The Vermont real estate market hasn’t strayed too far from national trends. Not unlike the rest of the country, The Green Mountain State has seen median home values increase for the better part of a decade. On the backs of insufficient inventory levels and an improving economy, home prices have jumped to historical levels, and there’s no sign of slowing down. Despite the latest increases, however, prices have yet to scare away prospective buyers. As a result, real estate in Vermont looks poised to maintain all of the momentum it managed to build in 2020 and perhaps even gain some. If for nothing else, houses are flying off the market. Buyers are now more motivated to act fast than ever before, and just about everyone looks like they will be the beneficiaries of a prosperous 2021: buyers, sellers, and the entire Vermont real estate investing community.
The Top Vermont Real Estate Markets
While the best real estate market in Vermont is up for debate, here’s a list of the cities investors may want to pay special considerations to:
Unemployment Rate: 3.1% (latest estimate by the Bureau Of Labor Statistics)
Population: 626,299 (latest estimate by the U.S. Census Bureau)
Median Household Income: $57,808 (latest estimate by the U.S. Census Bureau)
Percentage Of Vacant Homes: 19.65%
Foreclosure Rate: 1 in every 110,369 (0.09%)
Vermont Median Home Prices
The median home value in the Vermont real estate market is $273,024. At its current level, the state's median value isn't far off the median home value in the United States, which is a slightly more modest $263,351. However, it is worth noting that while Vermont's home values are slightly ahead of national trends, recent indicators suggest the playing field will be leveled sooner rather than later. Home values in Vermont aren't keeping pace with the appreciation taking place on a national scale. In the last year alone, the median home value in the United States has increased at nearly twice the Vermont rate, 7.5%, and 4.3%, respectively.
The last 12 months are indicative of what has transpired over the better part of a decade. Real estate in Vermont has failed to keep pace with national appreciation rates since the housing sector began recovering from the Great Recession. Since the first quarter of 2012, in fact, the median home value in Vermont has increased 19.7%. At any other time, such an increase would be very encouraging, and rightfully so. However, the median home value in the United States increased more than three times that of Vermont's. Increasing 63.5% from the first quarter of 2012, the median home value in the United States lapped Vermont not once, but twice.
Moving forward, the Vermont real estate market is expected to continue to trail national averages. Over the next 12 months, Vermont's median home value is expected to increase 9.6%, whereas the national average could increase by as much as 10.3%. Increases across both markets are expected to be driven by new indicators leftover in the wake of the Coronavirus. In particular, the lack of available inventory will continue to drive up competition and prices. The distinct lack of listings, accompanied by record-low interest rates, will drive up prices just about everywhere until new builds are brought to the market, and Vermont is no exception.
Vermont Foreclosure Trends & Statistics
The Vermont real estate market has one of the lowest foreclosure rates in the country. According to the latest data provided by RealtyTrac, an online leader in foreclosure information, only one in every 110,369 homes in Vermont is considered distressed (default, auction, or bank-owned). At that ratio, the state currently boasts a foreclosure rate of 0.09%, which is well below the national average. One in every 12,448 homes in the United States is considered distressed, or a total of 0.8% of the housing inventory.
Foreclosure rates, on both a statewide and nationwide level, were very low to start 2021. In fact, 2020 saw the least amount of foreclosure activity in 16 years. According to Attom Data Solutions' Year-End 2020 U.S. Foreclosure Market Report, foreclosures "were reported on 214,323 U.S. properties in 2020, down 57 percent from 2019 and down 93 percent from a peak of nearly 2.9 million in 2010, to the lowest level since tracking began in 2005."
While the Vermont housing market may have a lower-than-average foreclosure rate, there are still pockets of distressed inventory spread across the state. That’s not to say the following counties have high foreclosure rates themselves, only that they have high foreclosure rates compared to the rest of Vermont:
Rutland: (1 in every 17,128)
Bennington: (1 in every 21,108)
While the Vermont real estate market currently boasts a very low foreclosure rate, there's a good chance the state sees an increase in foreclosure activity sooner rather than later. If, for nothing else, the financial stress placed on thousands of households by the pandemic and resulting unemployment will almost certainly increase borrowers' hardships across the country. It is too soon to tell just how much of an impact the pandemic will have on Vermont's foreclosure activity, but there's a good chance filing will increase in 2021. Therefore, investors who position themselves well now may help distressed homeowners soon.
