This story, written by Report for America staff member Carly Berlin, was produced through a partnership between VTDigger and Vermont Public.
As states across the country struggle to relax their tight housing markets, the stagnation consuming Vermont is highlighted.
A recent nationwide analysis of home prices by the Federal Housing Finance Agency showed that Vermont experienced the highest year-over-year home appreciation rate of any state, at 12.8%.
That’s notably higher than the national average. Nationwide, home prices increased 6.6% between the first quarter of 2023 and the first quarter of 2024, according to the FHFA.
Nationally, low inventory of homes for sale has helped drive up home prices, Dr. Anju Vajja, deputy director of the FHFA’s Research and Statistics Division, said in a statement.
The national analysis analyzes a massive data set of single-family homes with mortgages, and tracks how the prices of those properties fluctuate over time. The FHFA notes that Vermont’s relatively small number of real estate transactions over the past decade could skew its ranking among states.
But a closer look at housing still shows a sharp increase in home prices from 2022 to 2023. A recent assessment from the Vermont Housing Finance Agency looked at the sales prices of primary homes specifically, roughly eliminating the 16%. of seasonal or occasional use housing in the state’s housing stock, which includes the federal analysis. It also takes into account homes paid for in cash, not just those purchased with a mortgage.
The VHFA found that the median sales price of primary homes reached $325,000 in 2023, a 5% increase from the previous year. The median price of new construction homes sold last year increased 11%, reaching $616,500. According to the analysis, no Vermont county has seen a drop in annual home sales prices since before the Covid-19 pandemic.
“No matter what you look at, home prices are rising, interest rates remain high, and affordability remains out of reach for many, many Vermonters who do not yet own their homes,” Maura said Collins, executive director of VHFA.
VHFA’s analysis also shows a dramatic drop in the number of primary homes sold in 2023 – a decline of nearly 26% from the previous year, down to 5,759 homes. The drop comes after a surge in home sales that peaked in 2020. Last year saw the lowest number of home sales in the state since 2012, when the housing market was still recovering from the Great Recession, according to VHFA.
That decline in home sales can be attributed to the fact that Vermont is not building enough new homes to meet demand, Collins said. High interest rates also play a key role. People who bought their homes when rates were lower might be reluctant to put them on the market and buy them elsewhere now, with interest rates for a 30-year mortgage hovering around 7%.
“More and more homeowners who want to downsize, move to more efficient homes, or move to different communities to take advantage of job opportunities, can’t do it, because they’re stuck in these very low interest rates that they’re probably going to have. ”Collins said.
The bottleneck in Vermont’s housing market also manifests itself in the shorter home sales timeline. In recent years, homes have been selling faster and faster: in 2023, the average number of days between the time a home went on the market and the time it was sold or contract was signed dropped to 62 .That may leave little time for potential buyers. to arrange its financing, Collins said.
“If you see something you like, you better move on, because it won’t be available for long,” said Peter Tucker, a lobbyist for the Vermont Association of Realtors.
The state’s tight housing market creates wide ripple effects on Vermont’s economy, said Megan Sullivan, a lobbyist for the Chamber of Commerce. Homelessness makes it more difficult for employers to retain their workers and attract new employees from out of state.
You hear stories of potential employees turning down job offers because they can’t find a place to live or because the only housing available is too expensive to match their salaries.
“It all comes back to our workforce, and our workforce continues to come back to the lack of available, affordable housing for workers in every industry, in every part of Vermont,” Sullivan said.
Sullivan, who advocated for Act 250 housing exemptions during this year’s legislative session, hopes that lawmakers’ attempts to reduce regulatory hurdles for housing development can help promote more growth. However, he acknowledged that reforming the state’s land use policies “will not be a silver bullet” to Vermont’s housing problems.
The Realtors Association’s Tucker sees some early signs that the market is easing, including a modest increase in the number of homes on the housing market in the first months of 2024, compared with the same period last year. .
“If we have a few more properties available for sale, we will be able to do more business. So ultimately that may help our industry, but it will certainly also relieve some pressure on pricing,” he stated.
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