I never thought I would see the “double-double” in New Hampshire. By that I mean a double-digit unemployment rate (14.5% in May) and double-digit year-over-year home price appreciation (generally 10%) at the same time. The conventional relationship is that when the economy tanks, housing slips and falls. That’s not happening in this virus-struck bizarro world. What accounts for this? For one thing, we are experiencing record low mortgage rates at or under 2.5%, thanks to Federal Reserve stimulus policies. Combine these rates with subdued construction and the thin inventory (only a one month backlog for units under $300,000) and units get scooped up as soon as a posting shows up on realtor.com. Realtors are busy, buyers are buying, and sellers are selling.The rental market appears to be holding up reasonably well.
The combined effects of existing rental subsidies, supple-mental unemployment benefits, an exceptionally low vacancy rate at the start of the year and an interim moratorium on evictions combined to ward off what would otherwise be challenging times for many renters and landlords. So, housing markets have not tanked as might be expected given the unprecedented soft economic conditions.
That said, issues remain. The pain of this downturn is not spread evenly across income and age cohorts. Most of the jobs lost have been in the retail, restaurant, and lodging sectors, consisting primarily of lower wage jobs held by younger workers. So, many of those who couldn’t find an affordable place to live before the downturn hit, find their housing situation even worse today. As Homer Simpson quipped, “It just gets worser and worser.”
As to the future? Stay tuned. Housing’s short and long term dimensions are elusive.
Russ Thibault is an economist with Applied Economic Research (AER.com). This column first appeared in the Housing Market Snapshot of the New Hampshire Housing Finance Authority.