Vermont is one of the more affluent states in the U.S. and both economists and housing market experts have reason to believe there is a lot of hope for the future of the state in the coming year. Thus far, the two major sources of forecasts on Vermont’s economy have issued generally positive predictions for the fiscal year that is poised to start on July 1, 2015. In the following, we’ll be taking a peek at the general economic outlook for Vermont, and then delving a bit deeper into the forecast for the 2015 Vermont Real Estate market. To read about Vermont’s competing neighbor, click here for the 2015 New Hampshire real estate market forecast.
All in all, both state economists Jeff Carr and Tom Kavet, as well as Vermont Economic Outlook Conference founders Art Woolf and Richard Heaps agree that the 2015 fiscal year will bring progress for the state’s economy. We concur with our research and real estate market forecast for the state. However, when it comes down to the specifics, they tend to disagree on certain issues.
Primary Influencers for 2015 Vermont Real Estate:
- Vermont met most of the projections the economists had devised for 2014, which, in turn, determined economists to leave the large part of their forecasts for 2015 unchanged. However, there is one major change that needs to be taken into account. In late 2014 Vermont Yankee closed, leading to a negative adjustment of the state’s revenue from tax of about $12 million per year.
- Along the same lines, most of Vermont’s wealth continues to be concentrated among the ranks of its high income earners. That’s where the state collects most of its income from tax, but it’s also where income tends to fluctuate most wildly. Economy experts predict that this situation, which overestimates the state’s reliance on upper income earners, might result in less predictable revenues. As such, it’s important that the state builds its reserves with surpluses to future-proof them.
- Forecasts for the state of Vermont’s labor market are contradictory. On the one hand, Carr and Kavet believe the relatively steady pace of nationwide economic growth could well translate into further development for Vermont’s own labor market. On the other hand, though, Art Wool says the data for 2014 determined a revision of labor force forecasts, which points to a lag in development. Here are some of the indicators that the two sets of economists took into account:
- Both homes and business in Vermont have had their debt massively reduced, which, in turn, leaves them more wiggle room in how to invest their capital. For the time being, a lot of costs are low in Vermont: interest, electric power, inflation are only some of them.
- On the upside, manufacturing has shown signs of increase, which might just signal the labor market is about to relax and grow as well. On the other hand, the often fickle indicators of business and consumer confidence remain rather stagnant. It’s worth mentioning here that the performance of Vermont’s stock market is a fair indicator of business confidence – and in the final part of 2014, the market did show some positive signs of activity.
- A population boost, largely driven by despondent workers returning to the market. Richard Heaps in particular has argued against the likelihood of this happening. What’s more, he has stated that Vermont’s labor market is unlikely to witness a rebound. The population here, much like in the rest of rural America, is aging, and the state is seeing many workers approaching retirement age. Meanwhile, younger workers are leaving the state, which, some economists argue, calls for a statewide policy of encouraging people of prime working age to come invest in Vermont Real Estate.
However, by far the biggest question mark, as far as Vermont’s economic performance in 2015 goes, remains the state’s construction and housing market. This only makes sense, since it was this very same market that caused the recession, what with the housing boom that lasted until late in 2011. While Heaps and Woolf have largely focused their forecast on the labor market, Carr and Kavet took the recent positive signs of the housing and construction industries as more of a tell-tale sign for the future. Some of the main trends in 2014 that they took into account include:
- The non-residential construction segment has seen quite a lot of sustained activity throughout 2014. Not only were major projects being developed during the year, but there was actually a lot varied activity on this front, which included many types of projects, of various sizes. This is a positive sign on two counts: first off, it creates new jobs in construction, and secondly, it makes it more likely for new jobs to emerge in the future in various sectors, as those commercial construction projects are occupied.
- The single-family home construction segment has also displayed an increase in activity in 2014. This positive trend was reinforced by a slight, yet encouraging uptick in housing values. In the longer run, the Vermont Housing & Conservation Board could significantly benefit from the increase in property tax transfer revenues this might lead to. As a matter of fact, according to Administration Secretary Jeb Spaulding, this could increase the agency’s budget by as much as 30 per cent.
- Meanwhile, though, with property tax rates on the up and up (owing to increases in property value over time), the real estate market is still a significant way away from seeing any tangible improvement. This is holding the total value of taxable property on the down low and still in a state of recovery from the recession.
At the same time, it’s important to bear in mind that the Vermont Association of Realtors is harboring positive hope for the future. Its predictions for the 2015 Vermont Real Estate, based on the market’s performance in 2014 are largely positive. They note that the economy has improved, by and large, that mortgage rates are still low, and that inventories are tight on most segments of the market. The Vermont Realtors’ 2014 Housing Review states that the 2015 housing market definitely has room for growth and some of that growth might actually materialize into profits this year.
These predictions have also been substantiated by the chief economist of realtor.com, Jonathan Smoke. Smoke cited the continued progress that the housing market made throughout 2013 and into 2014. Both consumer confidence and housing demand have been propped up by the number of new jobs created in 2014, as well as by the slight improvement of the GDP. With interest rates still at historically low levels, the housing market has posted rapid turnaround times for sales, with homes spending a median of 90 days on the market. On the down side, lending terms and conditions remain tight, as does the number of residential properties currently on the market. While there is a lot of potential for first-time home buyers to actually consider buying property in 2015, it must be said that this potential was also present in 2014. However, it failed to materialize into significant growth last year, so forecasts in this respect remain skeptical for the 2015 housing market in Vermont.
The above picture does give one several clues as to how the Vermont home market will evolve in 2015, yet it is incomplete. There are more positive factors still likely to drive home sales upward this year. Aside from low interest rates on mortgages and a slight uptick in the economy, these positive factors in our housing market predictions include:
- A slowdown in housing price increases. Prices rose rapidly in 2012 and 2013, but they slowed down to a more normal pace last year. For 2015, potential home buyers in Vermont can expect a resolute return to the long-term historical performance pace of home price increases.
- Fewer foreclosures and short sales on the market. Distressed home sales usually attract investors, which aim to turn around these properties and make massive profits off them. By the end of 2014, though, distressed sales had gone down by nearly 30 per cent. As such, it’s safe to assume that there will be a lot fewer of them for sale in Vermont in 2015.
- As distressed home sales decline and prices are on the rise, a lower number of investors on the market can also be noticed. As partially explained above, fewer investors leave more room on the property market for first-time buyers. And, after all is said and done, it marks an increase in chances for traditional buyers to make a comeback on a still recovering housing market, like the one in Vermont.