The beginning of the end for Maine’s hot real estate market may have taken root not in Augusta or Portland but in Washington, D.C.
Last week, the Federal Reserve raised interest rates to the highest they have been in 40 years in an effort to fight inflation. Chair Jerome Powell said Wednesday that Americans should expect further hikes.
Referring to the situation so far during the pandemic as an “extreme sellers’ market,” Dava Davin, owner of Falmouth-based Portside Real Estate Group, one of the state’s biggest realty firms, said there are signs it is shifting due to the Fed’s move, high inflation, declines in the stock market and other factors.
“People’s buying power has changed, and it also is having them maybe pause a little bit,” Davin said. “That sense of urgency isn’t there.”
Here are the key themes in the market that Davin touched on during a chat with the Bangor Daily News.
A decline in offers
Davin said she sees homes continue to sell very quickly, but they are now going with fewer offers. While a home in Portland would have 20 offers a couple of months ago, she recently saw one that received just two. It still sold for $60,000 over its asking price.
“We’re seeing the signs of this slow shift,” she said.
Homes are still going fast. A single-family unit on Washington Avenue in Portland that sold for $510,000 this week was listed on Monday and sold by Tuesday to a physician’s assistant at Maine Medical Center. Redfin recorded 107 sales of single-family homes from Monday to Thursday in Maine as of Thursday afternoon. The median price was $345,000.
The most expensive was a $2.52 million four-bedroom home on Sprucehead Island in Thomaston sold 25 days after listing. The cheapest: a three-bedroom in Guilford for $50,000 after being on the market for more than 250 days.
What goes up must come down. Like other markets, the real estate market has a natural progression to some extent. Many in Maine have already bought homes they were looking to purchase, Davin noted. Others seem to be stepping back.
“We just have less buyers,” Davin said. “But still enough to have a strong market.”
Why Maine is so desirable
There are many well-documented factors on why Maine has become so desirable, such as the shift to remote work since the beginning of the COVID-19 pandemic as well as the increased popularity of rural living since that time.
Asked why Americans who could choose to live in any rural state in the country would pick Maine, Davin noted that many are looking for proximity to the water. There is ample access to that in Maine either on the ocean or lakes.
The Portland metro area has also started to receive nationwide recognition, she noted. Saying that she was from there used to hardly get a response at real estate conferences. People now tell her they are planning a trip.
“Portland is cool, and everyone knows it,” Davin said.
She has also spoken to people who wanted to come to Maine to escape the harsh effects of climate change in other states, including California, where some schools have had to cancel after-school sports due to bad air quality.
“If you’re in it every day, and you have the option to move, it becomes part of that consideration,” Davin said.
Davin stressed that the market remains strong, with high demand and high prices despite recent declines on the latter. Some drops are coming quickly, including just one week after a listing is posted.
“It’s a signal that there’s a ceiling to what people will pay,” Davin said. “They are becoming more price-sensitive.”
The demand seen in Maine’s real estate market is being compounded by the strong level of out-of-state interest in Maine homes. That number had gone from 26 percent of buyers in 2020 to 33 percent in 2022, according to data collected by Portside on homes it sold. That number was 37 percent in 2021.
Davin said Portside had twice sold a home in Brunswick in February for $605,000 and then in May for $680,000 to out-of-state buyers. Both times, the buyers did not move in. It is currently on the market for $680,000. That is an extreme case, but she expects some of the out-of-state buyers will not stay in Maine long-term.
“We’ll get to keep the great ones that believe in our state and want to stay,” Davin said.