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Condo Market News

Encouraging Signs Ahead

Article written by Jack Carr, P.E., R.S., LEED AP, Criterium Engineers
Published in Condo Media, April 2014

It's about this time of year the residential real estate industry in Maine is looking over its shoulder at the sales results of last year and projecting their hopes tor the new year. Everyone is smiling. The news is good. In 2013, overall sales increased in volume by 18 percent compared to 2012, while prices increased 16 percent. This year looks even better.
 
The Real Estate Forecast Conterence, sponsored by the Maine Real Estate & Development Association, was held in Portland in January where the leaders of the industry revealed a deluge of positive statistics and a 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.
 
Median prices for homes rose from $226,000 in 2012 to $242,000 in 2013. Price increase by towns such as Cumberland/North Yarmouth (60 percent); Scarborough (40 percent); Yarmouth (31 percent); Portland (27 percent); Cape Elizabeth (25 percent); and Falmouth (23 percent) represent some of the hottest real estate markets in Maine. While the market has been relatively flat since 2010, the new market is being driven by current home inventories as new single-family construction continues to stall. Interestingly enough, this is not true for condo sales where new construction is leading the market.
 
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. Condo sales are becoming more than a third of the market. Comparing the month of January 2013 with sales of only 14 units to 2014's January sales of 46 units in Portland provides a good look at a very real trend. Even better, the average unit price for these two periods has increased from $216,000 to $377,000 per unit.
 
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 30 days in the real estate market in Portland due to a favorable cap rate of 8 percent for quality properties. Even historically left-behind multi-family markets, such as Lewiston and Biddeford, are seeing its inventory shrinking and cap rates of 11 percent. Meanwhile, apartment rents are steadily rising to reflect the demand.
 
As condo units are being purchased as investments for future vacation use in areas such as Old Orchard Beach as well as future retirement homes in the city, these factors have placed condo unit owners who rent their units into the same property management issues facing apartment building landlords. One of the least understood of these issues is the matter of radon air testing.

Radon

Maine has passed a new law requiring mandatory radon air testing in apartments cficctive March 1,2014. The purpose ofthe law is to protect tenants from the long-term direct effect of the carcinogenic radon gas, which is the second largest cause of lung cancer in the United States. Normally, rules and protocols affecting apartment buildings and their occupants are not transferrable to condominium living, but for unit owners renting their condo units, radon testing may have added a new wrinkle.
 
For condo units being rented for more than100 days, the new radon rules may treat unit owners as landlords who are required to test for radon gas, if the unit is adjacent to the ground or over a basement or commercial space. The law also is applicable to rented condo units on the first level; 10 percent of all units on upper floors, or a minimum of one unit per floor.
 
For small unit quantities (less than 10), the landlord is allowed to perform the radon sampling and tests following strict Department of Health and Human Services' protocols. Landlords or unit owners cannot delegate this radon testing or potential mitigation to employees or property managers unless they are licensed by the state. If radon resting reveals radon gas levels of greater than 4.0 pCi/L, the tenant is allowed to break the lease unless a mitigation repair is performed.
 
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.

 
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