The New Hampshire Advantage - by Peter Francese April 2006

REALTORS® must not have many friends at the Federal Reserve. Despite a fresh face at the top, our central bank raised the fed funds rate by another quarter point and stated with uncharacteristic clarity that they were not done yet.

The result is that a home buyer purchasing the average single family home sold in New Hampshire may have to pay as much as $200 more per month in mortgage payments or nearly $3,000 in points at closing.  As a result more home buyers across this region will be trying to find homes that cost less to compensate for the higher cost of borrowing money.

Also, any reasonably well-informed home buyer in New Hampshire this spring has to be concerned that if interest rates keep rising maybe that will negatively affect the future value of their home. Considering some of the lofty prices paid last year for homes in the Boston area, this is a very reasonable fear.

But a home buyer in New Hampshire has less to worry about regarding the near-term future value of their home. One reason is that at the present time there are more types of potential home buyers than in many other states.

People often buy a home New Hampshire because they have a job here, as happens in every state. But quite a few folks looking for a home here have a job in a nearby state to which they will commute on a daily basis. Other reasons people buy a home here include wanting to retire here or wishing to own a second home that they can use seasonally or in their leisure time.

Multiple reasons for wanting to own a home here means more potential buyers for each one. Among the explanations for this is New Hampshire 's high status among the 50 states in various measures of well-being.  The Census Bureau, for example, ranks New Hampshire at the top in terms of median household income.  But the Bureau also ranks us near the bottom (48th ) in terms of per capita state taxes. And Morgan Quitno again voted New Hampshire as the nation's "most livable" state.

The chart below shows how New Hampshire measures up against the other New England states in terms of state taxes as a percent of median household income.

Vermont ranks first in the nation in terms of per capita state taxes and because it has so few year-round households, state taxes are a high percentage of income.

The chart below is a cautionary tale. Part of the New Hampshire advantage is that its residents pay half as much of their income in state taxes as other New England states. But that means a far greater reliance on property taxes in each town or city.

 

This worked to our advantage as long as young people kept moving here and refreshing our workforce. But in recent years that youthful in-migration has reversed and a rising percentage of our homeowners are at or near retirement age.

According to the Census Bureau nearly 40% of New Hampshire homeowners are 55 years old or older. By comparison that percentage is 44% in Maine and 43% in Vermont, which are the first and second oldest states in the nation in terms of median age.

Because property taxes become increasingly burdensome to older homeowners, as their income often shrinks, it is imperative that a reasonable balance be maintained between the number and proportion of young, middle-aged and older homeowners.

Demographic balance may seem like an esoteric geek demographer's term to someone in the business of selling real estate. But our neighbor states probably wish they had paid more attention to it.  The New York Times had a sad article about Vermont on March 4th titled "Vermont losing prized resource as young depart".

Maintaining the New Hampshire advantage means building homes for people of all ages, not excluding them with age restricted housing or growth moratoriums.

Towns that reduce or eliminate the ability of young adults to buy their first home are diminishing the New Hampshire advantage and bringing us closer to the day when a depressing article like the one about Vermont gets written about us.

The advantage of having a multiplicity of buyers here in New Hampshire is not a permanent condition. It must be maintained through the extremely hard work of convincing planning boards that allowing homes to be built for people of all ages will be beneficial for them and for the future well-being of our state.