Maine, a popular state in the US, is often associated with its picturesque coastal towns, scenic landscapes, and vibrant culture. However, it also has a large housing market that's currently undergoing a major shift, dominated by increases in the prices of property.
In September 2022, the median sale price increased to 7.4%, which led to the number of sales decreasing by 9%. Mortgage interest rates have reached a 20-year record high of 7.08%, and many sellers might be forced to reduce the prices of their homes to try to sell them in the near future. Therefore, many homeowners are worried about the Maine housing market crashing. Is this a possibility?
There are several considerations that landlords and property owners need to be aware of before making decisions regarding their properties. Here's what you need to know:
Maine Housing Market Trends
Here are the two dominant trends we've noticed:
Increase in the Median Sale Price
The first noticeable trend in the Maine real estate market is the increase in the median sales price of properties. According to recent data from the Maine Association of Realtors, the median sale price of a single-family home reached a record high of $256,000 in 2020, which was an increase of 17.2%. This trend continued into the first quarter of 2021, when the median sales price rose to $279,000.
The latest data on Redfin shows that the median price is $334,300, which is still consistent with the trend. Keep in mind that this trend will make it extremely difficult for cash buyers to invest in property.
Increased Demand for Vacation Homes and Rental Properties
Another noteworthy trend is the increase in demand for rental properties and vacation homes. Since the state is known for its natural beauty and fun outdoor activities, many people are interested in vacation homes. This is an excellent way for landlords or property owners to earn rental income.
Therefore, in coastal areas and popular tourist destinations, there has been an increase in the median number of homes listed as vacation or investment properties.
Factors Affecting the Maine Housing Market
There are four main segments that impact the real estate prices in the Maine market, namely:
The overall health of the economy has a major impact on the Maine housing market. A few economic indicators include:
- Employment ratio
- Gross domestic product (GDP)
- The prices of goods
- Manufacturing activity
In the US, economic power is known for having a direct impact on the housing markets. This is no different in Maine.
2. Mortgage Interest Rates
The current real estate market in Maine is substantially impacted by mortgage interest rates. Since they are at record highs for the first time in more than 20 years, these rates have priced out many buyers from the market.
Home prices and interest rates are inversely related. When the interest rate drops, so does the cost of getting a mortgage, which boosts demand for real estate and drives up property prices in Maine.
3. Government Policies
Several factors that affect the demand for real estate include deductions, tax credits, and subsidiaries. By understanding current government policies, you'll be able to predict the demand and supply of real estate.
How could this help you, you might ask? By understanding the effect of government policies, you'll be able to identify potentially false information relating to the Maine real estate market, which will prevent you from making the incorrect decision regarding your property.
Based on factors including race, age, gender, migration trends, income, and growth, demographics describe the population's makeup. By using demographic data, you'll be able to determine what types of properties are high in demand and selling well in the market.
Current home market trends in Maine can be significantly impacted by significant changes in the country's population/ demographics.
Will the Housing Market Crash in Maine?
Fortunately for landlords and property owners, the housing market in Maine is not expected to crash. However, it is expected to slow down. This means that while prices will fall, they won't fall to the extent that they did during the Great Recession.
This is backed up by the following factors:
1. Stricter Lending Standards
In today's world, lenders are very careful about who they lend money to. Therefore, in order for potential buyers to get loans, they need to have excellent credit. The same lending system was not in place in the past, as anyone was able to get a mortgage, even those with a poor credit history and those who could not afford a down payment.
2. Low Inventory
Unfortunately, the number of available houses on the market continues to decrease. As per the laws of demand and supply, if there is a limited amount of inventory available, the price will increase.
The scarcity of inventory in the Maine real estate market follows this trend as well. By taking a look at the supply-demand curve, you'll be able to see that prices in Maine aren't going to crash anytime soon.
3. New Buyers
This factor works hand-in-hand with the low inventory rates. As more and more people are interested in buying homes, the supply continues to decrease.
4. Lack of Newly Constructed Homes
Given the nature of the real estate market, it's not possible to construct new homes quickly. This is because of factors such as the high price of land and regulatory approval.
5. Decreased Foreclosure Rates
In the past, there was a threat of a foreclosure crisis because many people didn't have many assets to their names. However, this isn't the case in the modern world as many homeowners are in stronger financial positions because of the equity in their homes.
Maine Housing Market Statistics
According to data from September 2022, some of the key market stats for the Maine housing market include:
- A 7.4% increase in the median home price, which is now approximately $344,000.
- Home sales have dropped by 9% in the past year, with the current sales number being 2,084.
- Mortgage rates of 7.08% as of 10 November 2022.
- The monthly supply of inventory has not changed since September 2021.
- According to data compiled by Maine Listings, the median sale price increased by 8.9% to $330,000 in December 2022 compared to December 2021. Comparing December 2022 to December 2021, sales dropped 36.6%.
- The number of real estate agents has doubled since the start of the COVID-19 pandemic.
- The Federal Reserve has increased the interest rate eight times over in the past year, according to Bankrate.com
Maine Housing Market Predictions
Many people have differing views when it comes to the future of the Maine housing market; however, here are a few of the most common and dominant predictions:
- The shortage of affordable housing in Maine is likely to continue, particularly in urban areas, because demand continues to outweigh supply.
- Many experts predict the market will stay stable in the future because of the low inventory levels, strong economy, and increased demand.
The Bottom Line
It's clear that the housing market in Maine follows quite specific trends that all piggyback off one another. Fortunately, the market isn't expected to crash anytime soon; however, the increase in the asking price of houses, lack of inventory, the fact that houses are staying on the market longer, and lack of low interest rates, are putting strain on the competitiveness and balance of the market between home buyers and sellers.
What Is the Median Sales Price of a Home in Maine?
The median of single-family home prices in Maine as of January 2023 is $335,000, according to the Maine Association of Realtors. As per the latest data on Redfin, this is $334,300. However, these are quite similar in comparison considering the time period to which it relates to.
Is the Maine Housing Market Expected to Crash Anytime Soon?
There is some fear of a housing bubble in Maine as a result of the startling rate at which home prices have risen over the past two years. Maine's housing growth, however, has been fueled by a combination of increased demand and a severe scarcity of available inventory. This disparity between supply and demand still exists today, keeping Maine home values high despite the rising mortgage rates. The home market in Maine is unlikely to crash in the near future, but growth will probably be much slower than usual.