VERMONT - If you are interested in investing in real estate in Vermont, here are some trends to watch for in the coming years. The number of out-of-state buyers purchasing homes in Vermont is soaring, and there is a shortage of available inventory. The corresponding inventory shortage will exacerbate the demand for homes in the state.
House Prices Will Rise 5% Between 2022 And 2023
According to a new study from Harvard University, the average price of a primary residence in Vermont will increase by 5% over the next five years. The study analyzed Multiple Listing Service data to calculate median home prices. It found that median home prices in northwest Vermont will increase by 18.3% over the next five years. In contrast, the median price of homes in other parts of Vermont will rise by less than five percent. For example, to afford the median home price of $313,464 in Washington County, you would need to earn $86,195 a year. For Bennington County, the median price would be $303,600; for Rutland County, $68,647 would be needed to buy a median home.
The lack of inventory is continuing to affect home prices, but the shortage of available properties will ease slightly in 2022. The real estate market will shift toward buyers in the second half of this year, but prices will not necessarily fall.
Demand For Single-family Homes Will Decline
The housing market has cooled off as interest rates continue to rise. Many developers are already booking a year or more ahead, and the number of available properties will continue to be limited. Rising lumber costs are also limiting developers' ability to meet demand. The cost of building homes is rising to meet rising profit margins, which is not helping the overall market. Until new home construction increases, the shortage of homes will continue.
According to the latest data from the Vermont Department of Finance and Management, home prices in the state will increase nearly nine percent in 2021 and more than 10% in 2022. By 2023, the state's housing market is expected to increase by 8.9%. The rise in prices is mainly due to out-of-state buyers.
The report cited data that showed that in April, a typical home buyer needed $27,400 to buy a home. This figure excludes 92% of Vermont renters.
Homebuilder Confidence Will Fall 12 Points To A New Level Of 55 In July
The National Association of Homebuilders reported a drop in builder confidence in July. The monthly index dropped 12 points from June's reading to 55. That's the lowest reading in a year. The housing market remains weak amid inflation and rising interest rates, impacting builder confidence. The builder confidence index measures current conditions, sales expectations, and buyer traffic. The three index components declined.
The national housing market index (HMI) has been downward for seven months. The July reading is the lowest since May 2020. It's also the largest drop in a single month in the survey's history, second only to the 42-point drop in April 2020. The declines were widespread, affecting all three HMI components: current sales conditions, sales expectations for the next six months, and traffic to prospective buyers.
The National Association of Homebuilders (NAHB) has predicted that homebuilders will build more homes in the next six months than in the previous five years. The Fed's attempt to discourage home sales isn't working. The NAR survey of home builders shows they are still optimistic about investors and first-time buyers. The pending housing market index from the Commerce Department suggests that housing starts are unchanged in August, despite the market showing a slight decline in July. Multi-family housing is helping the construction sector offset the drag on single-family housing.
Single-family Home Sales In Vermont Will Decline.9% In August
The state's housing market is experiencing a lack of supply, and builders are booking homes for one year in advance. The lack of inventory adds to the housing shortage and
While the current housing market is in a slump, it may be possible for home prices to fall further in 2023. Typically, home prices decline after demand catches up to supply. Although home construction in many regions has increased in recent years, it is still far behind. This means that if home prices were to drop significantly in 2023, they would need a huge decline in demand.
Homebuyers are pulling out of the market with a rising mortgage interest rate. Many experts forecast that home sales will fall significantly in the near future. While it is unlikely that home sales will plunge by that much, they will remain low, despite increasing mortgage rates.