The state's economic growth should continue to outpace that of other New England states in the next year and slightly exceed the national average, economists told key House lawmakers.


The state's economic outlook is good, but not as robust as it was in the mid- to late '90s, before the recession hit.

New England as a region is expected to lag behind the national average, however, with New Hampshire and Connecticut as the only exceptions, the group said Tuesday.

"New Hampshire once again is forecast to have the strongest growth in New England," Ross Gittell, an economics professor at the University of New Hampshire, told a joint meeting of the House budget and tax-writing committees.

The state's economic health is tied to the national economy, which also is growing, the economists said.

"The national economy is no longer in recovery, but is in the midst of an unqualified expansion," said Robert Tannenwald, an economist with the Federal Reserve Bank in Boston.

Corporate profits are growing steadily, which means employers are hiring, he said.

"We have had abysmal job growth (until the last year)," Tannenwald said.

Consumers also continue to spend on the goods and services businesses must sell to maintain their profits and the job growth, he said. The housing market also continues to thrive, though rising mortgage interest rates could dampen construction and sales going forward.

Tannenwald cautioned that America continues to borrow heavily and foreign governments are buying the debt, especially China. He said if the Chinese decide not to buy the debt in the future, Americans will be stuck holding the bill.

"Americans are tapped out. We are really in debt," he said.

Low interest rates have been a boon to the housing market, but many people used the extra borrowing power they got with low rates to put themselves at risk of being over-extended, he said.

Russ Thibeault of Applied Economic Research in Laconia noted that the average price of a New Hampshire home has doubled since 1997 from $120,000 to $240,000 -- and that could be out of reach for many consumers if mortgage rates rise as expected. Thibeault said it all depends how much rates rise.

For example, a consumer able to pay a $1,100 monthly mortgage could buy a $214,400 home with a 10 percent down payment if rates are 5.5 percent. His buying power drops to a $158,232 home if rates are 8.5 percent, said Thibeault.

Thibeault said he expects the appreciation of home values to cool to a more modest 3 percent growth in the year ahead.

The fate of the real estate market is important to both legislative committees because the state taxes property sales. The state has benefited from a booming market both due to the number of sales and the increasing values on which to tax them.

But the downside of the high price of housing, including rental units, is the impact on workers, Gittell said. Without affordable housing, workers leave, and without workers, businesses can't thrive, he said.

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