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Updated: August 28, 2023

Housing market has cooled but demand has been persistent

PHOTO / PETER VAN ALLEN At the Downs in Scarborough, eight houses of 525-square-feet were added to the housing mix.

Maine’s housing market continues to offer challenges for homebuyers, including first-time buyers. Buyers are still looking for move-in ready homes, in some cases paying in cash. 

The most recent numbers from Maine Real Estate Information System, better known as Maine Listings, show the number of homes sold in June was down 19.24% from June 2022. There were 3,364 units sold in June, versus 4,340 in June 2022.

At the same time, Maine’s median sales price continues to hit new levels in the first half of 2023.

June marked a high, with a median sales price of $385,000 statewide, an increase of 6.45% from $361,682 in June 2022. The number has shown a steady climb this year, with May’s MSP at $373,000.

Carmen McPhail, president of the Maine Association of Realtors and an associate broker at United Country Lifestyle Properties, said the Maine market is characterized by strong demand and continued low inventory.

Markets that have cooled off

Four Maine counties reported declines in the median sales price in June — including the aforementioned Sagadahoc, which includes Bath.

It’s unlikely these will be numbers that bring out the bargain hunters, so I’ll refrain from ranking the counties that saw declines.

  • Aroostook: $155,000 ($155.900 in June 2022)
  • Piscataquis: $170,000 ($172,500)
  • Sagadahoc: $417,500 ($420,000)
  • Waldo: $306,250 ($315,000)
  • Hancock County’s MSP was flat, at $380,000.

How Maine compares to other areas

When compared to the Northeast overall, sales volume was down by a similar percentage, 21.5%, while the median sales price rose 4.9% to $475,300.

The increase in median sales price sets Maine and the Northeast apart from the national trend. Nationally, the median sales price in June was $418,000, which was down 1.2% from June 2022.

New construction tapers off

The number of building permits issued in Maine in the first four months of 2023 was off the pace of recent years — but maybe not as much as might be expected.

Through April, 1,572 building permits have been issued in Maine.

Projected through 2023, Maine is on pace to issue 4,716 building permits, which falls well short of the 7,105 issued last year.

But the number would be right in the thick of pre-pandemic numbers recorded in 2017-19.

Still, there’s a major difference in the housing market from the pre-pandemic years.

One, Realtors continue to say there’s far less inventory than there was prior to the pandemic run-up on real estate. Maine’s median sale price has nearly doubled in six years: It was $200,000 in 2017, compared to the MSP of $385,000 in Junel of this year.

The cost of building a home has also increased by double digits, but remains an option within reach of many buyers. Houzeo estimates the cost of a new 2,000-square-foot home in Maine would be $230,000 to $340,000, not including the land, survey fees, site work, permits and related work.

Second, the pandemic brought out legions of cash buyers. So while the federal funds rate went from zero to 5%, sidelining many first-time buyers, there continued to be buyers who didn’t need a mortgage — downsizing baby boomers, people moving from more expensive markets. Cash-flush buyers have been ready and willing to go into bidding wars, which continue today on the more desirable properties.

“There is such a high demand for housing, new construction, or otherwise. We have seen builders slow down since the peak of the pandemic, but I don’t think that is due to consumer demand,” Dava Davin, principal and broker at Portside Real Estate Group, told Mainebiz earlier this year.

Likewise, New England-regional analyst Tom Dworetsky of Camoin Associates told Mainebiz issues like the cost of materials and lack of construction labor may also be factors in the slowdown of projects on the board.

“With interest rates remaining high and existing homeowners hesitant to give up the lower mortgage payments they locked in prior to the pandemic, the inventory of for-sale existing homes will remain constrained,” Dworetsky said. “New construction will continue to be in demand to supplement inventory available to buyers who may be unable to wait for more favorable rates. That is to say, a lack of demand is not what’s weighing on building permits, but rather issues on the supply side, including labor availability, cost of materials, and difficulty in obtaining financing due to stricter lending requirements.”

While much of the development is one-off projects or small developments, Maine’s housing stock is being bolstered at the Downs, which has built 500 housing units over five years and plans another 1,500 units, including apartments, senior living quarters, townhomes, duplexes, condos, single-family homes and “tiny” homes of 525 square feet (see image).

A lot can happen before the end of the year, but right now Maine is holding steady.

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