VITAL STATISTICS

There's no N.H. mortgage/lending crisis

SEACOAST VENTURES: The mortgage/lending crisis is the talk of the country. While it remains an issue of concern in this region, how do we differ from the national trend?

PETER FRANCESE: There is NO "mortgage/lending crisis" in New Hampshire. I can't emphasize that strongly enough. During 2007 fewer than 2,000 homes in our state were in any stage of foreclosure. While each one of them is extremely unfortunate for the individuals involved, those homes represent less than one half of one percent of all homeowners statewide.

New Hampshire has avoided the widespread foreclosures that have occurred in other states for three reasons. First, unlike some other states, very few homes here were purchased by speculators. Second, New Hampshire is one of the top 10 states in terms of family income and so most homeowners had no need for a risky sub-prime mortgage. Third, with very few exceptions, lenders in our state (with long memories of the early 1990s market collapse) were more careful not to lend too much based on market-peak appraisals.

SV: Is housing, as economists have said, the backbone of our economy?

FRANCESE: Housing is an important element in our statewide economy. But so are tourism, health care, retailing, professional services and high-tech manufacturing. Ours is a knowledge-based economy in which housing is a vital component because there must be a sufficient amount of it for anyone who wants to live and work here.

SV: A report late last year by the U.S. Conference of Mayors indicated the foreclosure crisis would be a major economic hit for the greater Manchester-Nashua metropolitan area. The report warned of sharp losses in growth of gross domestic product. Does this ring true based on your knowledge of the New Hampshire marketplace?

FRANCESE: No it does not. I have no idea where they got their data, but it's clear to me that they just made a mistake. This could have occurred because the Manchester-Nashua metro area is quite small compared to most U.S. metro areas. As a result statistics can more easily be misread or subject to error. Whatever the reason, I have not seen any local evidence that the Manchester-Nashua area is taking any kind of an economic hit.

SV: President Bush said in a news conference last month that the government should not aid lending agencies in the housing credit crisis, but members of Congress are pursuing various reforms to protect some homeowners. Where does regulation stand with respect to the need to better educate consumers, both buyers and sellers of real estate?

FRANCESE: It is very difficult to write regulations for the purpose of saving consumers who are willing to take extraordinarily high financial risks. There is no doubt that better educated consumers were less likely to get into sub-prime or quickly adjustable mortgages. But in the excitement of the housing boom too many home buyers either did not read their mortgage documents or they believed that ever-rising home prices would bail them out in the virtually certain case that they couldn't make their payments. It's not likely that even an act of Congress could have dissuaded them from taking such a huge risk.

SV: There continued to be discussion in some quarters last month about a potential recession. Can the Federal Reserve steer the country from a recession through interest rate reductions alone? Are there recessionary forces at play here?

FRANCESE: Interest rate reductions by the Federal Reserve are vital in avoiding a big nationwide economic downturn. But banks and other lenders also play a part. They must be willing to extend credit and right now that appears to be in short supply. Also, it is entirely possible for some parts of the nation to fall into recession while other parts hum along nicely.

I am deeply concerned about the long-term outlook for New England because of our slowing labor force growth. If we don't do a better job of attracting young people back to New England by providing both good jobs and affordable housing we could suffer economically even while the rest of the nation enjoys robust long-term growth. So, yes, there are recessionary forces at play here, but it's up to us, and not the Federal Reserve, to see that they don't take hold and stifle our economic growth.

SV: From a demographic point of view, is our graying population and growing retiree base providing economic stability? Do you see any new trends for 2008?

FRANCESE: It is young families with children that will provide our long-term economic stability and not our graying population and growing retiree base. Families with children spend far more for local goods and services than retirees, many of whom are not here year-round.

But let's be clear: a robust local economy is one that has people of all ages. A dying economy is one that excludes any segment of its society. Right now the greatest threat to New Hampshire's economic outlook is the systematic exclusion of young families with children.

During 2008 I predict that our housing market will begin reviving as more people around the nation realize what a great place New Hampshire is and either come here to live and work or come here to buy a vacation home. If we are lucky, we may even see more foreigners vacationing here, like the president of France did this past summer.