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Several key economic indicators are lining up in Maine and nationally, showing that the real estate market, which has seen a tear for the past two years, is beginning to cool.
Home prices are high, but sales in 2022 are expected to fall about 9%, mostly due to a tight sales market, said Lawrence Yun, chief economist for the National Association of Realtors.
Rising interest rates are also a factor. If 30-year fixed mortgage rates drop from the current 5.48% to 6%, selling activity could drop 15%, he said.
Here are some signs that already indicate a decline in the market, and some metrics potential buyers and sellers should continue to watch.
Door-to-door sales pending
Pending contracts for homes, which reflect a more timely impact from rising mortgage rates than closings, fell for the sixth consecutive month from March to April by 3.9%, according to the National Association of Realtors, the pending home sales index released Thursday. Pending contracts fell the most in the North East, by 16.2%.
Building permits and housing starts
Housing starts and building permits fell both in Maine and nationally in March, according to US Census Bureau data released last Wednesday. Building permits in Maine fell 52% from February to 414 permits in March after a sharp increase in January.
Builder confidence in the market for newly built single-family homes fell 8 points to 69 in May, according to the National Association of Home Builders’ index released last Tuesday, the fifth straight month of decline and the lowest reading since June 2020.
Days on market
How quickly a home sells reflects market demand. So far, days on the market have been relatively flat and low, but there are early signs across the country that homes are taking longer to sell.
Still, Maine homes continue to sell fast at an average of 7 days in January, February and April, while taking 9 days in March, according to the Maine Real Estate Information System. Nationally, homes took 17 days to sell in March and April this year and the same amount in April 2021, according to the National Association of Realtors.
A decrease in multiple bids on homes as some potential buyers pulled out of the market until it cools will help moderate prices and give buyers more chances. Multiple-offer competition showed signs of waning in March and April, according to online real estate marketplace Redfin.com.
Some 61% of property offers written by Redfin.com agents in April received multiple offers, up from 63% in March. The April figure was the second consecutive monthly decline and the lowest rate since March 2021.
Sales of single-family homes in Maine fell for the third consecutive month in April after peaking in January due to a shortage of homes available for sale, according to the Maine Association of Realtors. Some potential sellers are missing out on the volatile real estate market as they struggle to find new homes for themselves.
Meanwhile, Google searches for “homes for sale” were down 9.7% in the week ending March 19 compared to the same week in 2021. Searches for “homes for sale were flat at the end of January, and searches for “homes for rent” and “real estate” also fell, dropping 9.6% and 5.1%, respectively.