April 2021 Vermont Real Estate Market Update

Last April we were in a full on shut down and this year we’re getting our first glimpses of our lives returning to a new “normal” with vaccination numbers climbing and talks of more COVID restrictions being lifted or lessened in our state. What the last year has shown us is that even through a global pandemic, the Vermont real estate market has stayed stronger than ever. We continue to see more of the same, with low inventory, rising prices and an unwavering height of demand with no signs of change in the near future.

Home prices keep going up:

Vermont Business Magazine recently published an article highlighting Vermont as seeing the third highest increase in real home value across the nation according to the First American Real House Price Index! Chittenden and Franklin counties saw prices rise by 17.5% in the month of April year over year, and they grew by an impressive 8% from last month alone. This is indicative of the spring market and more home buyers out there searching, increasing competition and thereby home prices.

Are we in a bubble?

The short answer is not likely. With prices drastically rising and no end in sight, it is slightly reminiscent of 2006-2007 and many people are worried about a housing bubble and a crash. While Vermont never really saw the same devastation to our real estate market that other states did, this is still an understandable concern. The good news is that there is so much that’s different this time around than there was before. Most relevant is that the mortgage industry has learned from the past! Lenders have much higher lending standards now than they did previously, leading to more creditworthy borrowers. Mortgage forbearance has also been a major help, keeping people in their homes and out of foreclosure even when they were unable to work. That coupled with the lack of new construction, means that supply has stayed low - we currently have the lowest housing supply across the US that we’ve seen since 1990.

What’s happening with new construction?

With inflation driving the cost of all building materials to rise at record high rates, the construction of everything is more expensive than ever. The influx of people choosing to stay in Vermont as well as move here from other states has illuminated the shortage of housing that we’re seeing across all of Vermont. While new homes are being steadily built, they are being purchased just as quickly and aggressively as existing homes. We need more new construction in the state and for new homes to be built more rapidly to help us close the gap and aid in housing affordability. Building in Vermont is more difficult and expensive than in other states because of the rules and regulations put in place, such as Act 250. This discourages some builders from going through the process and drives longer timelines and ultimately higher costs to the builders that do, which they in turn pass on to the buyers of those home. Faster building and more mass production, i.e. larger neighborhoods, would reduce costs and build timelines which would ultimately help to alleviate the lack of supply we’re seeing and thus help prices to even out across the board.

Why should you buy if the prices are so high?

We understand that as a buyer, paying record high prices for a new home doesn’t sound so appealing. So why not wait and pay less once the market calms down? Well, the unfortunate reality is we may not see that happen anytime soon. We have been seeing prices rise steadily over the last ten years and while we may see some sort of evening out of pricing eventually, we are likely to see prices continue to climb for the foreseeable future.

One of the biggest questions to ask yourself when deciding if you should purchase a new home right now is how long you plan to stay there. While the market may go up or down during the time you own your home, you only experience a loss or gain of home value when you actually sell. So if you plan to stay put for 5 or more years, you are likely to see any changes in value even out over that time.

You want to sell your home but where will you go?

This is a great question and ironically if everyone stopped asking this question and put their home on the market, the issue would solve itself. But it is of course necessary to understand where you will go before committing to selling. Contingent sales (when you have to sell your home in order to purchase) can be seen as a negative, making it harder to win out in multiple offer situations. It is important to keep in mind that finding the perfect scenario where you can move into a new home at the same time that you sell is possible, though it may take longer and you will likely need some patience along the way. We have had luck finding off market properties which are often more flexible with timelines which can be a great win-win for all. Another option is to sell your home and find temporary housing, whether with a family member or in a short term rental - this can be a great option for those that want to take advantage of the current market but do not want to wait to find a new home first. Whatever your situation is, we are confident we will help you to figure out what options are best for you. Reach out to Jon directly to discuss, by emailing us or calling 802.488.3487.