Tax Lien Investing
Tax Lien or Deed: Tax Lien state
Interest Rate: 12%
Redemption Period: 1 year
Vermont Real Estate Investing
Nearly a decade's worth of appreciation has changed how local investors view the Vermont real estate market. Jumping 19.7% from 2012 (and 4.3% in the last year), Vermont's median home value leaves little room for short-term investors to work. Consequently, today's prices mark the highest they have ever been, and profit margins for rehabbers are growing thinner. Real estate in Vermont is simply getting too expensive to flip as a short-term investment. Of course, rehabbing is still a viable exit strategy across the entire state, but investors will find rehab opportunities aren't as numerous as their long-term counterparts: rental properties.
As it turns out, the Vermont real estate market looks poised to benefit long-term investors who prioritize building or adding to rental property portfolios. Several indicators, in fact, appear to tilt the scale heavily in favor of today's landlords:
High Prices: Prices in the Vermont real estate market have been increasing for the better part of a decade, stretching profit margins thinner than most investors would like to see. As a result, profitable rehabs are growing harder to find. Again, rehabbing is still viable in the state of Vermont; just harder to find at the moment.
Low Interest Rates: According to Freddie Mac, the average commitment rate on a 30-year fixed-rate mortgage is 2.79%. While rates are up slightly from the start of the year, they are still historically low. In fact, rates are so low that they promote the purchasing of real estate in Vermont. With rates well under three percent, prospective buyers can offset today's high prices and increase an asset's monthly cash flow potential.
Low Price-To-Rent Ratios: At 12.46, Vermont's price-to-rent ratio suggests it is more affordable to own a home than to rent one. Typically a low price-to-rent ratio would drive more people to buy than rent, but that's not the case in today's market. While more people would like to buy, there isn't enough supply to meet demand. As a result, even prospective buyers will be forced to rent. Landlords will ultimately see an increase in demand as vacancies become less of a threat to their bottom line.
The Coronavirus has created several tailwinds for today's landlords. Indicators created in the wake of the pandemic will go a long way in helping those with long-term investing aspirations. That's not to say there aren't short-term opportunities in the Vermont real estate market, but rather that the current marketplace favors landlords more.
Vermont Housing Market Predictions
The Vermont housing market has had a great run, much like the rest of the country. For the better part of a decade, in fact, real estate in Vermont has exhibited many of the same characteristics as its national counterpart. Price increases, confidence in the market, and several other indicators are in line with national trends, but what does that mean moving forward? What can the Vermont real estate investing community expect moving forward?
Secondary cities will thrive: Vermont's largest and most expensive cities are pricing out millennial homebuyers.
As a result, 2021 may be the year the largest homebuyer population sets its sights on secondary cities in the Vermont real estate market. Instead of looking at places like Burlington and Montpelier, expect more affordable alternatives like Wilmington, a relatively short drive from both Massachusetts and New York.
Inventory will drive appreciation: Prices in the Vermont real estate market have increased nearly twenty percent in as little as eight years. While the driving force behind the latest bought of appreciation may be attributed to several factors, a distinct lack of inventory is perhaps the most prominent reason prices have risen so much. The Coronavirus has also prevented builders from adding to inventory, which only compounds the inventory shortage. As a result, expect prices to increase for the foreseeable future.
The Vermont real estate market has benefited from many of the same tailwinds as the rest of the country since 2012. For eight consecutive years, in fact, progress was made on the heels of increasing demand and prices. It wasn't until 2020 when the Coronavirus was officially declared a pandemic, that real estate in Vermont was at risk of experiencing a setback. That said, the state took one step back and several forward. The pandemic actually catalyzed spurring a lot of activity. Today, just about everyone participating in the Vermont housing market is better off, especially the investing community.
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