urchase and the rising fuel prices in September threatened to make heating a new home prohibitively expensive. The small slow down in buying late last year reinforced the news media's premonition, and buyers believed the market was at the end of its run up. Interest rates continued to climb, taking more buyers out of the market and the market slowed still further. This left the housing market with larger than normal inventory and more frequenThe current real estate market slowdown is unique because it was not precipitated by any major economic event. Unlike past market downturns which were brought about by events such as large job losses and business downturns. In fact, the current economic situation is really quite good:

1) Interest rates are dropping and are under 6.5%

2) Fuel prices are dropping

3) The stock market is going up and is threatening to break to break 12,000

4) The employment outlook is good.

So why is it that there are large numbers of houses on the market and 21% fewer homes have sold in New Hampshire this year compared to 2005?

This market is one which is driven by negative news, a bad perception and self fulfilling prophecy. (sounds like a movie ad) Three years ago the news media began calling for the market bubble to burst. But home prices continued to climb and buyers continued to buy. As time went by the "Bubble Bursting" stories came more frequently, weighing on buyers minds. Of course it was easy to believe there would be a dramatic end to the market since we experienced a stock market downturn in 2001 after a very hot market. But the frenzied buying continued.

The run up in home prices in New Hampshire made the purchase of a home very difficult for most buyers and especially for first time buyers. This made the market very sensitive to any changes in the cost of a home. In 2005 three events occurred that gave buyers a reason to pause.

Interest rates began to creep up

In September 2005, fuel prices spiked to over $3.00 per gallon.

And of course there was that fear of a bursting bubble the news media "predicted"

The increasing interest rates made an already difficult to afford home even more expensive to purchase and the rising fuel prices in September threatened to make heating a new home prohibitively expensive. The small slow down in buying late last year reinforced the news media's premonition, and buyers believed the market was at the end of its run up. Interest rates continued to climb, taking more buyers out of the market and the market slowed still further. This left the housing market with larger than normal inventory and more frequent

reak 12,000

4) The employment outlook is good.

So why is it that there are large numbers of houses on the market and 21% fewer homes have sold in New Hampshire this year compared to 2005?

This market is one which is driven by negative news, a bad perception and self fulfilling prophecy. (sounds like a movie ad) Three years ago the news media began calling for the market bubble to burst. But home prices continued to climb and buyers continued to buy. As time went by the "Bubble Bursting" stories came more frequently, weighing on buyers minds. Of course it was easy to believe there would be a dramatic end to the market since we experienced a stock market downturn in 2001 after a very hot market. But the frenzied buying continued.

The run up in home prices in New Hampshire made the purchase of a home very difficult for most buyers and especially for first time buyers. This made the market very sensitive to any changes in the cost of a home. In 2005 three events occurred that gave buyers a reason to pause.

Interest rates began to creep up

In September 2005, fuel prices spiked to over $3.00 per gallon.

And of course there was that fear of a bursting bubble the news media "predicted"

The increasing interest rates made an already difficult to afford home even more expensive to purchase and the rising fuel prices in September threatened to make heating a new home prohibitively expensive. The small slow down in buying late last year reinforced the news media's premonition, and buyers believed the market was at the end of its run up. Interest rates continued to climb, taking more buyers out of the market and the market slowed still further. This left the housing market with larger than normal inventory and more frequen

buyers continued to buy. As time went by the "Bubble Bursting" stories came more frequently, weighing on buyers minds. Of course it was easy to believe there would be a dramatic end to the market since we experienced a stock market downturn in 2001 after a very hot market. But the frenzied buying continued.

The run up in home prices in New Hampshire made the purchase of a home very difficult for most buyers and especially for first time buyers. This made the market very sensitive to any changes in the cost of a home. In 2005 three events occurred that gave buyers a reason to pause.

Interest rates began to creep up

In September 2005, fuel prices spiked to over $3.00 per gallon.

And of course there was that fear of a bursting bubble the news media "predicted"

The increasing interest rates made an already difficult to afford home even more expensive to purchase and the rising fuel prices in September threatened to make heating a new home prohibitively expensive. The small slow down in buying late last year reinforced the news media's premonition, and buyers believed the market was at the end of its run up. Interest rates continued to climb, taking more buyers out of the market and the market slowed still further. This left the housing market with larger than normal inventory and more frequen

buyers. This made the market very sensitive to any changes in the cost of a home. In 2005 three events occurred that gave buyers a reason to pause.

Interest rates began to creep up

In September 2005, fuel prices spiked to over $3.00 per gallon.

And of course there was that fear of a bursting bubble the news media "predicted"

The increasing interest rates made an already difficult to afford home even more expensive to purchase and the rising fuel prices in September threatened to make heating a new home prohibitively expensive. The small slow down in buying late last year reinforced the news media's premonition, and buyers believed the market was at the end of its run up. Interest rates continued to climb, taking more buyers out of the market and the market slowed still further. This left the housing market with larger than normal inventory and more frequen

urchase and the rising fuel prices in September threatened to make heating a new home prohibitively expensive. The small slow down in buying late last year reinforced the news media's premonition, and buyers believed the market was at the end of its run up. Interest rates continued to climb, taking more buyers out of the market and the market slowed still further. This left the housing market with larger than normal inventory and more frequent price reductions.

Over the past year the market has corrected itself. Home prices have fallen, fuel prices have fallen and interest rates have fallen. In other words, homes have become more affordable. So why are buyers not buying? There are certainly buyers who want homes and who are in a position to buy. I do not think that there is any lack of demand, there are many who want to buy a home. Buyers are waiting to see a market bottom. My guess is that as long as buyers believe that prices will continue to fall they will not be motivated to buy.

As stated earlier, part of the problem is that homes have become too expensive. But I do not feel that this factor alone is what has precipitated the downturn. If home affordability were the sole problem I would expect to see people spending less for homes. This would be seen as a drop in the average selling price of houses in the area. In fact, the average selling price of a home is up in Q3 2006 over the same quarter in 2005. Home prices are clearly down, demonstrated by the average price per square foot of homes sold which after 6 years of steady increases have dropped in 2006. This tells me that during this market downturn buyers are taking advantage and buying more house for the money. They are not spending less, but buying larger or more nicely appointed homes. Not something one would do if affordability were the problem.

An event is needed for this market to turn around; prices must stop dropping or perhaps interest rates increasing. At this point there is no reason not to buy a home given the current market conditions.