Andy Day gave up looking to buy a house after a year. He had seen more than a dozen homes in the Bangor area and put down five or six offers, only to be elbowed aside by the competition every time.
“I was always outbid,” Day said, even when he bid $40,000 over the asking price on one property. “The closest I got, I was a backup for one. So it was pretty discouraging.”
Day had been approved to buy a house under $200,000 using federal rural development and housing administration loans.
The properties that were within his budget either needed serious renovation or were immediately snapped up in “bidding wars” by competitors who could pay far above asking price. He looked up some buyers’ addresses, and saw that a number were from out of state.
“It was pretty discouraging,” Day said. He eventually gave up his search as the number of financially viable options dwindled.
It’s a common story across the Bangor area as would-be homeowners with modest incomes are being shut out of a housing market that saw sales and sale prices climb statewide throughout the pandemic. The Bangor area’s housing market is short on a supply of properties for sale, and the intense competition that creates puts first-time homebuyers at a disadvantage.
The median price of a home in Penobscot County last year was $200,000, according to the Maine Association of Realtors, the highest since the organization began tracking single-family home sales in 1998. The median price had risen nearly 18 percent from the year before, when it was $170,000.
That’s a considerable expense in a county where the median household income is $50,808.
Renters fare no better. A renter making minimum wage would have to work 67 hours a week to afford a market-rate, two-bedroom home in Bangor, according to calculations from the National Low Income Housing Coalition.
Two factors are largely to blame for the Bangor area’s housing situation, according to interviews with two residents, two realtors and a loan officer: lack of inventory and tight competition.
Maine has a housing shortage of around 25,000 units, and the number of days that a property stayed on the market for sale declined from 52 days in February 2020 to 21 days in February 2021, the Bangor Daily News reported last year.
Most first-time buyers are reluctant to make any sudden moves, said Ben Sprague, a commercial loan officer at First National Bank in Bangor. That puts them at a disadvantage in a market that favors speed and aggression.
“It can be hard to feel confident enough to place an offer when you don’t have a lot of time to think about it,” Sprague said.
On top of that, the competitors are changing, he said. First-time homebuyers now face competition from not just other local residents, but also mom-and-pop investors and national corporations that can put down higher offers and buy up properties, sometimes sight unseen, with the intention of renting them out.
“Oftentimes people are just buying properties for the income potential of renting them out, as opposed to buying them as their own personal residence,” Sprague said. “When you are primarily focused on the income from a property, the actual condition of the property, I’m sorry to say, doesn’t always matter as much.”
Day said that a number of properties he saw that were within his budget needed extensive renovation, defeating the purpose of finding a home that was within his means.
“I don’t have the time or the energy to completely rehab a house,” he said.
Amanda Lister, who bought a house in Searsport last July, said she saw at least 10 properties during her search, most of which required serious renovation.
Lister had been approved to buy a home over $200,000 using U.S. Department of Agriculture rural development loans and wanted to stay in Waldo County to be close to her son’s school and his father.
“It was a lot for me, but for the area and what’s available, it was slim pickens,” Lister said. She and her realtor saw at least 10 properties, most of which needed major repairs.
The median price of a house in Waldo County was $270,000 last year, a more than 20 percent increase from the year before.
“For a lot of the price points people were listing, a lot of them needed so much work,” Lister said. “I was okay with cosmetic things but it needed to be livable.”
She eventually closed on a home in November that was slightly out of her price range but didn’t require serious work.
Buyers at all stages of their home-owning lives are running into a lack of inventory, said Julie Dawson Williams, the owner of ERA Dawson Bradford Realtors in Bangor. Longtime homeowners who may want to move are finding fewer options, so they’re staying put and not putting their current homes on the market.
That translates into fewer “starter homes” more suitable for first-time buyers, Williams said.
Developers appear to have picked up the pace in building new homes over the past two years, according to data from the Federal Reserve Bank of St. Louis on building permits for single-family structures. But the new construction isn’t yet enough to calm the housing market competition buyers are experiencing.
Sprague said that pent-up demand is also part of the reason the housing market remains red-hot and will likely continue to be so for some time.
“The housing market does have some room to run,” he said, adding that low interest rates on home loans have also made people more comfortable taking on debt to buy a home.
“There’s a lot of buyers that are coming of age. Forty-seven percent of the country right now is Millennials or Gen Z and people who are just coming into their peak homebuying years.”
Sprague doesn’t see the market letting up for at least a year or two. Interest rates are rising, though, which could act as a counter and cool things off a little, he said.
Home prices probably won’t see dramatic upticks, but Sprague expects more modest increases of five to 10 percent over the next year.
Day still occasionally looks at home listings, but he’s less gung ho about the prospect of homeownership.
“I’ve gotten to a point now where I’m appreciating my apartment a little bit more for what it is,” he said.