Maine’s real estate market is looking forward to 2017 with rising job hiring; the stock market hitting new highs; and a great past year in real estate sales. Everyone is smiling. The news is good. In 2016 overall state home sales increased in volume by 10% compared to 2015, which was also a strong year.
The Real Estate Forecast Conference sponsored by the Maine Real Estate & Development Association (MEREDA) was held in Portland in January where the leaders of the industry revealed a deluge of positive statistics and a very bright forecast of things to come. As with population and average income levels, real estate in the greater Portland area and Cumberland County set the tone for the rest of the state. Cumberland County showed the largest number of sales with the highest real estate medium sale price.
Median prices for Cumberland County homes rose from $245,000 in 2015 to $260,000 in 2016. Typical average sale price per town varied: Cape Elizabeth ($430,000); Cumberland ($359,000); Portland ($264,000); and Yarmouth ($375,000). While the market has been relatively flat since 2010, the new market is being driven by current scarce home inventories as new single family construction continues to stall. Interesting enough, this is not true for condo sales where new construction is leading the market.
Many factors are creating this condo market environment. With the economy improving, the inventory of apartments in the cities is shrinking. Multi-family buildings spend less than 21 days in the real estate market in Portland due to a favorable cap rate of 8% for quality properties. Even historically left-behind multi-family markets such as Lewiston and Biddeford are seeing its multi-family inventory shrinking and cap rates of 10%.
Meanwhile, apartment rents are steadily rising to reflect the demand making condo ownership a reasonable alternative. This has resulted in Munjoy Hill and Bayside neighborhoods seeing luxury condos buildings springing up everywhere. Old mill building complex’s in both Biddeford and Lewiston are being converted into condominiums.
Condo sales are becoming more than 35% of the market with sales of 345 units in Portland alone with pricing as follows:
27% < $200,000
30% < $300,000
20% < $400,000
10% < $500,000
13% > $500,000
The problem with the market is the age group needing new housing and making up 36% of the buyers are the Millennials/ Gen Y’s (medium age 30) and they are strapped with college debt and have the least ability to raise the down payment funds. The next largest buyers group (26%) are the GenXers (medium age 42) are planning to upgrade to a larger home as they are in their peak earning years.
Boomers have become empty nesters who do not want to deal with the four-bedroom suburban house. They are migrating to the new high-end condominiums in the urban areas such as Portland to enjoy the fine restaurants and cultural attractions the city has to offer. Changing demographics in the urban areas see condos being purchased for vacation homes; investments; and a search for a new living style.
The Boomer market falls in two categories. The younger Boomers (medium age 56) making up 16% of the market are seeking homes to house multi-generations while the older Boomers (medium age 65) making up 15% of the market are downsizing and planning for longer distant moves for their retirement plans.
Perhaps the Silent Generation (medium age 74) making up 9% of the market are selecting interesting choices. While 30% are pursuing senior related housing the vast majority are buying new, smaller homes with many amenities such as air conditioning and high end finishes. This generation is less likely to compromise on their needs.
As with any market, the current condo market in Maine has its pluses and minuses. While the prices for new condos are increasing, the amenities and quality of the new condo developments are improving, proving the old adage, you get what you pay for.
Published in Condo Media, April, 2017