Maine should record solid job growth and the unemployment rate will remain low in 2016, a bank economist told the Maine Real Estate & Development Association’s annual meeting in Portland Thursday.

Both of those trends coupled with low interest rates should buoy real estate sales, said James Marple, an economist with TD Bank Group. The state could add 5,000 jobs this year, he said, adding that job growth probably will slow in 2017.

Overall, Marple said he is “cautiously optimistic” that the Maine and U.S. economies will perform well this year, although he noted that forecasting has been more difficult because recent skids in the stock and oil markets have upended business and government finances.

Marple said the strong value of the dollar will hurt parts of the U.S. economy that depend on exports because it makes U.S. goods more expensive for foreign buyers. Maine, he said, is not as heavily dependent on exports as some other states, but what it does export goes to Canada, where the value of the Canadian dollar has plummeted compared to the U.S. dollar.

That will probably make Canadian businesses and consumers reluctant to buy Maine and American goods, he said. It also could have a big impact on the summer tourism season because Canadian vacationers may choose to stay closer to home instead of traveling to Maine, where lodging and meals will be costlier because of the exchange rate. On Thursday, one Canadian dollar was worth 70 cents U.S.

But Marple said the plunge in oil prices will be a net plus for Mainers, unlike states like Texas and those in the Plains, where the falling value of oil will harm local economies. He also believes that oil prices have probably bottomed out and will rise later this year, albeit slowly.

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On interest rates, Marple expects the Federal Reserve to continue to hike rates, slowly increasing them through the year, though he said longer-term rates are unlikely to increase much. That means mortgage rates – which are typically tied to the interest rates on 10-year Treasury bonds – are unlikely to go up. With housing prices expected to increase, but at a slower rate than in recent years, that spells good news for the Maine real estate market, Marple said.

On Thursday, the Maine Real Estate & Development Association also released its index, which tracks the health of the commercial and residential real estate markets, along with the construction industry.

For the third quarter of 2015, which ended Sept. 30, the index was at 100. That’s a decline from the 120 recorded in 2014, but still up over the past three years.

The index was established by Muskie School economist Charlie Colgan, who used figures from 2006 to establish a baseline of 100. It includes measures such as home and commercial sales, real estate prices and construction employment to gauge the health of the real estate market in the state.

Of the major components of the index, commercial real estate finished last summer relatively strong, construction activity was flat, and the residential real estate market rose 9 percent over the end of 2014.

“Commercial real estate activity continues to be a strong driver for the positive index trends, but, for the first time (since the recession), residential activity was a big contributor as well,” said Michael O’Reilly, president of the Maine Real Estate & Development Association and a banker with Bangor Savings Bank. “Given the relatively small scale of the Maine real estate market, larger commercial transactions are still having a big effect on the index.”

Sales and lease rates for commercial space were both up through the third quarter last year, O’Reilly said, and residential sales of existing properties were up 14 percent, passing the base year of 2006 for the first time. Median prices, mortgage originations and residential building permits lagged other measures, but also were heading up, he said.

 


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