Vacancy Pressure Eases, Affordability Still a Struggle

MARKET INSIGHTS
The county’s vacancy rate is 2.8%, significantly below the national average.
Rents have increased 3.1% annually since 2001.

CBHB_2015_Spring_NewGraph_RentalV2

Apartment hunting in Northwest Vermont is often a competitive endeavor, given an extremely low vacancy rate and increasing demand from a diverse professional workforce.

The Vacancy Rate Is Easing

The vacancy rate stood at 2.8% in June, compared with a two-decade average of 1.4%, according to real estate consulting firm Allen & Brooks. The region’s vacancy rate has eased this year due to a boost of new apartment construction, such as Finney Crossing in Williston and Riverrun Luxury Apartments in Winooski.

The Vacancy Rate’s Impact on Renters

The higher vacancy rate is allowing renters to take more time when assessing and deciding on which property to lease, although all available units are still finding tenants, Allen & Brooks noted. The county’s vacancy rate, while not as low as in the past, is still well below the national average of 4.1%.

Local Hiring

Local employers such as the UVM Medical Center and Keurig Green Mountain are hiring, with many of the professionals opting to rent before buying. As the economy continues to improve, Coldwell Banker Hickok & Boardman believes more renters will decide to buy homes, which could lead to an even higher vacancy rate.

Competitive Rents

In the meantime, rents continue to be competitive in Chittenden County. The average monthly rent has increased 3.1% annually since 2002, Allen & Brooks found. Wages for some workers haven’t matched that pace, which has caused affordability issues. Residents in Burlington are spending about 44% of income on housing, a level that’s considered unaffordable, according to a report published by the city last year.

Shifting Demand Among Neighborhoods

Some less expensive neighborhoods, such as Burlington’s Old North End, are witnessing an increase in demand because they are more affordable than the Hill Section and other Burlington neighborhoods, Allen & Brooks notes. Some renters are looking for apartments in newly constructed buildings, such as the Packard Lofts in the Old North End, because of the convenience of living in a newly built home with amenities.

Because our rental expert has extensive contacts with landlords, Realtors and associations, Coldwell Banker Hickok & Boardman Realty is well positioned to help clients find the most recent properties on the market.

Contact Our Rental Specialist

AubertSteStephanie Aubert
(802) 503-1150
rentals@hickokandboardman.com

Addison County Market Gains Momentum

County Averages
Median Sale Price:Units Sold:Newly Listed:Days on Market:
$214,001133 (10.8%)396 (3.4%)166
CBHB_2015_Spring_NewGraph_Addison-copyProperty sales in Addison County are benefiting from an improving economy and lower commuting costs.

The residential market in Addison County has been gaining momentum since late last year, when our Realtors noted that properties in good condition and locations were going under deposit quickly. A number of trends are helping the county’s real estate market.

Lower Commuting Costs

Given that Addison County has a lower median sales price than neighboring Chittenden County, the area becomes even more attractive to professionals when gas prices are lower, as they have been this year.

A Diverse Employer Base

Employers including Middlebury College and UTC Aerospace, a supplier of aerospace and defense products, are drawing new buyers into the market.

Luxury Sales

The county’s waterfront and country estates appeal to high-end buyers. Four of this year’s $800,000-plus sales were recorded in the county, with three in Cornwall and the fourth in Hancock.

Higher Sales and Pricing

All of those trends helped boost the number of transactions by 10.8%, while the median sales price rose 7.3%.

Middlebury remains the county’s most active town for home sales. While the number of transactions there dipped  3.4% in the first six months, the median sales price rose 3 percent.

Because some towns have a small number of overall transactions, one or two high-end sales can cause a significant jump in median pricing, as in Cornwall and Hancock.

Land sales were little changed during the first half of the year, while the median sales price slipped 4.7% to $81,000. Some retirees and homebuyers have been seeking land purchases in the county in order to custom-build homes.

MARKET INSIGHTS
Median pricing rose 7.3% in the first half of the year.
Lower gas prices and a diverse employer base are boosting interest from buyers.
Middlebury remains the most active town for property sales.

