out," he said. "After significant increases you do need to have a period . . . where the market reaches its reasonable rate of return." But some sellers are slow to accept this, many agents said. Too often they will insist on listing properties with yesterday's high appreciation rates built in, they said. As a result, some properties are not selling, and sellers are having to lower their asking prices. "If you price above where you should be, your property sits on the market," Maxfield said. Ed Buczynski, president of Masiello Group, which comprises 29 offices in New Hampshire, Vermont and Maine, said, "The sellers right now have to understand where their values are. That the appreciation rate is not screaming like it used to be and they need to adjust to what the values are today to sell their property." Few believe there will be any decline in values. Economists, too, believe values will hold steady, but foresee a decline sometime around late 2006 or early 2007. Decline? What decline? Real estate sales agents contend, however, there will be no decline. They say today's values are reasonable, despite years of double-digit appreciation because the market was overdue for strong appreciation following the real estate downturn in the early 1990s. Plus, they say there is no oversupply of housing and the economy is sound. None have seen houses selling for less, despite sellers having to lower their expectations of gain. Betty LaBranche, of Betty LaBranche Agency Inc. with offices in Portsmouth, Exeter and Hampton, said, "No one is selling for less than they paid or even what they paid a year ago. There's not one person I know of that bought even a year ago that didn't sell for at least 10 to 15 percent more." Asked if Seacoast properties will continue to appreciate at a rate of 10 to 20 percent, LaBranche said she didn't know, but suspects rates to stay around 10 to 15 percent. Kathy Walsh, of Kathy Walsh Real Estate Inc. covering sales in the Seacoast area, said first-time homes selling between $180,000 to $300,000 are remaining very strong. But instead of appreciating at 14 percent or more, the appreciation is about 5 to 8 percent. Staying strong Walsh expects the market to continue strong and steady so long as interest rates remain below 8 percent. "If we get to 8 percent, you could see a real slow down," she said. Walsh, who also is on the board of directors for the New Hampshire Housing Finance Authority, said there is no oversupply of housing. That observation seems to be supported by recent sales figures from Andrew Werry, executive director of Northern New England Real Estate Network, which tracks MLS sales. Werry noted very little change in the time it takes a single family house to sell in Hillsborough and Rockingham when comparing the second quarter of this year to the second quarter of 2004. In Hillsborough, houses sold in 66 days this year compared to 63 days last year. In Rockingham, properties sold in 78 days compared to 80 days last year. Normal supply Dick Badger, of Badger Realty, with offices in North Conway and Jackson, said, there is no oversupply of housing or a lot of speculative building in the market. The supply and demand are well balanced, he said. One way Badger gauges housing prices is by comparing the selling price of an existing home to the price it costs to rebuild that home. By that measure, existing homes are underpriced. "An existing house costs less than a replacement house, even when factoring in depreciation, at least in Mount Washington Valley areas," he said. Copyright 2005 - The Union Leader.