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Real Estate Market

2016 Real Estate Outlook for Stowe and Northern Vermont

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 nick@stowevt.com.  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!!


Stowe VT and the Unsettled Real Estate Market

Economic gurus and Wall Street Analysts are starting to forecast an economic and real estate market slow down for 2016.  The 3rd Qtr GDP growth come in at half the 2nd Qtr GDP growth rate, a shock to some and a reason for people to lift their collective heads and assess what is going on.  According to Investopedia (they have great market perspective) there are six indicators pointing to a slow down.  They are:

i) European economy is getting worse,

ii) China's growth has stalled (once you look past the Chinese Governments funny numbers),

 iii) unemployment isn't so rosy (yes, we are creating jobs, but we still have the lowest labor participation rate in 38 years.)

iv) We have a bigger than anticipated problem in student debt.

v) The Fed can't cut rates any lower without risking creating a recession themselves.

vi) The economic data now is VERY similar to the time period leading up to the last recession (retail sales, down - US Factory orders, down - Real  GDP, down - US Exports are weakening and corporate profits are dropping).

Please click here for the Investopedia article.

Bottom line, for those who do live here, be thankful you are in Stowe and Vermont!  This isn't just because Vermont is a great place to live, which it is.  This is because if anything has proven true about the Vermont real estate market it's that it never grows or recedes as fast as the national average.  As the mantra goes, our peaks and valleys are in the landscape, not real estate markets.  Why?  Because when the luster of the city wears off and people don't make money there, where do they go.  You guessed it.  People are more inclined to move out of the concrete canyons and pursue the things in life they have been sacrificing.  They become lifestyle buyers.  When the allure of financial gain goes away people embark on other pursuits.

Look at the couple years after the last recession.  Vermont outpaced the national average by 14% in one demographic, people between the age of 35 and 44.  In the last few years, as the economy has got better that segment's growth has slowed down.  If there is a recession that starts next year look for that trend to ramp back up.  If this recessions has anywhere near the vigor and sting of the prior one look for the lifestyle movers who held in here last time to say "NO, NO, NO, I'm not doing this again!!"

What does mean for Stowe, VT.  Given that Stowe is the preeminent lifestyle town in Vermont we should see a disproportionate share of new faces.  In short, it doesn't look like the demand side will fall all that much.  Stowe has the luxury of two major buyer groups - one, primary owners as the town becomes more of a bedroom community for Burlington, and, two, people who want their second/retirement homes here.

With that understanding of the demand side, let's look at the supply side.  Some Real Estate agents in the market here noticed a number of recent price drops on homes in the market and have concluded its time to cut bait and run, the market is already tanking.  Is that accurate?  The year 2014 was a record breaking sales year - yes, we benefit most from economic growth like everywhere else.  The market forces do reign supreme.  Then 2015 had all the ear marks of another record breaker (click here for the Stowevt.com 2015 Real Estate Outlook), but that didn't play out like we thought.  A brutally cold winter (yeah, awesome skiing!!) slowed winter sales.  However, the real issue was buyers were faced with a paucity of decent supply in 2015.  So sales pulled back regardless of the indication of ever increasing demand.  Supply was not there.  Where did that demand go? It's still there!  The majority of buyers are underwhelmed with  the product on the market.  Current owners saw houses flying off the shelf in 2014 and ratcheted their prices up in 2015 for less than desirable product.  Anything that was clean, presentable, functional sold and sold fast.  Further adding credence to this assessment is builders have some of the biggest backlogs of construction projects they have had in years.  People still want to be in Stowe and if they can't find quality they're going to build it.  See projects like Stowe Highlands (click here or details).

We are not saying an economic pull back will not affect the Stowe, VT real estate outlook, it will.  However, it shouldn't effect it like other places.  Just be glad you live here and that our peaks and valleys are really in the landscape and not in our housing market!  Stay tuned for the 2016 Real Estate Market Outlook coming soon.

If you would like to discuss the Stowe and Northern, VT real estate outlook, please feel free to call 802.585.1131 or email nick@stowevt.com.  Look for our 2016 Stowe Real Estate Market Outlook soon.

2015 Stowe and Vermont Residential Real Estate Market Outlook

The New Year brings reflection, assessment and strategy on all fronts, including real estate.  Lamoille County and Stowe, VT set records in terms of the number of residential real estate transactions in 2014 - the most units sold, ever.  This amount surpassed the number of transactions seen in the irrationally exuberant times of 2006.  So everybody proclaimed in 2014 that the real estate market was fully recovered (the Stowe Reporter said so six month into the year when the market only had 8 more units sold than the same time the prior year - bold move).

Truth be told, the high-end market ($1.5mln) sputtered out of the gate and was a late arrival to the transaction party, almost all of the closing above $1.5mln started after September 2014.  The fuel of low interest rates, the Vermont lifestyle selling at a premium and a lagging recovery on real estate prices made 2014 active, very active.  This positive forward looking data seemed to go against the dower assessment of the State's economic condition as often written about by Art Woolf, a UVM associate professor.


His premise was that the US Census data showed that Vermont's population was diminishing and this is the cause for us having the second lowest unemployment rate in the country - not job growth.  This loss of people would put greater pressure on those left to pay taxes, etc. and this would create an economic downward spiral for Vermont.  (Detroit, but with mountains and landscape.)  I largely agree(d) with his economic conclusion for the everyday resident.  However, we all know Vermonters like to keep Vermont weird (that is Vermont doesn't always comport with economic trends).  How could we be selling so many houses if the usual economic drivers of Vermont were failing (Vermont hasn't created a net new job since 2010 and has only seen decreases in the disposable spending of its population - come on Montpelier, get your act together!!).


Then "it" came out.  Moving companies have some of the best data at projecting future trends in residential real estate.  United Van Lines conducted research on where moving company's moved the most people to in the United States. VERMONT WAS THE FOURTH MOST POPULAR STATE TO MOVE TO IN 2014!!  This isn't interest rate movement fueling demand - this is a structural shift in buyer mentality.  Vermont cool is selling at a high right now.  This begs the question, if we had enough activity last year to drive record sales then what happens when all the real estate search engines say Vermont homes searches are up over 100% from the same time one year ago (Stowe is up almost 200% from last year)?


This is the kind of structural demand change that will buck modest and controlled interest rate increases - which are coming.  This is also the kind of demand change that moves prices.  Vermont usually never sees large gains or losses in real estate values; take the national average, divide by two or three and that is usually where Vermont finishes.  Add in factors like most all the reasonably priced houses were bought up in 2014 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 4.5% 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 2015 will set another high water mark in total transactions.


If you would like to know where these buyers are coming from and what they are looking for, please call 802.585.1131 or e-mail nick@stowevt.com.  This buying trend is being fueled by the only population demographic in the state to outpace the national average.  These folks are flocking to Vermont!!