Addison_Table

Buyer Activity Improved but Median Price Dipped

County Averages
Median Sale Price:Units Sold:Newly Listed:Days on Market:
$210,00047 (6.8%)181 (-7.7%)209
CBHB_2015_Spring_NewGraph_GrandIsle-copyAfter a slow winter, homebuying activity in Grand Isle recovered as spring arrived, helping lift the number of sales by 6.8% for the first six months of 2015. That came after a dip in sales during the first quarter of 2015.

Professionals and retirees seeking single-family homes are drawn to the county for its pristine waterfront properties and quiet lifestyle. Its proximity to Chittenden County and Burlington attracts professionals, while a range of property types and prices attracts a wide variety of buyers. This year’s trends have been influenced by a number of factors.

Mid-Priced Housing

The median sale price dipped by 13.4%, representing a preference for mid-priced housing. While Grand Isle is well known for its luxury waterfront properties, the high end of Northwest Vermont’s housing market has been slower to recover than lower-priced segments.

Only One Luxury Sale

During the first six months of the year, the county recorded one luxury sale, a $1.35 million Adirondack-style home on Lake Champlain.

A Small Market

Because Grand Isle is the smallest real estate market by volume in Northwest Vermont, a shift in only a few transactions can have a large impact in overall sales and pricing trends.

Three land sales were recorded in the first six months, compared with eight sales in the year-earlier period. The median sale price slipped 61% to $60,000.

Grand_Isle_Table

Affordable Franklin County Draws Buyers

County Averages
Median Sale Price:Units Sold:Newly Listed:Days on Market:
$196,000219 (1.4%)574 (-6%)142
CBHB_2015_Spring_NewGraph_Franklin-copyFranklin County’s residential market is rebounding after a slower market in 2014, helped by demand from first-time homebuyers who are drawn by the county’s more affordable price point than Chittenden County’s.

In the residential market, which is dominated by single-family homes, a number of factors are influencing sales and pricing.

Proximity to I-89

Those towns located closer to I-89 are typically witnessing higher median pricing. For instance, Fairfax, which is adjacent to I-89, boasts the highest median sales price in the county, at $253,000. Enosburg,  an eastern town that’s farther from the interstate, had one of the lowest median sales prices, at $115,500.

Towns closest to the interstate also recorded the highest number of sales, such as St. Albans Town, Swanton and Fairfax. Many of the towns in the eastern part of the county recorded fewer transactions than those in the west, which are closer to the highway.

Commuters To Chittenden County

With gas prices remaining low, some buyers who work in Chittenden County are seeking homes in Franklin County, given that commuting costs have become more affordable in the past year.

A Diverse Business Base

Demand for housing is also growing thanks to the county’s diverse base of corporate employers, including Ben & Jerry’s, pharmaceutical company Mylan, and logistics company A.N. Deringer.

Land sales fell 52% to 11 transactions. Sales were especially slow in the first quarter, when the abnormally low temperatures kept buyers on the sidelines. The median sale price for land parcels declined 9.3% to $61,800.

The multi-family market was steady with eleven sales during the first six months. Given the competitive market for duplexes and three- and four-apartment homes in Chittenden County, investors are looking to Franklin County for lower-cost options. The median sale price rose 71% to $276,000.
Franklin_Table

Chittenden County Springs into Summer

County Averages
Median Sale Price:Units Sold:Newly Listed:Days on Market:
$265,500889 (18.1%)1,547 (2.9%)88

CBHB_2015_Spring_NewGraph_Chittenden-copy

The first half of 2015 has brought buyers back in force to Chittenden County, returning the market to the type of activity that was typical before the recession in 2008.

The real estate market gained momentum as spring and summer arrived. Our Agents reported that this winter’s below-normal temperatures might have delayed some real estate activity. Warmer weather brought both buyers and sellers back into the market.

A number of factors helped lift the county’s real estate transactions and median pricing.

CBHB_2015_Spring_NewGraph_Chittenden2-copyEmployers Are Hiring

Local businesses such as the NRG Systems and The University of Vermont Medical Center are hiring. That’s bringing new professionals into the home-buying market. GlobalFoundries completed its purchase of IBM’s chip business, including its Essex plant, and vowed to keep jobs intact.

