VITAL STATISTICS

New Hampshire real estate strong

Seacoast Ventures: What role does public perception play in the ups and downs of the real estate market?

FRANCESE: Public perception, also known as consumer psychology, is very important in the sale of residential real estate. If the public perceives, for example, that the price of homes is going to rise in the future then potential home buyers are more likely to buy now rather than wait for a lower price.

SV: To what extent is the Northeast housing market dependent on the national conditions?

FRANCESE: National housing market trends are what get reported in the newspaper and that affects people's perception. It can create an atmosphere where potential home buyers feel the market has become more favorable to them because there is more inventory of unsold homes that they can choose from.

There are significant differences, however, between the national real estate market conditions and those in New Hampshire. A key difference is that our state has more demand from second-homeowners and retirees. New Hampshire is well known as a very financially attractive place to retire because of the absence of an income tax and sales tax and the often very high property tax abatements given to senior citizens. As a result, our population age 65 and older is growing far faster than any other New England state.

Another factor is commuters -- people who live in New Hampshire but work in Massachusetts, Maine or somewhere else. The point is that New Hampshire has a multiplicity of demand for housing that many other states do not have.

SV: In November 2006, the New England Economic Partnership released a forecast that called for New Hampshire to lead the region in the housing market. Is this playing out?

FRANCESE: The multiplicity of demand described above is the main reason why that forecast is likely to play out. Home values have not declined as much as in other states and in many places they have not declined at all. The New Hampshire housing market is likely to be significantly more robust than in other parts of the region. New Hampshire's housing market will probably recover first and be better than most during the coming year.

SV: The phrase "work-force housing" gets a lot of attention in the media and in political circles. How critical is this to support the economy, especially as Maine and New Hampshire appear to grow a deeper shade of gray each year?

FRANCESE: It is the absence of any significant amount of work-force housing that has been a major contributor to driving away young people. The region has lost hundreds of thousands of young adults over the past 15 years. New Hampshire lost more than 20,000 residents ages 25 to 44 years old during the first half of this decade. We may never get those people back but we have to do what we can to help the next generation of young workers who will be graduating from high school and colleges in our state and who will need someplace to live.

The perception that work-force housing is bad because it will raise property taxes is not true, but it's so strongly held that most places do whatever they can to prevent it from being built. That's very unfortunate because having adequate work-force housing will be the single-most important driver of our future economic growth.

SV: Will low interest rates and competition in the lending industry see the real estate market to a quicker recovery? Is there a missing link to a rebound?

FRANCESE: I think the historically low interest rates we have will enable the real estate market to stage a recovery, whether it will be quick or not is something for others to say. I look at low interest rates as an enabler. They are a necessary but not sufficient condition for rising home sales. High interest rates can be a deal killer if they raise the cost above the affordability threshold. Right now there really aren't any impediments to a rebound in home sales. Generally speaking, prices appear to have stabilized, which indicates a balanced market. It represents a meeting of the minds, and that is important. Homes are taking a little bit longer to sell, but they are still selling. But it is not likely that we will see the kind of unsustainably high demand that there was a couple of years ago.

SV: In the real estate market, like the stock market, what goes up must come down. Does the stock plunge at the end of February send Realtors, buyers or sellers any signals?

FRANCESE: I don't think so. The only thing the stock market correction might do is to put a little bit less money in the hands of those with big portfolios that might be in the market for a second home. But it may also have the effect of suggesting to investors that it's time to get back to investing in the real estate market because the stock market doesn't look as attractive. So any downturn or pessimism about the stock market may turn out to be optimism for real estate ownership.

The stock market, as you may have noticed, can be very volatile from day to day, while the real estate market is more stable. It is possible, however, to lose a great deal of money in either market, as the stock day traders and house flipping speculators have found out, to their dismay.