MEREDA Forecast Conference: Residential real estate continues to roar
File Photo / Tim Greenway
Portside Real Estate Group owner Dava Davin spoke at the Forecast Conference of the Maine Real Estate and Development Association.
The multifamily market in southern Maine has seen a lot of activity over the past year, with new development, the emergence of Brunswick as a hot spot and with Biddeford in a period of growth and transformation, said Brit Vitalius, of Vitalius Real Estate Group, at the MEREDA Forecast Conference.
Saco and Biddeford continue to see high demand from tenants. That’s illustrated with the phase one redevelopment of the Riverdam Mill in Biddeford, where 24 of 25 residential units were pre-leased in just one month.
Tenants choosing to be there, according to a survey, include students, artists, young professionals, a real estate agent and a retired RN, said Vitalius. Their reasons include the city’s up-and-coming character, walkability, and easy commute to Portland and Boston.
Median sales prices have increased substantially since 2011: by 140% in Saco-Biddeford and 111% in Portland. And inventory is tightening. Earlier this month, there were only 20 multis on the market in Portland; of those, only two were less than $500,000, six were over $1 million and 22 were under contract. Westbrook had just one multi on the market and 14 were under contract.
Lewiston-Auburn had 12 on the market and 31 under contract. That compares with 2011, when Lewiston-Auburn had two years of inventory and nobody was buying, he said.
Investors in larger multi properties of five or more units presents a diverse buyer profile. Recent buyers included tenants who bought the six-unit building they were in, a young couple, a veteran with cash, and some 1031 exchanges.
Vitalius projected that Portland’s recent rent control referendum could impact values in properties with below-market rents, but that the market will largely stay steady. He expected Saco and Biddeford to continue to see strong activity and solidify its status as a new urban center, while Westbrook will see continued price increases driven by low inventory. Low interest rates are expected to continue to entice multi-unit buyers.
A $7 billion residential market
The southern Maine residential real estate market stayed hot through 2020, said Dava Davin, owner of Portside Real Estate Group.
The growth included dramatic price increases, with houses often selling above list price, multiple bids and an increase of out-of-state buyers from 25% to 33%. One out of 10 buyers in 2020 were from Massachusetts. Out-of-staters were winning bids over local buyers because they were able to pay all cash and were comfortable waiving contingencies such as building inspections, Davin said.
The region is seeing 1.5 months of inventory compared with five to six months previously, she noted.
The single-family market took in over $7 billion for 22,500 units sold in 2020, a 24% increase over 2019’s $5.7 billion.
The year also saw record-breaking sales. A single-family home in Westbrook listed at $859,000 sold for $1 million after receiving 15 offers, six of them from out-of-state; the price was the highest for the type of property ever seen in Westbrook, said Davin.
Maine’s biggest sale of a home built on speculation was a Kennebunkport waterfront property that went for $5.95 million, to a Maryland buyer.
Maine’s median home price increased 13.8%, the largest yearly increase the state has seen in at least 20 years and maybe forever, said Davin.
Statewide, the number of transactions was up 9.1%, with York and Cumberland counties representing 40% of that increase. Spending an average of just seven days on the market, 65% of single-family homes sold at or over asking price.
The most popular homes in 2020 were ranches with three bedrooms on one to two acres. Previously, Davin said, buyers were asking for less than an acre. But in 2020, they expressed an interest in having more space to spread out. Also popular were pools, in-law apartments and dedicated offices within the house. Waterfront property was in vogue, with 25% more sold in 2020 compared with 2019.
The luxury market for homes of $1 million or more, stagnant for years, saw an 81% uptick in sales.
For 2021, Davin predicted continued price increases, although at a slower rate, with continued out-of-state demand. There will likely be more sales in areas outside of Greater Portland, such as Saco-Biddeford, Bath, Brunswick and rural areas west of Portland, as people get priced out of the Portland market.
For sellers, low inventory will protect prices. For buyers, continued low interest rates will offer more buying power to meet increasing prices. Millennials, she said, are likely to be looking for their next home as they expand their families; Gen Z, who may have moved back home with their parents to ride out the pandemic, might have saved up money to be in the market as first-time buyers in 2021.
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