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The good news is that the economy is recovering strongly, and the bad news is that housing supply continues to lag, which is a major problem.

On December 7, NH Housing and economist Dr. Elliot Eisenberg co-hosted an online webinar entitled "Economy 2022: Growth or Slowdown". Eisenberg is a former economist of the National Association of Home Builders. He currently serves as a consultant and writes a daily economics blog on a range of economic-related topics.

According to Eisenberg, the economic recession caused by the COVID-19 pandemic is different from anything in recent memory. Although it will take years to recover from the bursting of the Internet bubble and the 2008 recession, the economy rebounded almost immediately this time. The national unemployment rate has dropped to 4%, productivity has increased, GDP has grown, and the stock market has performed well.

But not everything recovered so quickly. As the pandemic spread across the world, it caused disruptions in manufacturing, the flow of goods and materials, and caused scarcity of consumer goods. These supply chain issues lead to shortages and price increases, which in turn leads to inflation.

The pandemic has also caused major changes in consumer behavior. People continue to work and receive salaries, but they cannot spend their money on travel or entertainment. This, combined with stimulus checks, resulted in a significant increase in savings. 

In addition, during the pandemic, many people turned to work from home. Since there is no need to be close to the office, some workers have begun to move from the urban area to the suburbs and nearby rural areas. This led to a boom in home sales.

Although many people across the country did move, most did not move far. Ben Frost, managing director of housing policy and public affairs in New Hampshire, said the same is true in New Hampshire.

"Although we have heard a lot of news about the increase in buyers from Massachusetts, we found that most buyers are already in New Hampshire. However, buyers from other places have increased slightly, but they have increased statistically." Frost said.

The small inventory of houses on the market, coupled with the increase in demand, has led to soaring house sales prices. According to Frost, the current average house price in New Hampshire is $375,000, which is lower than the August 2021 peak of $410,000.

Eisenberg pointed out that there is a shortage of 3 to 4 million units nationwide, and this inventory has been shrinking in the past decade. Most of the current real estate market is concentrated on the resale of existing houses. "There is no new house to buy," he said. 

Two economic sectors that continue to lag behind are creating major challenges for builders and developers who want to build new homes. Supply chain issues have led to a significant increase in the scarcity or cost of construction materials (such as wood, shingles, nails and even electrical appliances).   

Secondly, many people have left the labor force, which makes it difficult to obtain the labor required to build new houses, and many people in these industries are currently busy with existing housing renovation projects. 

Eisenberg also pointed out that 10 years ago, 40% of newly built homes were entry-level homes; now it is almost zero. Given that millennials are reaching the golden age of buying houses, they have nothing to buy, which will have a long-term impact. 

The state's rental market is also still full of challenges. National rents rose by 3.1%. Housing costs account for 20% to 30% of the consumer price index and may lead to inflation. The vacancy rate is still very low, which makes finding locations difficult and leads to increased costs. 

Even so, Eisenberg is still optimistic about the future. As long as the COVID-19 pandemic continues to subside and turn to the epidemic phase, he will see the economy continue to recover. Backward areas such as retail and restaurants will become stronger, and rising wages will attract more people back to work. He also saw continuous improvement in small businesses.

This event is also the last event hosted by NH Housing CEO Dean Christon, who will retire at the end of the year. Christon has been with NH Housing for 34 years and has been CEO for the past 15 years. New CEO Robert Dapice will take over in January. Dapice has been working at NH Housing since 2014 and is responsible for managing the multi-family housing program.  

Eisenberg’s visual presentation is as follows:

Kathy Staub is a freelance writer from Manchester.

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