South Burlington, Vermont - April 21, 2006

Housing is still being built at a rapid clip, most of it in the form of condominiums-- such as Eastwood Commons in South Burlington. This area by itself has added hundreds of rental and condo units to the housing stock. Still, an annual survey by real estate analyst Mark Brooks shows that housing is getting less affordable.

"As you can see," he explains, pointing at a graph, "...it's really been dropping, and that is the lowest level we've seen since the very early 1990s."

Experts say rising interest rates are making homes less affordable, one reason that the market has cooled. The escalation of home prices in Vermont slowed from the double digits to single-digit-- less than 6%.

A declining number of new building permits for single family homes shows how Chittenden County's housing market is slowing down. For 15 years, the county averaged just over 400 permits per year, until last year. In 2005, only 283 building permits were issued.

In spite of the slowdown, demand for housing remains high, especially for condos.

"So even though there's a lot of new construction coming on the market, this year and also into the future, there's a lot of people who are after condominiums to purchase," explains Brooks.

The housing market is driven by more than home sales. Remodeling and home improvement represent at least as big a part of the economy, and it's at expos like the Home and Garden show in Essex Junction this weekend-- that people find ideas and plenty of products.

"The market has slowed a little bit, but the housing industry is still booming. We're still building homes," says Joe Sinagra of the Homebuilders and Remodelers Association of Vermont.

Many homeowners are keeping their homes and fixing them up, because in spite of the slowdown in prices, it's still a tight housing market.

"Because the market was so tight, and still is tight, people just can't find a home that they want to go into, or don't want to pay-- they want to make the money on the sale, they don't want to spend it on a new home. So instead, they're cashing out the equity in that house and finishing off the basement or putting an addition on," explains Sinagra.

The home improvement business clearly continues its boom. And nobody Channel 3 talked to expects any kind of crash in residential real estate. There's just too much demand for housing.

Andy Potter - Channel 3 News