The Economic Outlook Is Strong

Economists at the Vermont Economic Outlook Conference earlier this year predicted the state’s unemployment rate could decline to 3.5% by year-end, with corporations adding 1,500 private-sector jobs.

Tight Inventory

Properties in the $250,000 to $350,00 are in strong demand, which is driving up pricing as homebuyers compete in the marketplace.

Burlington Remains Desirable

Unit sales surged by 31%. Still, median pricing slipped 4.5% during the first half of 2015, which indicates that buyers are seeking lower-priced housing. Affordability remains an issue in the Queen City.

Affordable Towns Close to Burlington Also Witnessed Strong Trends

Towns that offer quick access to Burlington but lower price points also recorded higher sales, including Winooski, Essex, and Colchester.

MARKET INSIGHTS
Median pricing rose 6.2% during the first six months of 2015.
Housing in Burlington remains in demand, with residential properties selling in an average of only 88 days on the market.
More affordable towns close to Burlington also saw an uptick in sales.

Chittenden_Table

High Vacancy Rates Drive Demand

Multi-Family Averages
Median Sale Price:Units Sold:Newly Listed:Days on Market:
$310,00051 (-8.9%)124 (0.8%)103

CBHB_2015_Spring_NewGraph_MultiFamily-copy

The multi-family property market remains in high demand from investors, thanks to Northwest Vermont’s low vacancy rate and relatively high rents.

While that’s attracting buyers into the market for duplexes and three- and four-unit properties, our Agents are noting more demand from buyers than can be met with current inventory levels, especially when it comes to properties that are in good condition and in prime locations.

Across the four counties, the median sale price rose 4.2%, while the transaction volume slipped 8.9%. Several trends are impacting this market:

Inventory Remains Tight

Those supply-and-demand issues are causing the median sale prices of multi-family homes to rise, with some properties attracting multiple offers. Given the lack of inventory, however, the number of transactions has declined during the first six months of this year when compared with a year earlier.

Chittenden County’s Attractive Vacancy Rate

While the long-term vacancy rate in Chittenden County is only 1.4%, there has been some easing this year given the construction of hundreds of new units, such as Finney Crossing in Williston and Great Cedars in Winooski, according to real estate consulting firm Allen & Brooks. That’s caused the vacancy rate to jump to 2.8%, the highest since Allen & Brooks started surveying the issue more than two decades ago. Nevertheless, that is still significantly lower than the national vacancy rate of about 4.1%.Because the vacancy rate has eased, renters are taking more time to choose their apartments, although Allen & Brooks notes that available units are eventually leased because of the still lower than-average vacancy rate.

High Monthly Rents

Investors are eager to participate in Northwest Vermont’s multi-family market because monthly rents are relatively high. Rent for a three-bedroom apartment was almost $1700 in 2014, which is also attractive to investors. Across all apartment sizes, rents rose 2.3% last year.

CBHB_2015_Spring_NewGraph_MultiFamily2-copyLocal businesses such as Keurig Green Mountain and the Immigration and Naturalization Service are hiring and bringing new professionals to the region. Many of those young professionals prefer to rent rather than buy at the moment.

However, as the economy continues to improve, more renters may shift into the home-buying market, which could lead to higher vacancy rates, according to Allen & Brooks.

 

MARKET INSIGHTS
Tight inventory remains an issue in the multi-family market.
Vacancy rates have eased this year, but still remain lower than the national average.
Monthly rents have continued to rise.

Slower Demand for High End Property

The luxury residential market in Northwest Vermont offers a range of spectacular properties, drawing buyers interested in waterfront estates, country properties, as well as stately city residences.

While our Agents are seeing signs of renewed activity in the luxury market, this segment has been slower to recover than the region’s mid-range housing. One reason may be Vermont’s relatively high property taxes, which may potentially dissuade vacation-home buyers from purchasing in the state. Below are a few trends that are impacting the market for homes above $800,000.

A Slower Pace

Sellers have readjusted their expectations for sales prices amid slower demand for high-end property. That means buyers may find excellent values among the region’s luxury properties, with some homes selling below assessed value.

