New Hampshire is currently facing a significant real estate challenge: a glaring lack of inventory. This shortage of available properties on the market is not merely a localized concern but reflects a broader phenomenon that’s sending ripples across the state’s entire real estate landscape.

This intricate issue, shaped by various factors such as demand and supply dynamics, demographic shifts, construction constraints, and more, has been further complicated by the trend of rising interest rates. In this comprehensive blog post, we will dissect the inventory crisis in New Hampshire, delve into the profound impact of rising interest rates, and explore potential strategies to navigate this complex situation.

Understanding the Inventory Shortage: A Closer Look at New Hampshire

What Does Lack of Inventory Mean?

The term “lack of inventory” in real estate refers to the deficiency of available properties for sale. In New Hampshire, this shortage is felt acutely across different housing categories, impacting everything from affordable housing to luxury estates.

Why is Inventory Shrinking?

1. Demand Outstripping Supply: A combination of native residents looking to purchase homes and newcomers drawn to New Hampshire’s appeal is driving demand.
2. Limited New Construction: Stringent zoning laws in towns with high demand, high costs of land and materials, and labor shortages are slowing down the pace of new home construction. According to one source, the average cost to build a new home in New Hampshire is $307,400 which doesn’t include land.
3. Aging Population and Downsizing: As baby boomers downsize and millennials enter the market, the pressure on different types of housing increases. This particular dynamic lends to the desire to build accessory dwelling units, also known as ADU’s. However, recent legislations was tabled that would address the zoning regulation around ADU’s.
4. Investor Activity: Investment in real estate as rental properties or vacation homes can reduce the inventory available for regular homebuyers. Short term rentals are generally allowed with the exception of a few towns. This trend has had a significant impact on inventory causing many towns to consider town level ordinances to limit the number of units being used for short term rentals.

Interest Rates: From Historical Lows to Rising Concerns

Interest rates act as a vital lever in the real estate market, influencing everything from buyer affordability to investor activity.

The Low Interest Era

Historically low interest rates have played a part in stimulating home buying in New Hampshire. The ability to secure affordable mortgage loans encouraged more people to enter the market, inadvertently contributing to the inventory depletion.

Rising Interest Rates: The New Reality

As US monetary policy focuses on slowing inflation, here’s how this shift impacts the New Hampshire real estate market:

1. Cooling Demand?: Higher interest rates mean more expensive mortgages. This could potentially cool demand, but the lack of inventory may persist as sellers hesitate and construction lags.
2. Seller Dilemma: Higher rates might discourage current homeowners from selling, as their next mortgage could be more costly, further reducing available inventory.
3. Investor Reactions: Rising rates may deter some investors, but the impact on inventory remains uncertain, depending on investor strategies and market responses.
4. Impact on Prices: While some expect rising rates to stabilize or even reduce home prices, the persistent lack of inventory is counteracting this effect, maintaining upward pressure on prices.

Crafting a Path Forward: Customized Solutions for New Hampshire’s Inventory Crisis

To effectively address the intricate real estate inventory issue in New Hampshire, a set of tailored, forward-thinking strategies are necessary. Given the complex blend of factors at play — demand, supply, construction limitations, demographic changes, and the new reality of rising interest rates — the solutions should embrace a multi-pronged approach.

Encouraging Construction and Development

One of the primary drivers of the inventory crisis is the shortfall in new housing construction. To tackle this, state and local governments could work collaboratively to streamline the construction permitting process and relax stringent zoning regulations where applicable.

Furthermore, incentives could be provided to developers to encourage the building of both single-family and multi-family homes. Addressing labor shortages in the construction industry — perhaps through vocational training initiatives or partnerships with technical schools — could also stimulate the rate of new housing creation.

Strengthening Affordable Housing Efforts

As house prices soar amidst the inventory crisis, affordable housing becomes even more crucial. Developing a strategic plan to bolster affordable housing projects can ensure that everyone, irrespective of their income bracket, has access to suitable homes.

Local governments could consider partnerships with non-profit organizations or private sector entities to increase investment in affordable housing. Public policies could also be crafted to encourage the construction of affordable units in new developments.

Navigating the Impact of Interest Rates

Interest rate policies play a pivotal role in shaping the real estate landscape. Given New Hampshire’s unique market dynamics, there is a need for a careful assessment of how interest rate changes impact both buyers and sellers within the state.

Strategic planning by policymakers is crucial in order to strike a balance between managing inflation concerns, maintaining economic stability, and avoiding unintentional disruptions to the local real estate market.

Supporting First-Time Homebuyers

Aspiring homeowners, especially first-time buyers, are often most impacted by shrinking inventory and escalating prices. Expanding support programs that assist these buyers can be an effective strategy.

This could include enhancing education about the home buying process, increasing awareness of available resources, and possibly expanding down payment assistance programs. By easing the path to homeownership, more individuals could feasibly transition from renters to owners, helping to stabilize the market over time.

Conclusion: A Path Forward for New Hampshire

The real estate inventory crisis in New Hampshire is a multifaceted challenge, intertwined with rising interest rates, demand and supply dynamics, demographic shifts, and broader economic factors.

To navigate this complex landscape, a concerted effort involving policymakers, real estate professionals, community leaders, and residents is essential. Tailored solutions, rooted in a deep understanding of New Hampshire’s unique context, can guide the way forward.

The journey may be fraught with uncertainty, and there are no quick fixes. But through collaboration, innovation, empathy, and perseverance, New Hampshire can forge a sustainable path toward a more balanced and resilient real estate market. The goal is clear: a thriving, inclusive, and stable housing landscape that resonates with the core values of the Granite State and serves the best interests of all its people.