April 18 – Maine home sales rose for a second straight month in March even as the average sales price neared an all-time high, dampening hopes that an easing of the inventory squeeze would put downward pressure on prices.
The busy spring real estate market got off to an early start in March, with more and more homes coming onto the market and buyer demand continuing. But professionals worry that prices could become unsustainable as the season warms.
Just 888 homes changed hands last month, a 3.5% increase from the 858 sold in March 2023, according to data released Thursday by the Maine Association of Realtors.
Despite another month of higher sales, prices continued to rise steadily, closing last month at a median of $380,000, up 12.6% from the $337,500 median in March 2023.
Paul McKee, president of the Maine Association of Realtors, celebrated the second month of sales increases after a 31-month period of declining sales, but he’s not ready to call it a trend.
“I want to wait another 30 days before I say that,” he said.
An early spring and summer market is good news for sellers — McKee said appropriately priced homes sell quickly and often receive multiple offers — but it’s a bad sign for potential buyers.
Monthly home sales prices usually peak in the summer.
Last July, the average price was $385,000, the highest ever recorded.
If prices show a similar spike from March to July this year, it could put homeownership even further out of reach for many Maine residents.
“That’s scary,” McKee said.
For a while, it seemed that while prices might not fall, they could slow down. But March brought double-digit appreciation, and McKee said he’s not optimistic the trend will reverse anytime soon.
“We know we can’t continue this trend, that’s not sustainable,” he said, “(but) I don’t see price stagnation or depreciation for a long time.”
McKee attributes the continued price increases to the inventory crunch that has been going on for more than a decade. And it’s not just in Maine.
Last year saw the lowest volume of home sales in the country since 1995, according to the National Association of Realtors.
“There are another 100 million people in the country and we haven’t increased our sales,” McKee said.
The problem is felt acutely in Maine. Officials estimate that Maine needs about 38,500 housing units to address historic underproduction and that an additional 37,900 to 45,800 housing units will be needed by 2030 to meet projected population growth and household changes.
While there has been a concerted effort within the state legislature to increase housing stock, this is not enough to undo the damage of historic underproduction.
“We need to develop workforce housing/affordable housing, and not enough of that is happening across the state to make things right or complete,” McKee said, adding that over-regulation and public resistance are hindering development. Even without these roadblocks, the industry’s ongoing labor shortage is also hampering construction efforts.
“It’s a vicious circle we’re in now,” he says.
Nationally, year-over-year sales fell 2.8% in March, according to the National Association of Realtors, while the average sales price rose about 4.7% to $397,200.
Regionally, home sales in the Northeast fell 3.8% and the median price rose 9.9% to $434,600.
Lawrence Yun, chief economist at the national association, said in a statement that there are now nearly six million more jobs than before the pandemic, indicating there are more home buyers in the market. But they don’t buy houses.
“Although home sales are recovering from the cyclical trough, they are stuck as interest rates have stopped moving,” he said.
MORTGAGE PRICES REMAIN HIGH
Mortgage rates have been fluctuating between 6.5% and 7% for several months and reached 7.1% on Thursday, according to mortgage buyer Freddie Mac. It was the first time this year that mortgage interest rates exceeded 7%.
“As interest rates rise, potential homebuyers are deciding whether to buy before interest rates rise even further or wait in hopes of a decline later this year,” Freddie Mac said in a statement. “It remains unclear how many homebuyers can withstand rising interest rates in the future.”
The Maine Association of Realtors also looks at three months of data in county-by-county comparisons to get a larger sample size of sales transactions.
Sales increased by about 4% between January 1 and March 31, compared to the same period last year, while prices rose by 10.6%.
Sales figures swung dramatically across the state. Waldo County saw a 33.8% drop in sales, while Androscoggin County saw a nearly 40% increase.
Retail prices also varied, although they rose across the board. Oxford County saw the most modest price increase, up 1.7% from $299,950 from Jan. 1 through March 31 last year to $305,000 this year. Piscataquis saw the sharpest increase, up 43.6% from $165,000 to $237,000.
Cumberland County remains the most expensive in the state, with a median price of $533,500 – a 13.5% increase from the three months last year.
