Back to the Future? 1991 vs. 2011

The Holidays and 2011 has come and gone. Leap Year Day  and the New Hampshire Primary and has come and gone.  Housing was used as a wepon by both encumbants and hopfulls this primary season, but as the snow settles, lets now look back at what really is going on in the state and around the corner.

To do this, lets pull the lense back. Back a few years to 1986, not because of the great year for Boston sports, but because it was a great year for New Hampshire Real Estate. With 58,000 total real estate deed transfers in the state that year, it was the highest on record and the lowest foreclosure percentage in the 35 years, we have had this statistic measured. In the five years that followed we saw the foreclosure rate rise (to higher levels than our current challenges) and the transfer of property seize up. From 1991 through 1996 our real estate market expanded. Total property transfers increased by almost 20%; the total percentage of foreclosure transfers dropped from a peak of just under 20% to almost 6%; interest rates dropped for a 30 year fixed by 2.5% and our state created almost 50,000 jobs. 

So what does this history lesson tell us? What does where we are today have in common with our non so distant past of the early ninties? What is different?

For starters consider the graph below. While the total transfers of real estate in the state is not the only measure of recovery it is a good indicator of what consumers and corporations are feeling in terms of confidence to make a long term purchase. What we feel is similar is the increase in total transfers of real estate from 2009 through 2011.

Real estate is a reaction to stability and the comfort people have in choices. Not shown on the above graph is the 20,000+/- jobs that have been created in the state since December of 2009. Also not show is the decrease in a 30 year fixed interest rate by about a half of a point over that same span. We see this all as a positive indicator. Recessions and recoveries are cyllical and we see this year as a turning point for that recovery in the state.

No analysis would be complete, however without a look at some of the differences in the cycles. In 1986 the decline in the market was like slamming on the brakes, but we arrived at our current condition by pumping them. Our recovery beyond 1991 was shown with a spike in foreclosures up to 20% and then a slow recovery year over year, but because currently we had no spike we have remained around 15% foreclosure rate for the past few years.

Overall we believe that the recession and recoveries of two decades ago share more in common that what they are apart. However because this go around did not have the “shock” decline effect, we feel that it will be a bit slower to recover as there are still issues to work out. Surely no one in 2012 is slamming on the gas, but we feel that people are staying away from the brake petal.