August was yet another month of declining home sales and rising prices in Maine, but real estate agents say the market is starting to level off.
The number of single-family home sales in Maine declined almost 10 percent last month compared with August 2021, according to figures released by the Maine Association of Realtors on Wednesday.
The statewide median sales price for homes sold last month was $340,000, a 9.7 percent increase from August 2021, but a slight decrease from the July median of $354,000, according to the association’s figures. The median is the price at which half of the homes sold for more money and half sold for less.
Demand for single-family homes in Maine remains strong, and while active for-sale listings are still historically low, they’ve been on an upward swing for the last six months, said Madeleine Hill, a broker with Roxanne York Real Estate in Harpswell and president of the state real estate association.
About 1,850 homes in Maine changed hands in August, nearly a 25 percent increase from July.
“With additional for-sale inventory, we’re seeing a leveling in some areas of Maine,” she said. “Buyers are approaching these market trends in a more strategic fashion, with contract contingencies and seller concessions becoming more common.”
Holly Mitchell, an agent with Keller Williams in Portland, is seeing the same.
Inspections, which practically disappeared during the pandemic, are commonplace again. Buyers are asking for repairs or negotiating a little more. They’re taking a little longer to make a decision.
“It’s a little bit more of a reasonable market,” she said. “There’s some give and take.”
Some buyers using government loans, like FHA or VA loans, were previously boxed out of the market, unable to compete with cash offers thousands of dollars over the asking price. But now, sellers are more agreeable to different kinds of financing, allowing buyers to put less money down and still have offers accepted, Mitchell said.
But houses are still selling rapidly and she doesn’t foresee prices falling dramatically anytime soon.
Mitchell also isn’t expecting inventory to increase, especially as interest rates climb.
The average rate included in buyer contracts for a 30-year, conventional fixed-rate mortgage was 5.22 percent in August, down from 5.41 percent in July, according to the National Association of Realtors.
The relief didn’t last long: Mortgage rates are not only back on the rise, they’re also the highest they’ve been since 2008.
The average 30-year fixed mortgage rate climbed to 6.02 percent last week, according to mortgage buyer Freddie Mac. A year ago, the rate averaged 2.86 percent.
The recent rate increase will continue to dampen demand and put downward pressure on home prices, but inventory remains inadequate, Freddie Mac said in a news release. Because of this, home price declines will likely continue, but they won’t be large.
Mitchell estimated that somewhere around 50 percent of the country has interest rates under 4 percent, and many who bought during the height of the pandemic are locked in at rates significantly lower than that. Those homeowners are going to be extremely reluctant to sell, she said.
“Even if you were selling the house you live in and buying it back, your monthly payment could be hundreds of dollars more,” she said.
This is a concern nationally, as well.
Lawrence Yun, chief economist for the National Association of Realtors, said rising inflation has hampered the housing market.
“The housing sector is the most sensitive to, and experiences the most immediate impacts from, the Federal Reserve’s interest rate policy changes,” he said. “Some homeowners are unwilling to trade up or trade down after locking in historically-low mortgage rates in recent years, increasing the need for more new-home construction to boost supply.”
COUNTY, NATIONAL DATA
In Cumberland County, the median price was $503,500 for the three-month period ending Aug. 31 – an increase of 11.6 percent from the same period a year earlier, and the highest median price in the state.
The real estate association also looks at three-month data for county-by-county comparisons to get a larger sample size of sale transactions.
Washington County saw the largest decrease in sales, with a 26.9 percent drop, but it also saw the highest increase in prices. Between the start of July and the end of August 2021, Hancock County homes sold for an average of $160,000. In the same three-month period this year, they sold for an average of $237,000, a 48.4 percent increase.
Sagadahoc County is the only county that saw an increase in sales during the three-month period. Between July and August last year, 135 homes were sold. This year, there were 150, an 11 percent increase. Prices rose at a similar rate, 11.3 percent, from $355,000 to $395,000.
Sales were flat in Piscataquis County, with 104 homes changing hands both years, but prices increased almost 18 percent from $172,500 to $203,450.
Kathleen O’Toole, a Kennebunk-based agent with Coldwell Banker, is seeing slow changes in the market.
Many sellers are still listing their homes at peak-pandemic prices, which is no longer feasible, she said, so price adjustments are more common.
“Interest rates will continue to force the hand of sellers to lower the prices and be more realistic,” she said.
She’s also noticed more homes listed as “back on the market,” which she attributes to the mortgage rate hikes.
Buyers are getting excited and diving in, but then realizing that with the rates, the mortgage just isn’t affordable. It’s not the steal they thought it was, then they back away from the deal.
It’s a discouraging scenario for a lot of people, especially first-time home buyers.
“People join the buyer search and they’re disappointed by what their money can afford them,” O’Toole said. But it’s not hopeless.
“You just have to be lucky and you have to be creative to make anything happen in this market,” she said.
Nationally, sales fell nearly 20 percent last month from August 2021, and prices rose 7.7 percent to a median of $389,500, according to the National Association of Realtors. While still an increase from a year ago, August’s median price breaks a three-month stretch of national sales above $400,000.
Regionally, sales fell 13.7 percent last month from the year before while the median price in the Northeast rose slightly by 1.5 percent to $413,200.
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