City Living

Our Agents note that buyers are increasingly looking for high-end homes in or close to Burlington because of a desire to be near restaurants, the arts, and the University of Vermont Medical Center.

Waterfront Property

Buyers seeking waterfront properties are interested in homes with higher elevations and seawalls in good condition, given concerns about flooding.

Traditionally, the region’s waterfront properties have maintained a strong draw on luxury buyers. However, the first half of 2015 has seen a shift toward properties closer to town or with large acreage. Only four of this year’s sales included waterfront access.

Chittenden County represented the bulk of high-end sales, with nine transactions above $800,000. Four sales were located in Addison County, while Grand Isle recorded one transaction.

CBHB_2015_Spring_NewGraph_Luxury

MARKET INSIGHTS
Four of this year’s fourteen $800,00-plus home sales are waterfront properties.
Nine of this year’s luxury sales are located in Chittenden County.

Market Beginning to Warm Up

At the start of 2015, Vermont’s housing market is benefiting from some positive local and national trends, including historically low mortgage rates and an improving employment market. While there are reasons for optimism, some issues remain as an overhang from 2014, which resulted in an uneven year for Northwest Vermont’s real estate market, with a slowdown during the winter and summer months followed by a pickup in fourth quarter sales.

As the spring of 2015 arrives, Vermont’s housing market is warming up after a first quarter that saw both strong positive trends and some headwinds.

The positive local and national trends include historically low mortgage rates and a stronger employment market. In Vermont, the unemployment rate stood at 3.9% in February, well below the national average of 5.5% for the same month. Employers are also hiring, thanks to expanding businesses such as Dealer.com and Keurig Green Mountain, which are bringing new homebuyers into the Northwest Vermont real estate market.

Our region started 2015 with strong momentum, following a burst in home-buying activity at the end of 2014. Thanks to the resolution of the future of IBM’s former Essex Junction semiconductor plant last fall, home sales once again picked up in Essex and neighboring towns. The plant’s buyer, GlobalFoundries, said it would keep the plant open and had no layoff plans, which eased fears for property buyers and sellers. That helped lift sales in late 2014.

Still, the region faced some pressures in early 2015. Most notably, the unusually cold temperatures in February caused some buyers and sellers to delay their property plans. Our Agents note that they are seeing an uptick in listings and buyer inquiries now that the weather is warming up, which is encouraging owners to put their properties on the market and for buyers to make appointments to see listed homes.

While employers are hiring and the unemployment rate continues to drop, there are some residual effects of the Great Recession that are also creating challenges for homebuyers. Wage growth has continued to lag, putting pressure on consumer spending. During the past two years, home price appreciation has outpaced wage growth in 76% of U.S. housing markets, adding to affordability issues for many buyers, according to housing data company RealtyTrac.

 

marketwide

While Vermont has sat out much of the boom-and-bust cycle of the recession, it also hasn’t seen the same type of housing price appreciation as states such as California. At the same time, home affordability in Northwest Vermont continues to be a serious issue for buyers, especially given stagnant wage trends.

The average Burlington household spends about 44% of its income on housing, much higher than the one-third of income that residents of cities such as Portland, Oregon pay, according to a 2014 report from the City of Burlington. Rising property taxes across the state of Vermont are also creating affordability challenges for some buyers.

Those wage and affordability issues may be putting pressure on local home prices. The median sales price across Northwest Vermont’s four counties declined 1.8% in the first quarter. Nevertheless, sales volume jumped 13.6% during the first three months of 2015, indicating pent-up demand for home buying. That’s a shift from overall sales last year, which declined 0.7% by unit sales, although the median sale price rose 0.9%.

Despite these concerning economic issues, we do expect to see an improvement in our real estate market in 2015. In its April outlook report, the National Association of Realtors predicts that sales and median pricing for existing homes will rise 6% this year. In Vermont, we at Coldwell Banker Hickok & Boardman Realty expect a positive, although more tempered year, with a 4 – 5% rise in sales volume and moderate price appreciation. Many renters are considering purchasing and we expect the percentage of first time buyers to shift upward this year.

Mortgage rates, still near historic lows, may rise later this year when the Federal Reserve is expected to boost interest rates. Still, any increase will likely be incremental, with Freddie Mac recently predicting the average 30-year fixed-rate loan rate will stand at 3.9% for the year.

