A development of new homes in Eagleville, Pa., is shown on Friday, April 28, 2023. The Federal Reserve's rate hikes have led to higher costs for many loans, from mortgages and auto purchases to credit cards and corporate borrowing, and have heightened the risk of a recession. Credit: Matt Rourke / AP

Real estate prices in Maine are rising less vigorously than they have in the past decade, reflected in flagging equity and increases in the number of mortgages that are seriously underwater, a study released Thursday found.

The number of equity-rich homes in Maine declined 1.8 percentage points to 55.5 percent in the first three months of this year compared with the last three months of 2022, a study by the real estate data firm ATTOM found. Equity rich means that the combined amount of loan balances on a property is no more than 50 percent of its estimated market value.

Even though the decrease in equity was small, it is the latest indicator of how a decline in home prices across much of the country after they skyrocketed in Maine and elsewhere earlier in the pandemic has started to affect homeowners. Home-seller profits have slid to their lowest amount in two years, ATTOM said.

“The recent downturn in the housing market is chipping away at the bounty they reaped from a decade of price surges,” ATTOM CEO Rob Barber said.

It is still too early to tell if this is a long-term trend, and there are reasons to believe the market may rebound this year, but Barber said “various measures suggest that the best of the boom may be behind us.”

Existing single-family home sales declined almost 17 percent in March compared with the prior year because of rising interest rates and lower than normal inventory, according to the Maine Association of Realtors. The median sales price for homes sold rose 3.85 percent to $337,500.

The Portland-South Portland metropolitan statistical area had a high equity-rich percentage at 59.7 percent in the first quarter of this year, or 79,026 mortgaged homes, down 2.2 percentage points from the last quarter of 2022.

Among Maine counties, Lincoln led with 66.6 percent of mortgaged homes being equity rich, followed by Cumberland at 59.9 percent and York at 59.5 percent. In Penobscot, just 43.1 percent were equity rich, down 4 percentage points from the fourth quarter of 2022 to the first quarter of this year.

At the same time, mortgaged homes in Maine considered seriously underwater rose 0.3 percentage points between the two quarters. That is small but still among the largest increases in the Northeast. Seriously underwater means that the combined balance of loans on the property is at least 25 percent more than its estimated market value. Nationwide, there was no change in underwater properties at 2.9 percent.

“The change is small, but it is worth following, especially with the future of the housing market so uncertain,” Barber said.

Aroostook County had the highest percentage of seriously underwater homes at 6.7 percent, or 610 mortgaged homes in the first quarter of this year. That is up about half of a percentage point from the last quarter of 2022. Washington County also had a high share of underwater mortgages at 6.5 percent in the first three months of this year.

The ATTOM report comes on the heels of the Federal Reserve once again increasing interest rates on Wednesday. It bumped rates up 0.25 percent to top 5 percent, a 16-year high. It was the 10th rate hike since March 2022 aimed at reducing inflation, but the rate hikes also have filtered down to rises in mortgage interest, credit card and other consumer borrowing rates.

“The latest interest rate hike by the Federal Reserve is unnecessary and harmful,” Lawrence Yun, chief economist for the National Association of Realtors, said. “Consumer price inflation has been decelerating and will continue this trend.”

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Lori Valigra

Lori Valigra, senior reporter for economy and business, holds an M.S. in journalism from Boston University. She was a Knight journalism fellow at M.I.T. and has extensive international reporting experience...