Agent Faith Morse called this spring’s real estate market more of a “Nantucket sleighride,” lurching back and forth rather than the straight upshot it has been in recent years.
Buyers had to offer at least $20,000 over asking price to even make an offer on a house last year, but that isn’t the case anymore because buyers are pinched by higher mortgage interest rates, she said. Instead of having 40 or 50 people at an open house, there might be only three.
“The biggest thing is the unpredictability,” said Morse, an agent with Better Homes and Gardens/The Masiello Group in Auburn.
Single-family home prices have been rising since 2012, with the median sales price increasing from $170,000 to $335,000 in 2022, according to Maine Listings. That’s a 12 percent price rise in 2022 alone, but the number of homes sold shrank more than 17 percent because of a supply shortage. It still is difficult for the average Mainer to afford a home, especially in Greater Portland, with few signs that will change soon.
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The trends continued in the first two months of this year, exacerbated by continued rises in mortgage interest rates and worries over inflation. Prospective homebuyers could afford less, making it harder to buy a house. And every time the Federal Reserve raised its key interest rate, mortgage rates followed. The current rate for a 30-year fixed loan is 6.87 percent, according to Bankrate.com.
Morse said dealing with the interest rate hikes — the Federal Reserve has increased them eight times over the past year — has made it difficult to price a house in a way that it will be affordable to buyers.
“When they raise interest rates the buyers all take a breath and step back, like a school of fish that gets scared when something startles them,” she said. “Everybody turns around and goes the other way for a minute, and then they come back.”
Morse still is seeing buyers bid over the asking price for desirable homes and locations. She recently helped clients bid $60,000 over the asking price and they weren’t the highest bidder, and didn’t get the home. She doesn’t expect home values to drop soon.
That is causing prospective buyers to try to purchase less expensive homes, which are especially in short supply, Donna Coglitore, an agent at Keller Williams in Bangor, said. She helped clients bid on two homes, one that had 11 offers, the other, eight, all of them over the asking price. Neither of her clients’ offers were accepted.
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“I don’t think we’ll ever see the old normal,” she said. “Prices are going to stay higher.”
She said average sales prices range from $200,000 to $400,000 in Bangor, with 13 active listings that are not under contract available now in the Queen City. In a normal year she would have 30 to 50 available. Those 13 range in price from $75,000 for a single-wide trailer to $489,900 for a ranch home.
Morse said the Multiple Listing Service shows Portland has 55 condominiums and homes for sale ranging in price from $329,000 to almost $3 million. Lewiston and Auburn have 23 homes ranging from $84,900 for a trailer to $849,000 for a cape house, according to Blake Fecteau, co-owner of Hearth & Key Realty in Auburn.
Fecteau began seeing a market slowdown over the winter, and now is getting more potential buyers using FHA government and Maine State Housing loans. In previous years those types of loans targeted at lower income buyers made it difficult to compete with cash buyers who still are in the mix but in smaller numbers.
He said it also feels like banks and home appraisers are being more conservative in their assessments to protect borrowers from getting underwater, or owing more than the home is worth.
Morse agreed, saying that buyers are taking “a more thoughtful process” now.