This story, by Report for America corps member Carly Berlin, was produced through a partnership between VTDigger and Vermont Public.
As states across the country struggle to loosen their tight housing markets, the gridlock consuming Vermont’s stands out.
A recent nationwide analysis of home prices from the Federal Housing Finance Agency showed that Vermont saw the highest year-over-year home appreciation rate of any state, at 12.8%.
That’s markedly higher than the national average. Across the country, home prices rose 6.6% between the first quarter of 2023 and the first quarter of 2024, according to the FHFA.
Nationwide, the low inventory of homes for sale has helped drive up home prices, Dr. Anju Vajja, deputy director for FHFA’s Division of Research and Statistics, said in a statement.
The national analysis looks at a massive dataset of single-family homes with mortgages, tracking how the prices of those properties fluctuate over time. The FHFA notes that Vermont’s relatively small number of real estate transactions over the last decade could skew its rank among the states.
But a more close-to-home analysis still shows a strong upward tick in home prices from 2022 to 2023. A recent evaluation by the Vermont Housing Finance Agency looked at sale prices for primary homes specifically, weeding out the roughly 16% of seasonal or occasional-use homes in the state’s housing stock, which the federal analysis includes. It also takes into account homes paid for in cash, not just those purchased with a mortgage.
VHFA found that the median sales price of primary homes reached $325,000 in 2023, a 5% increase over the prior year. The median price for newly constructed homes sold last year jumped by 11%, reaching $616,500. No county in Vermont has seen a decline in annual home sale prices since before the COVID-19 pandemic, according to the analysis.
“No matter what you look at, home prices are increasing, interest rates remain high, and affordability continues to be out of reach for many, many Vermonters who don’t already own their homes,” said Maura Collins, VHFA’s executive director.
VHFA’s analysis also shows a dramatic drop in the number of primary homes sold in 2023: a nearly 26% decrease from the prior year, down to 5,759 homes. The decline comes after a spike in home sales that crested in 2020. Last year saw the lowest number of home sales in the state since 2012, when the housing market was still recovering from the Great Recession, according to VHFA.
That decline in home sales can be chalked up to the fact that Vermont isn’t building enough new homes to meet demand, Collins said. High interest rates play a key role, too. People who bought their homes when rates were lower might be reluctant to put their homes on the market and buy elsewhere now, with interest rates for a 30-year mortgage hovering around 7%.
“More and more homeowners who want to downsize, or move into more efficient homes, or move into different communities to follow job opportunities, are not able to do that – because they’re locked in to these very low interest rates that they likely have,” Collins said.
The bottleneck in Vermont’s housing market also manifests in the shorter timeline of home sales. Over the last several years, homes have sold faster and faster: In 2023, the median number of days between when a home went up for sale and when it was sold or went under contract fell to 62. That can leave little time for prospective buyers to arrange their financing, Collins said.
“If you see something you like, you better move on it — because it’s not going to be around for long,” said Peter Tucker, a lobbyist for the Vermont Association of Realtors.
The state’s tight housing market sends wide-ranging ripple effects through Vermont’s economy, said Megan Sullivan, a lobbyist for the Chamber of Commerce. The lack of housing makes it more difficult for employers to retain their workers and to attract new employees from out of state.
She hears stories of prospective hires turning down job offers because they can’t find a place to live, or because the only available homes are far too expensive to match their wages.
“Everything comes back to our labor force, and our labor force keeps coming back to the lack of available and affordable housing for workers in every industry, in each part of Vermont,” Sullivan said.
Sullivan, who advocated for exemptions for housing from Act 250 during this year’s legislative session, hopes that lawmakers’ attempts to reduce regulatory hoops for housing development can help promote more growth. She acknowledged, though, that reforming the state’s land use policies “isn’t going to be a silver bullet” for Vermont’s housing woes.
Tucker, from the Realtors’ association, sees some early indications of the market loosening, including a modest bump in the number of homes on the real estate market in the first few months of 2024, compared to the same period last year.
“If we have a few more properties available for sale, we can do more business. So that ultimately may help our industry, but it’s certainly going to take some pressure off of pricing, too,” he said.
Have questions, comments or tips? Send us a message.
_
