The Portland Press Herald / The Maine Sunday Telegram

March 3

Housing market may have hit bottom

By Tux Turkel tturkel@mainetoday.com
Staff Writer

PORTLAND — Rising sales volumes and slowly stabilizing prices suggest Maine's home market has hit bottom in the current cycle, a leading broker said Thursday at the Maine Real Estate and Development Association's annual forecast conference.

Continued high unemployment, greater than expected foreclosure activity and a premature pullback of government tax incentives could threaten the outlook, noted Christopher Lynch, president and owner of Legacy Properties in Portland, but the market seems poised to slowly improve in 2010.

''The worst is behind us,'' he said.

Lynch's comments echoed a familiar theme at the conference: Maine hasn't been hit as hard as some states by the real estate bust, but the recovery here will be gradual, uneven and subject to outside forces including mortgage interest rates and tighter credit.

The conference, the state's signature meeting of real estate professionals, was attended by more than 500 people. It took place in a business environment improved from this time last year but during a national recovery that remains tentative.

Those conditions were reflected in other forecasts.

The retail market in Greater Portland has a decade-high vacancy rate of nearly 11 percent, according to Mark Malone of Malone Commercial Brokers. Overall, lease rates have plunged from a peak of $19 a square foot in 2006 to roughly $13.50 last year, he said. For the first time this decade, there was less occupied retail at the end of the year than at the beginning -- a negative net absorption rate of 139,000 square feet.

Most of the activity last year was smaller projects for a single tenant, such as Walgreens, not strip malls by national developers.

''The multi-tenant centers really went away,'' Malone said.

Looking ahead, Malone said he foresees the smaller, back-to- basics trend continuing, along with vacant space being taken over by other retailers or converted to non-retail use. There will be very little new construction, and rents will stabilize at quality properties, he said.

A big question mark, Malone said, is whether the large number of commercial mortgage-backed securities coming due in the next few years will be restructured by patient lenders or unloaded through distress sales. Bargain sales could benefit local investors who were largely eclipsed by national outfits during the boom.

On the home front, Lynch noted a piece of better-than-expected news contained in December real estate statistics. The median sales price for single family homes for the month was up more than a percent over 2008, which, he said, helps make the case for stable prices.

The crystal ball for residential real estate has been hazy at the past two MEREDA conferences. In 2008, the forecast was for prices to bottom out by year's end. That didn't happen.

Last year's forecast called for prices to fall another 5 percent to 10 percent before stabilizing. That forecast may be closer to the mark. The latest data from the Maine Real Estate Information System shows the statewide median price fell nearly 9 percent in 2009, to $164,000. That puts today's median price on par with 2004 prices.

Whether December data truly indicate a turnaround in prices will be determined in the months ahead.

Maine has a high percentage of first-time home buyers -- 54 percent -- who benefited last year from the government tax rebates, Lynch noted. The extension of the first-time homebuyer program and a new rebate for repeat buyers should help stimulate sales until mid-year, he said.

In some states, the industry is worried about new foreclosure sales from people who owe more than their homes are worth. But the single-family market in Maine hasn't seen a material impact from foreclosures, Lynch said, and he doesn't expect that to happen this year.

''There doesn't seem to be enough of them out there to drag down prices,'' he said.

In the multi-family market, prices continued to fall last year, especially outside Portland, according to Brit Vitalius, a principle at Sullivan Multi Family Realty in Portland. Foreclosures and distressed sales were common. Short sales and bank-owned deals accounted for up to 30 percent of the action in Portland, he said. There are signs that the rental market is hitting bottom, he said, although distressed sales are likely to continue at a similar pace in 2010. Properties with fewer than four units will benefit early this year from government tax incentives, then stall, Vitalius said.

Portland's office market had a tough year in 2009, with the overall vacancy rate edging up a fraction to 9.15 percent. But the worst is over, according to Drew Sigfridson, a broker at CB Richard Ellis/The Boulos Co. in Portland. Vacancies will start to fill slowly as existing firms rehire. Sales of properties in which owners have too much debt will present opportunities for savvy investors, he added.

 

Staff Writer Tux Turkel can be contacted at 791-6462 or at:

tturkel@pressherald.com