I. There is
plenty of demand for housing in Portsmouth
Before we talk about supply we need to understand demand. Let’s start by estimating how much demand there is for housing in Portsmouth right now. This is actually fairly easy to calculate if you know where to look for the numbers.
Forecasted Population 2010[1] 22,200
Minus Estimated 2003 Population[2] 21,051
Equals
Forecast Growth +1,149 Additional Residents
Estimated 2003 Population 21,051
Divided by Estimated 2003 Households[3] 9,981
Equals
Average Household Size 2.11 Residents
per household
Forecasted Population 2010 22,200
Divided by Average Household Size 2.11
Equals Forecast Households 10,521 Households
Forecasted Households 10,521
Divided by estimated occupancy rate[4] 96.5%
Equals Required Housing Units 10,903 Required Total Housing Units
Required Housing Units 10,903
Minus 2003 Housing
Units[5] 10,363
Equals Additional Units Required 540 Required Addt’l Housing Units
All other things being equal, unless an average of 90 units per year is built in Portsmouth from 2004 to 2009 (540 units divided by six years), there will continue to be a shortage of housing.
In fact, Portsmouth has only averaged 44 new housing units per year from 2000 to 2003[6].
In each of Rockingham and Strafford County’s eight other large municipalities (having more than 5,000 housing units) an average of 116 units per year were added from 2000 to 2003[7].
Therefore, unless a dramatic shift in Portsmouth’s housing policies occurs, supply will remain tight. In fact, if all other things remain the same, vacancies will likely stay low, price levels will not likely retreat substantially, properly priced property should continue to be readily absorbed and, regrettably, Portsmouth will likely continue to be the subsidized housing capital of the region. The threat of seeing Portsmouth “overbuilt” in the next five or so years, by any type of property remains remote (assuming competent marketing). But, keep in mind that simply because there is demand for 540 housing units does not mean that they must be built now. To do so would likely result in an oversupply.
II. Demand Continues to Contribute to Price
Increases
The tables below summarize 154 houses and 184 condominiums that each sold twice between 1999 and 2004. The average annual rate of appreciation is calculated for each set of resales based upon the year they were first bought.
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Average Annual Appreciation Rate Based |
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Upon Year Bought & Year Sold |
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Portsmouth, NH (1999 thru 2004) |
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Condominums |
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Year Sold |
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2000 |
2001 |
2002 |
2003 |
2004 |
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Year Bought |
1999 |
19.9% |
18.9% |
20.0% |
22.9% |
16.2% |
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2000 |
-- |
18.8% |
19.9% |
14.3% |
14.6% |
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2001 |
-- |
-- |
13.1% |
14.0% |
17.6% |
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2002 |
-- |
-- |
-- |
9.3% |
15.4% |
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2003 |
-- |
-- |
-- |
-- |
11.5% |
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Overall Average: |
17.5% |
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Single Families |
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Year Sold |
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2000 |
2001 |
2002 |
2003 |
2004 |
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Year Bought |
1999 |
12.0% |
14.8% |
17.4% |
14.1% |
14.8% |
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2000 |
-- |
11.3% |
13.1% |
18.7% |
15.5% |
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2001 |
-- |
-- |
13.5% |
15.5% |
14.0% |
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2002 |
-- |
-- |
-- |
13.2% |
15.5% |
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2003 |
-- |
-- |
-- |
-- |
10.8% |
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Overall Average: |
15.1% |
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Working backwards from 2004, the charts show that the prices of houses and condos continued to rise during 2004, but it was at a slower pace than years before. The rate of increase is still impressive, at four times the rate of inflation. If the demand for condominiums in Portsmouth was significantly softening, prices would not have risen 11.5% from 2003 to 2004.
III. The
Condominium Market is Not Experiencing an Oversupply
Properly
priced condominiums continue to sell and do so briskly. Tables on the next page
break down condominium sales by price range. Comparing 2003 to 2004, a similar
number of condos sold and did so at a similar ratio of sale price to list price.
They also sold at a similar median price but did so at a somewhat faster pace.
Although it is quite early in the new year, year-to-date results are similar.