As always, it remains that both sellers and buyers need to reflect on their personal situation. Utilizing the local knowledge within this report and the advice of your agent – you can make an informed decision about your next move.

 

trends

Chittenden County Renters Feeling Squeezed

MARKET INSIGHTS
The county's vacancy rate is 1.7%, less than half of the national average.
Rents have increased 3.1% annually in the past decade.

Because of an extremely low vacancy rate and new hiring from companies including Keurig Green Mountain, renting an apartment or home in Chittenden County is often competitive.

The county’s vacancy rate stood at 1.7% in December, or less than half the national rate of 4.2%. Because of the tight vacancy rate, renters should plan to add extra time in their search for an apartment or home, especially when compared with regions with more available inventory.

The pace of hiring by local employers, ranging from technology companies such as Dealer.com to retailers like Trader Joe’s, has brought an influx of new professionals into Chittenden County. Our rental expert has found that about half of relocating professionals opt to rent before seeking a home purchase.

Rents are also competitive in Chittenden County, with the average price rising 3.1 percent annually since 2002, according to real estate consulting firm Allen & Brooks. The average rent for a two-bedroom apartment was $1,155 last year.

Average wages in Chittenden County haven’t kept pace with the rise in rents, which means that renters are paying a higher share of their income toward housing costs than in many other parts of the country. Almost two-thirds of renters pay more than 30% of their income toward housing expenses.

Some less expensive neighborhoods, such as Burlington’s Old North End, are experiencing an increase in demand because of the affordability issues, Allen & Brooks notes. Other renters are seeking smaller apartments in newly constructed apartment buildings, because those studios and one-bedrooms may be more affordable than larger apartments in older homes.

Because our rental expert has extensive contacts with landlords, Realtors and associations, Coldwell Banker Hickok & Boardman Realty is well positioned to help clients navigate the rental market.

rental

Demand for Rental Apartments Continues to Grow

MARKET INSIGHTS
Median Sale Price:$312,500
Units Sold:20 (-16.7%)
Newly Listed:56 (-6.7%)
Days on Market109

While demand for multi-family properties remains strong, the first quarter saw some challenges, including tight inventory and an extremely cold weather in February, which may have kept some buyers on the sidelines.

Nevertheless, our agents are witnessing multiple offers on properties that are well priced and in attractive locations. Within Chittenden County’s multi-family market, Coldwell Banker Hickok & Boardman Realty was involved in more than one-half of all sales by units, outpacing all other real estate offices in the county and placing our Agency almost 30 percentage points ahead of our closest competitor. Because of our strength, our agents have an unparalleled understanding of the trends within the multi-family market.

Northwest Vermont’s low vacancy rates, as well as a diverse and growing professional base, continue to create an attractive market for investors and owner occupants of duplexes and three- and four-apartment buildings. The apartment vacancy rate for Chittenden County stood at 1.7% in December, the most recent data available, according to real estate consulting firm Allen & Brooks. By comparison, the U.S. vacancy rate for apartments was 4.1% in the first quarter.

multi

The recession and successive years of weak economic growth dampened the ability of some residents to acquire their own homes, which has driven up demand for rental apartments within the region. Monthly rents are also relatively high, with rent for the average two bedroom apartment standing at almost $1200 in 2013, which is also attractive to investors.

A lack of multi-family inventory may continue to be an issue in the market, especially as newly listed properties declined 6.7% during the first quarter. Our agents are noting that more multi-family properties are being listed as the weather improves, however. Demand for rental properties is also getting a lift from hiring by local employers, such as Dealer.com and Trader Joe’s, the grocery store that last year opened a South Burlington location.

Many young professionals are continuing to rent because of the advantages of apartment living, such as having services such as lawn care arranged by the property manager, Allen & Brooks notes.  Some young professionals are also burdened with high student debt, which has been dampening their ability to save for a down payment.

With economists at the Vermont Economic Outlook Conference predicting that 1,500 new jobs may be created in the state this year, as well as a continued improvement in the unemployment rate, our region may see an increase in demand for rental properties.