Not many New Years come with as much potential economic uncertainty in the market. That holds true for the Northern Vermont real estate market. However, it seems that as uncertainty grows in the outside world it is making Vermont more alluring. What? You mean people want to live where their food is grown locally, where the police truly protect and serve the community, where they have immediate access to life fulfilling recreational activities - Yes, quality of life matters! The list of attributes people state for moving to Vermont is lengthy. How much do they want to live here? I'll leave you with this quote:
“I tell people all the time that I’m in the most financially challenged period of my entire adult life, and I don’t know if I’ve ever been happier.” said Chris Alberti in a write up the Boston Globe did on his restaurant, Peasant in Waterbury (click here for the article).
Apparently, at all costs!
Am I saying Vermont is utopia? Absolutely not! Vermont has always been perceived as a challenged economic state. That is largely still true. There are a number of impediments to business here - namely high taxes and politicians who seem to abandon economic principles. From the outside, it might seem as though they don't want job growth here. To figure out how Vermont politicians see job growth, think of the way a 1930s waspy aristocratic housewife might view jobs, they are not all equal. Vermont doesn't want all jobs; it wants a certain kind of employment. Vermont's job recovery through the recession looked like its economy was going to stall. I largely agreed with the dower economic prospects of internal job growth. This has always been the way it has been - after the recession people's main reason for leaving the State was lack jobs. That has changed as of late. We have reached the point where employers have more job openings than Vermont has qualified workers (click here for recent piece on the VT employment market). The state should start having the universities and colleges offer programs that get graduates in a position to meet the skill demands of local employers.
While it may not be utopia, we are seeing that the rest of the country's problems make Vermont problems look like something out of a 1960s sitcom (we should all start hash tagging #vtproblems). We almost made it the whole year without the police shooting someone in the line of duty - no other state could claim that. Vermont offers a very safe place to live (FBI rated Vermont the safest place to live in 2015), outstanding quality of life, great access to local organic food and now the state is serving up jobs. This is better economic news than Vermont has seen in some time. This time period is very reminiscent of the socioeconomic drivers to the prosperous period the State had in the 1970s.
To understand why, let's look at where people are moving out of and into. Illinois is losing people so fast that State's tax revenues are dropping by $4,000 per minute. What turned some heads this time last year was that in 2014 Vermont was the 4th most popular move in state in the country, as rated by United Van Lines. As we discuss in our 2015 Market Outlook, United Van Lines report is a great forward looking indicator of real estate market trends and it was one of the elements that caused us to forecast such a positive outlook for 2015. It looked like 2015 was going to be a great year for real estate sales in Vermont. Then, wham, a brutal winter slowed homes sales in through the beginning of 2015. Ice didn't leave the lakes until June. The market prediction looked foolhardy. Well, not only was it spot on, it is fair to say we are now witnessing further evidence in the structural change in the demand for Vermont and thus, Vermont real estate. Vermont turned out to be the 3rd most popular move in state in the country in 2015, according to United Van Lines study (click here for report). Little ole Vermont is number three?
In 2014 Stowe and Lamoille County saw record breaking sales as Lamoille County was the fastest growing in the state. The number of transactions in 2015 in Stowe was down 20% from the same as the year prior. Twenty percent is huge! This has caused some agents to declare that there will be downward trend in pricing in 2016 for Stowe. We at Stowevt.com couldn't disagree more!
In our analysis all the clean, presentable and priced right homes sold in 2014 and it looked like 2015 was going to be a record breaker for Stowe homes sales. In the end it seems all the inventory was gobbled up in 2014, creating an impediment to sales for 2015. This impediment that proved far greater than a brutal winter. This left buyers underwhelmed with Stowe real estate offerings. The problem is a supply side problem. How do we know? Not only was Vermont the third most popular state to move into in the country; 2015 WAS VERMONT'S BEST YEAR FOR HOME SALES EVER!! The result was 2015 had more transactions than '05, '06, '07 and '14. The State's residential homes sales were up 13% year on year. Ultimately, our 2015 prediction underestimated the demand. All of the major real estate search engines are reporting an uptick in the pace of online traffic looking at houses in Stowe and Northern VT. Some of the best months for sales were at the end of the year. Perhaps, this was aided by the mild start to winter. This trend doesn't show any signs of letting up.
There are really not many other ways to explain home sales increasing by 13% for the state, but then down 20% for Stowe. Stowe is at the vanguard of Vermont real estate price increases and is a lagger in decreases. What further supports this is: 1) condo sales in Stowe are up 21%, mirroring the state trends and 2) home builders here have the largest backlog of projects in year and for some, in their history. If people can't find it to buy, they are going to build it.
What complicates matters is generally election years bring a drop in the stock market as people converting to cash in profitable times ahead of any perceived changes in government policy and thus tax policy. Then, add in a collapsing stock market in China as their inflated GDP numbers of past have forced them to consider letting their currency float without capsizing them. The drop in the stock market out of the gate is reminiscent of 2008. The headwinds facing the local real estate market are the Federal Reserve’s current stance on interest rates; they will be raising rates. The majority of Wall Street Analysts are predicting a total of 4 increases of 25bps each over the year to get mortgage rates to 5% by year end. Also, the strength of the dollar to the loonie has slowed down prospective Canadian buyers - who have a strong influence here.
The question facing the Stowe and Northern VT real estate market this year is will the demand for real estate increase enough to outpace the effect of the Federal Reserve's monetary policy and the weakening loonie. Our answer is, as long as nothing like geopolitical instability unsettles the oil market, or China's economy doesn't drag the world down with it, Vermont real estate will outperform the national real estate market to post positive gains. One of the main reasons is oil costs are low and it is pumping billions back into our economy thus giving people more disposable income. There are not many times in the history of Vermont real estate where the potential to outperform the national average has existed.
The significance of the structural demand change will outpace modest and controlled interest rate increases. It is also the kind of demand change that moves prices. Vermont usually never sees large gains or losses in real estate values; it follows the national indexes. If you wanted to know the Vermont housing market, you usually take the national average and divide by 2 or 3. Vermont isn't normally a market leader. Add in factors like most all the reasonably priced houses were bought up in 2015 creating a lack of supply and it points to real estate prices increasing in the near future. Therefore, our prediction is that home prices will increase 4% in Vermont this year with the premier areas experiencing even greater pricing increases. Increasing interest rates will keep market pricing from accelerating at a greater pace. We also predict that 2016 sales will fall short of 2015 pace given that interest rates will slow transactions in the 3rd and 4th Qtr of 2016. Basically, get ready for a blistering 1st Qtr and 2nd Qtr for real estate sales.
If you would like to know where these buyers are coming from and what they are looking for, please call 802.585.1131 or email firstname.lastname@example.org. This buying trend is mainly being fueled by the only population demographic in the state to outpace the national average. They are flocking to Vermont!!