May 22, 2022


Specialists in home design

Rising rates, home prices ‘strangling affordability’ | What’s Working

Buying a house is all about numbers — dramatically increasing numbers.

Someone who waited two years to purchase a home in Rockingham County now would need to earn another $70,000 a year to afford a median-priced home, now nearing $600,000 this spring.

For that, you could put two new Honda CR-Vs in the garage every year.

Rising interest rates intersecting with home prices that have risen more than 40% in two years are pushing monthly mortgage payments higher — nearly $1,000 more for principal and interest alone — than two years ago for a median-priced home statewide.

“It’s strangling affordability,” said Rob Dapice, executive director and CEO for New Hampshire Housing. “It’s making home ownership increasingly out of reach.”

The higher housing costs also are complicating efforts to attract and retain workers.

“It’s absolutely linked to New Hampshire’s current workforce challenges,” said Elissa Margolin, director of Housing Action NH, which includes housing developers, lenders, property managers and others. “There are positions that can’t be filled.”

Over the past two years, the median priced home in the state has risen nearly $130,000, to $440,000, producing a monthly payment of $2,272 for principal and interest on a 30-year loan.

Principal and interest are only two ingredients of the monthly mortgage payment.

Taxes as well as hazard and private mortgage insurance raise that payment to $3,424, or $1,307 more than in March 2020, according to Heather McCann, director of housing research at New Hampshire Housing.

Real estate agent Moe Archambault described the housing price spike as “crazy unprecedented” in New Hampshire.

“I’ve been selling homes for over 30 years and I have never seen that type of increase in home values,” he said.

Over the 30 years of the loan, the buyer of that $440,000 house (borrowing 95% of that cost) will pay $156,000 more in interest with the 5.11% rate available on April 21 of this year than with the 3.33% interest rate of April 2020, according to an online mortgage calculator.

The disparity would be even larger if that person had bought that house two years ago, when the state’s median selling price was $311,545. Between the lower cost and lower interest rate, the buyer would have saved $227,000.

Meanwhile, the state’s estimated median household income — the number that half are over and half are under — is around $108,000. Only about 1 in 5 New Hampshire households make more than $150,000 a year.

An all-inclusive monthly payment of $3,424 represents 38% of that median household income, above the recommended 30% mark housing advocates recommend.

To reduce their monthly payments, buyers can make a bigger down payment, refinance in later years or pay off their mortgage early. Private mortgage insurance also could disappear over time. On the flip side, other costs such as hazard insurance and taxes could rise.

Renters not immune

Archambault is renting out a two-bedroom apartment on Manchester’s West Side for $1,600 a month. The same apartment rented for $1,045 for the past five years.

“I can’t answer the phone fast enough,” said Archambault, owner and broker at Moe Marketing Realty Group in Bedford. “You’ve got people not making a lot of money begging for it.”

In another instance, several people bought condos in Derry that were cheaper than staying in their apartments and paying hefty rent increases, he said.

Margolin said even people with better paying jobs are having trouble finding a suitable place to live.

“We’ve heard of engineers turning down positions because they can’t find housing,” Margolin said. “Imagine now if you are earning low-income wages, say in retail or the hospitality industry, imagine how difficult that housing market is on your wages.”

What's Working Housing

Developer Conor Beote of Beote Construction, left, speaks with Daniel De Faria of JDS Builders at a new development on Therrien Lane in Manchester last week.

When home builder Conor Beote listed five new homes for sale off Wellington Road in Manchester over the winter, he had buyers for all them within a week — at prices ranging from $540,000 to $660,000.

Some buyers won’t close until January 2023, meaning they may have to pay even higher interest rates, since the Federal Reserve has signaled it will boost rates again.

“It’s definitely a worry that I might lose some buyers due to that,” said Beote, principal of Beote Construction in Merrimack. “It’s probably more stressful for the buyers. For me, I’m not as concerned if I lose a buyer. I still have confidence with the market the way it is, I can resell that exact home again.”

His purchase-and-sales agreement for all 11 homes in the subdivision on Therrien Lane contains language that he can increase a home’s price if building supply costs rise by more than 15%.

With a tight market of homes for sale, “new construction has become where buyers can at least pick and choose a little bit and not settle for an existing house that they have to make a decision on that second,” Beote said.

The interest rate effect

Rising interest rates have meant more house shoppers scrambling to lock up a house and their financing before costs go higher.

Archambault is selling more homes this year than last.

“What I’ve been seeing personally is buyers trying to race to get in before those interest rates climb so much higher that it’s going to knock them out of the game,” Archambault said.

“I know some of my buyers have had to readjust what they could afford,” said Bedford real estate agent Dorothy Mills.

The frenzy for lower-priced homes is as intense.

In March, a three-bedroom Cape style house in Dunbarton hit the market on a Tuesday and was under contract the following Monday. About 160 potential buyers shuffled through the 1,547-square-foot home.

“That was a very big one,” said Mills, the listing agent.

The 13.5-acre property on Robert Rogers Road was priced at $365,000 and drew 18 offers, some north of $400,000. Closing is scheduled for mid-May.

In New Hampshire in March, 23% fewer home sales finalized and 19% fewer houses were for sale than last year.

Housing solutions

Many across the state, including business groups and employers, are talking about how to fix the housing situation.

Their ideas include “the importance of re-examining local zoning ordinances in order to make it easier to provide more housing,” said New Hampshire Housing’s Dapice.

Allowing duplexes where only single-family homes are permitted and reducing minimum lot sizes are two suggestions.

“Something has to change in the state about how houses are approved for building and building lots. That’s all town-controlled,” said real estate agent Rachel Eames, whose family also owns a land development company.

What's Working Housing

Josh Bujnowski of J & B Painting paints at a new development on Therrien Lane in Manchester last week.

Cash from outside

Some buyers are bringing money they got selling houses elsewhere.

Archambault is working with clients from Malibu, Calif.; Kansas City, Mo.; and Dallas, as well as states around the Northeast.

The Dallas guy is joining a startup firm in Belmont. Kansas City can work remotely. Malibu wanted to escape California and has family ties in the Granite State.

“They’re getting top dollar from their house knowing they will need top dollar for the next house,” Archambault said. “They have to live somewhere.”

Empty-nesters looking to downsize have an advantage over first-time buyers aiming for the same-sized home.

“They have the extra money” from selling their existing homes, Mills said.

Eames said the usually busier spring housing market is just starting.

“I haven’t heard complaining about it (interest rates) yet,” said Eames, owner/broker at Eames Realty Services, based in Concord.

She thinks people who had tight budgets when interest rates were 3% to 4% already have dropped out of the market.

Eames wondered how people with small children and day-care costs can afford housing if they are in lower-paying jobs and need to pay for gas to commute 45 minutes or longer.

“How do you make that work?”

What’s Working, a series exploring solutions for New Hampshire’s workforce needs, is sponsored by the New Hampshire Solutions Journalism Lab at the Nackey S. Loeb School of Communications and is funded by Eversource, Fidelity Investments, the New Hampshire Charitable Foundation, Dartmouth-Hitchcock Medical Center, the New Hampshire College & University Council, Northeast Delta Dental and the New Hampshire Coalition for Business and Education.

Contact reporter Michael Cousineau at [email protected] To read stories in the series, visit