Signs that the housing market in Maine and nationally is slowing down continue to mount, with recent surveys showing a decline in builder confidence for the 10th straight month, fewer single-family homes being built and a slight uptick in terminated contracts.
Builder confidence in current and future single-family home sales is half of what it was just six months ago, according to the recent National Association of Home Builders/Wells Fargo Housing Market Index. The survey, which gauges builder perceptions of sales and traffic of prospective buyers, showed the lowest confidence since August 2012, except for a short blip at the start of the COVID-19 pandemic in spring 2020.
This is the first year since 2011 when single-family housing starts declined, and the trend will likely continue because of the higher mortgage rates in response to ongoing efforts by the Federal Reserve to stem inflation, said Robert Dietz, chief economist for the contractors’ association.
The news comes as single-family home prices in Maine continued to rise in September, compared with last year, though more slowly than in recent months, according to the Maine Association of Realtors. At the same time, monthly sales prices have continued to decline since March, giving homeseekers a reprieve from sharply escalating prices.
Although inventory has increased in recent months in Maine, it remains low as buyers hesitate amid rising mortgage interest rates, inflation and worries about a recession.
Maine is still subject to a critical affordable housing shortage, which has become a hot button in this year’s governor’s election with former Gov. Paul LePage, a Republican, suggesting that the housing supply be increased by getting school districts to consolidate and using old buildings for homes.
Gov. Janet Mills, a Democrat, has struggled with affordable housing during her tenure, but she and the Democratic-led Legislature passed a housing overhaul this year that takes on single-family zoning by allowing two units on lots previously zoned for one, requires cities and towns to allow “in-law apartments” and offers state assistance to liberalize zoning codes.
There is some positive news about the housing market, although it is muted. Some 7 percent of realtors across the U.S. responding to a September confidence index survey by the National Association of Realtors said they expect buyer traffic to increase in the next three months. But that’s down from 24 percent last September. And 8 percent expect a rise in seller traffic, but that also is down from 21 percent last September.
Fewer buyers are waiving contingencies now compared with a year ago, with 19 percent willing to waive appraisals, compared with 23 percent last year, and 19 percent agreeing to waive inspections, compared with 21 percent last year, the realtors’ association found.
The percentage of distressed home sales nationally doubled over the past year to 2 percent of overall sales nationally, compared with 1 percent last year. The average number of offers also decreased from 3.7 to 2.5. The number of housing contracts that were terminated rose to 6 percent in September from 5 percent a year ago.
Homes also are taking longer to sell across the country. Only 70 percent sold in less than one month, compared with 86 percent last September. Not that long ago, in April, homes in Maine were selling much faster than the national average, taking nine days, compared with 34 nationally.
Since then, high mortgage rates that had hovered around 3 percent have risen to nearly 7 percent, significantly weakening demand, especially for first-time and first-generation prospective homebuyers, said Jerry Konter, chair of the homebuilders’ association and a developer from Savannah, Georgia.
“This situation is unhealthy and unsustainable,” he said. “Policymakers must address this worsening housing affordability crisis.”