This is an interesting time to buy a house in Vermont.

For one, the market remains brisk, in part part because of low rates and the COVID-19 factor: Out-of-staters uneasy about living in high-density communities and cities are buying up homes and land in the hopes of relocating to a state with one of the lowest COVID rates nationwide.

That is attractive. And while the scenario has advantages, there are complications for now and for the future. Sure, it is nice for homeowners to be able to unload their homes, often for much higher than what the market here typically supports. But there are two dilemmas: there is nowhere for those folks to go; and the higher purchases prices will — in all likelihood — drive up property values and tax bills. While there are corrections that can be made in towns that have seen robust, inflated sales, those adjustments do not happen automatically. It will take careful observation of grand lists over a few years to get those values back into place.

The inventory that was vanishing at an astonishing rate has plateaued according to many experts.

Even with mortgage rates hovering near all-time lows, rising home prices are putting more pressure on buyers to come up with a bigger down payment.

In the April-June quarter, the median down payment on a single-family U.S. home was $13,955, a 15.3% increase from a year earlier, according to industry tracker Attom Data Solutions. In the first three months of 2020, it vaulted 29% from the same period in 2019.

The trend follows a steady climb in U.S. home prices this year. As of August, they were up 5.2% from a year earlier.

The rise in home prices is stretching the limits of affordability for many Americans already struggling to save for a down payment.

“Home values are increasing approximately twice as fast as typical incomes,” said Chris Glynn, senior economist at Zillow. “There’s this divergence between home values and the salaries and incomes that buyers have to keep up with that.”

That divergence shows no signs of easing, given the combination of extremely low inventory of homes on the market and fierce competition as more millennials look to transition from renting to owning.

Demand for homes has been strong this year, despite a brief slowdown in the early days of the pandemic. Sales of previously occupied U.S. homes surged 9.4% in September to a seasonally adjusted annual rate of 6.54 million, according to the National Association of Realtors.

That sales pace was the highest since February 2006, the peak of the last housing bubble, and left just 2.7 months of available homes on the market, a record low.

The thin inventory of homes helped drive up the median selling price to $311,800, up 15% from a year earlier, according to NAR.

Meanwhile, COVID also has had an interesting effect on home renovations. People who have been working remotely or quarantining have been taking a hard look at their houses, hearing about the brisk sales, and making improvements of their own for potential resale.

With an increased demand on home improvement (and even new construction), finding a contractor (or subcontractor) has been a challenge. In fact, they are so overbooked, many Vermont contractors are scrambling to finish projects before it gets too cold to work, potentially bumping clients to spring.

Conversely, COVID has put a strain on construction materials, and even such home basics as appliances. The delays are not weeks, in some cases, but months out. Not only can manufacturers not keep up with the demand, many plants have been forced to close or scale back in order to provide for a safe work space during the pandemic.

That push-pull on supply and demand has equated to Economics 101: If demand exceeds supply, charge more. And that has happened in earnest. A sheet of plywood, that in the pre-COVID era went for about $10 a sheet is now around $30. That’s a serious blow to budgets, increasing project costs by 20% or more in many cases.

Builders, contractors (including subcontractors like electricians and plumbers) are having a busy year, for sure. It is a good problem to have. Same goes for bankers, title attorneys, home inspectors and the like.

These are good problems to have, until they are not good problems to have. We cannot foresee what this boom means for everyday Vermonters (aka taxpayers) and the eventual shift in our demographics. For now we can be grateful for the fortunes of other, but be cautiously optimistic we have not priced ourselves out of a state.

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