Newly built homes at the Hillside at O’Brien Farm development in South Burlington on June 22, 2020. File photo by Glenn Russell/VTDigger

To afford a median-priced home of $420,917 in northwest Vermont, an individual or family has to earn $115,742 a year. That’s according to a new study by Harvard University’s Joint Center for Housing Studies.

The report found that home prices rose drastically over the past year — and that Vermont is one of the most rent-burdened states in the country. It also concluded that a recent rise in interest rates could temper the real estate frenzy. 

“We’re seeing a substantial increase in median sale price,” said David Parsons, a Realtor with RE/MAX North Professionals, which mainly covers Chittenden County. “Demand is quite high.”

The Harvard report found that, nationwide, home prices rose a record 20.6% from March 2021 to March 2022. The northwest Vermont counties of Chittenden, Grand Isle and Franklin saw a median sale price increase of 18.3 percent between May 2021 and May 2022, according to Multiple Listing Service data analyzed by Parsons.

Home prices were somewhat lower in other regions of Vermont, according to the Harvard study. 

In Washington County, it found, an individual or family would need to make $86,195 a year to afford a median-priced home of $313,464. In Bennington County, it would take $83,484 to buy a median-priced home of $303,600, and in Rutland County $68,642 to buy a $249,630 home. 

To calculate these metro numbers, the authors of the report assumed a 3.5% down payment on a 30-year mortgage and a 4.98% fixed interest rate. They also assumed that home buyers would take on a monthly debt of 31% of their income. 

Disparities in home ownership between races persist nationwide. In early 2022, 45.3% of Black households, 49.1% of Hispanic households and 59.4% of Asian households owned their own homes, the report found, compared with 74% of white households. It did not break down demographic data for Vermont.

Buying a house is especially hard for first-time home buyers. Nationwide, the typical buyer needed $27,400 to make a down payment of 7% in April, an amount of money that excludes 92% of renters, whose median savings are $1500, the report found. 

“I have the utmost sympathy for folks that are just entering the market because it’s highly competitive,” Parsons said.


The Harvard researchers also found that Vermont was one of the states where renters were most burdened in 2020, the first year of the pandemic, with 45% or more of renters paying 30% or more of their income toward rent and utilities. 

“More and more households are spending a larger share of their housing costs on rent, and that’s affecting most states across the country,” Alexander Hermann, one of the lead authors of the study, told VTDigger. “And it certainly appears to be true in Vermont, where nearly half of renters are spending this especially large share of their income on housing.”

Lower income households and people of color across the country continued to struggle to pay rent in the first months of this year. More than 20% of households making less than $25,000 a year were behind on rent from December 2021 to April 2022, the report found. More than 20% of Black households and more than 15% of Hispanic and Asian households were behind on rent. 

Nationwide, eviction rates were almost back to pre-pandemic levels, the report found, with March 2022 rates almost equaling February 2020 rates.

Vermont renters had one of the lowest rates of being behind on rent, with just 7% of Vermont renters falling behind, the report found. 

High demand

On Thursday, the average number of days a house in northwestern Vermont was on the market was 22, according to Parsons. For a condominium or townhouse, it was nine days. 

“It’s incredibly challenging for buyers out there,” Parsons said. “Many of our buyers, they’re writing you somewhere between three to seven offers before they get an offer accepted, and in many cases, they’re waiving important contingencies — things like home inspections or appraisals, just to put themselves in a position to be competitive enough in those multiple-offer situations to win bids.”

The number of sales in Vermont has risen 16.2% between May 2021 and May 2022, according to Parsons. 

One contributing factor to rising home prices across the country has been an influx of millennials into the market after delaying living on their own through their twenties and early thirties, according to the Harvard report. It found that on average, between 2016 and 2021, 359,000 more households per year were formed by people between 35 and 44 than in the previous five years.   

A declining unemployment rate and rising wages gave young adults the financial footing they needed to move into home ownership. As a result, the report found, 62.3% of households between 35 and 44 now own homes, up from 58.9% in the first quarter of 2016.

Cooling off?

A sudden spike in interest rates is expected to slow the rapid rise in home prices nationwide, the report concluded, and the large number of apartments under construction across the country should temper rent increases. 

“Interest rate increases, especially of the magnitude we’ve experienced so far this year, can rapidly deteriorate affordability,” Hermann said. “And that’s doubly true with the kinds of price increases we’ve seen since the start of the pandemic. Interest rate rises will price out a large number of potential home buyers.”

Between rising prices and rising interest rates, the report found national home buying starting to slow, citing findings that as of mid-May, the Mortgage Bankers Association’s unadjusted Purchase Price Index showed a 16% drop in mortgage applications from May 2021. 

Parsons said that in Chittenden County, he’s seeing some indications of a slowing market because of rising interest rates, but he said it is still very much a strong seller’s market because the supply of homes is too limited for the current demand.

“For some buyers, obtaining mortgages, just with higher rates, that’s going to impact what they can afford, and I think, ultimately, that’s what’s going to impact the market,” Parsons said.

In April, 1.64 million homes were under construction in the U.S., the highest number since 1973, the report found.

But it costs more to build. 

If a building cost $10 million to build before the pandemic, it costs $13 million now, according to Joe Larkin, who owns Larkin Realty and is breaking ground on an 83-unit building in South Burlington. Larkin said he is seeing no decline in demand for apartments in the Burlington area. 

And as for that $420,917 median home price?

“You can’t build a single-family home for anywhere near $410,000,” Larkin said. “When I look at the market, I don’t see any real inventory at that $400,000 level.”

Previously VTDigger's economy reporter.