Maine Housing Market Update Report – Fall 2022
What is the Maine Housing Market Like?
Since the COVID-19 pandemic, the state of Maine has attracted many new residents, drawn in by the high quality of life, strong economy, and affordable housing prices of this beautiful state. According to estimates, approximately 7,000 more people made their way to this northern New England state than tried to leave it. Therefore, property prices have significantly increased in the past two years, powered by the low interest rates, high demand for housing, and limited inventory. Nevertheless, the increasing mortgage rates following the aggressive monetary policy initiated by the Federal Reserve Bank have started taking a toll on the Maine housing market.
According to data collected in September 2022, the latest available at the time of writing, the median home price in Maine had reached $344,400, 7.4% more than the year prior. There was only one month of housing supply available as of October 2022, unchanged since October 2021, and a far cry from the five to six months necessary to establish a balanced market. As the inventory continues to dwindle, with only 4,342 houses for sale in Maine in October 2022, 13.7% less than the previous year, a balanced market may seem like a pipe dream. In consequence, the housing market in Maine remains very competitive, with multiple offer situations and waived contingencies being a common occurrence and a staggering 40.2% of properties selling above the asking price.
Nevertheless, interest rate hikes are influencing the Maine housing market. Although Maine home prices are still climbing, it is at a much more reasonable pace than the year before: in September 2021, housing prices in Maine were increasing by 16.9% in year-over-year comparisons. Properties also tend to stay on the market longer, with the median number of days on the market reaching 32 in September 2022, compared to 13 in September 2021.
How does the Maine Housing Market Compare to the National Housing Market?
Despite its staggering growth in recent years, the Maine housing market remains more affordable than the national average. It is still going strong as it continues to attract new residents from out-of-state. This influx of newcomers, coupled with an already limited inventory, is contributing to keeping Maine home prices higher than they have ever been.
Nevertheless, as the cost of borrowing money has significantly increased since the spring of 2022, we are starting to see its effects on the Maine housing market. As the inflation rate skyrocketed in the aftermath of the COVID-19 pandemic, the Federal Reserve Bank adopted an aggressive interest rate hiking policy to cool down the economy. As of November 2022, the Fed had initiated four consecutive 75 bps interest rate increases, with more likely on the table before inflation slows down to a targeted rate of 2%. Mortgage rates have skyrocketed to hover around 7% at the time of writing, standing at their highest level since April 2008 and twice as high as they were the year prior.
Prospective buyers must contend with still-high property prices and high-interest rates, which as significantly affected the demand nationwide. However, another consequence of this hawkish approach is that current homeowners may consider postponing selling their properties to avoid renouncing their existing affordable mortgage. Therefore, in Maine, as in other states across the country, the available inventory is not growing as fast as the demand created by first-time home buyers and new residents moving to the state. Although Maine home prices are still increasing, it is at a slower rate than previously observed.
Maine Metro Areas with the Hottest Housing Markets
Maine is the most rural state in the country and the 13th-least densely populated, with most of the interior and northern parts of the state being covered by forests and mountains. All the major metropolitan areas are concentrated on the coast and the southern regions. Here are the hottest metro areas in Maine in terms of volume:
Portland is the largest city in Maine, with a population of 68,408. Portland's economy relies mainly on the service sector and tourism, as well as the maritime industry, with an active waterfront that supports fishing and commercial shipping. The Portland housing market is very competitive, with listed properties receiving five offers on average and getting snatched off the market after a mere 13 days. Portland home prices are still growing rapidly, with the median home price reaching $570,000 in October 2022, 21.3% higher than the previous year. It is not surprising, as 55.7% of homes sell above the asking price, and multiple offers, some with waived contingencies, are very common.
Lewiston is the second largest city in Maine, with a population of 36,617, and conveniently lies halfway between Augusta, the state's capital, and Portland, the state's most populous city. It is a diverse city that has seen a spike in economic and social growth in recent years. The Lewiston housing market is very competitive. Homes in Lewiston receive five offers on average and only stay on the market for a median number of 8. 60.5% of homes sell above the asking price, with multiple offers, some with waived contingencies, being the norm. In consequence, the median sale price is still increasing despite the higher mortgage rates, reaching $270,500 in October 2022, 11.5% higher than the year prior.
Bangor has a population of 31,753, making it the state's 3rd-largest settlement in Maine. Bangor's economy is based on services, retail, healthcare, and education. The Bangor housing market is not as competitive as the two cities previously mentioned, although homes still receive multiple offers, and 48.5% of them sell above the listing price. The median sale price continues to increase rapidly, reaching $224,500 in September 2022, 24.7% higher than the year before, and properties only stay on the market for a median number of 21.
Higher Mortgage Rates Could Slow Down the Price Growth in Maine
Mortgage rates are hovering around 7% as of November 2022, with more interest rate hikes likely in the work in the coming months. In consequence, prospective home buyers must now pay thousands of dollars more in interest than their predecessors, significantly affecting their buying power.
As of the time of writing, many cities across Maine are still seeing double-digit increases in home prices as the demand for housing continues to outpace the available inventory fast. Nevertheless, Maine home prices are increasing at a slower rate than they did the year prior. The demand is cooling down since some house hunters find themselves priced out of the market or are considering postponing their home-buying plans until mortgage rates become more affordable.
Key Market Stats for the Maine Housing Market
According to September 2022 data, some of the key market stats for the Nebraska housing market appear as follows:
· Median home price: $344,400 – a 7.4% Y.o.Y. increase.
· Home sales: 2,084 – 9.0% less than a year ago.
· Months supply of inventory: 1 – unchanged since September 2021.
· Mortgage rates as of November 10th,2022: 7.08%
Historic Price Changes and Affordability
Maine home prices have climbed to staggering heights since the COVID-19 outbreak, powered by an influx of out-of-state newcomers attracted by the excellent quality of life and affordable cost of living with interest rates near historic lows. The median home price has increased from $231,900 in September 2019 to $344,400 in September 2022, with a peak of $376,200 in June 2022, representing a 48.51% increase in 36 months.
However, Maine’s average income is not growing nearly as fast, especially since households must contend with the high inflation rates. Although Maine housing prices are still continuing their upward trajectory due to the imbalance between demand and available inventory, it is at a much more reasonable pace than in previous months.
- The Maine housing market is still going strong, with some local housing markets being extremely competitive with housing prices climbing in the double digits due to the influx of new residents from out-of-state.
- The current inventory is not nearly sufficient to fulfill the demand, keeping property prices high.
- Although Maine home prices are still increasing, it is at a slower rate than in the past two years as the higher interest rates are taking a toll on the demand and house hunters’ buying power.