Despite the low inventory, now is a good time to buy a home, but buyers need to be well prepared and understand it won’t be easy, experts say.
“If the time is right for you, there’s really positive things happening. It’s an absolutely wonderful time to buy a house with historically low interest rates,” said Jackie Boies of Money Management International, a nonprofit consumer credit counseling organization.
Even with rising prices, “interest rates are fabulous,” often below 3 percent.
“It’s very tempting to buy,” she said. “Low interest gets you a lower monthly payment and lower debt. These rates are unheard of,” said Boies, MMI’s senior director of Housing and Bankruptcy Services.
But there are other things to consider, including the buyer’s financial situation, the lack of houses and rising prices. To buy in this market, a potential homeowner needs to have done their homework, such as lining up financing before looking at houses.
Low interest rates and the pandemic have created a seller’s market with houses fetching above asking price, Boies said. Out-of-state buyers in dense communities “want to get out and have a little space.”
Hello Maine.
Demand in the Portland area has been building for years, “but with the pandemic it’s statewide,” said Aaron Bolster, president of the Maine Association of Realtors.
“If you’re moving from out of state do you care where you move as long as you have an internet connection?” said Bolster, owner of Allied Reality who has 21 years of experience. The value of Maine homes continues to rise. “I’ve never seen anything like it,” Bolster said.
Statistics released Aug. 23 showed that the median sale price of a Maine home hit $315,000, up from $254,900 a year ago, a 23.58 percent jump.
Cumberland County is the most expensive. Cumberland’s median sales price is now a whopping $450,000, up from $362,000 one year ago.
Historically, Maine home sales have been 75 percent Maine residents and 25 percent out of state and international, Bolster said. The pandemic increased the number of out-of-state and international buyers to 35 percent, he said. “The number keeps getting larger from non-residents.”
Housing inventory remains tight, making it hard for first-time buyers. This is a listing on Vera Street in Portland. (Photo by Derek Davis/Staff Photographer)
That demand has made it tough for Mainers with modest incomes to buy their first home, said Daniel Brennan, director of Maine State Housing. They’re “really getting pinched,” Brennan said. Some who’ve unsuccessfully made offer after offer are “taking a break.” Bolster said. “They’re saying ‘we can’t go through that roller coaster anymore.’ ”
When asked if potential home buyers should wait for prices to go down, experts questioned whether that will happen, adding it’s impossible to accurately predict.
Inventory is slightly improving, Bolster said, but there’s no sign of prices retreating or leveling off.
“This is the third straight month the number of homes available is increasing,” Bolster said. “But the appreciation continues to climb.”
“We don’t know if it will calm,” Brennan said. “Where it goes from here is anybody’s guess. My hope is the market will begin to normalize.”
Proper caution and preparation key
Whether to buy now “is so individual,” Brennan said. “Every situation is different,” Brennan said. “Buying a home is one of the most important purchases you’ll make in your life. Proper caution is important” regardless of the market.
Maine State Housing offers home buyer courses, as does Coastal Enterprises Inc.
At some point there has to be a cap on rising home prices, “but it feels like prices may continue to go up,” said MMI’s Boies. Interest rates, even if they rise slightly, are likely to stay low which will continue to attract buyers, she said. As the country moves toward recovery from the pandemic Boies expects more housing construction “and more opportunity to buy.”
The right time to buy, she said, involves more than the price and interest rates.
Becoming a homeowner may sound good, “but if you’re accustomed to living in an apartment, maybe you don’t want to mow the grass every weekend or do other home maintenance. There’s a commitment to being a homeowner. You have to be ready.”
A buyer needs a stable income, a good credit score (a score in the 700s means better loan rates) savings for a downpayment of between 10 to 20 percent, and expenses, Boies said. If any of the three are missing, it may not be the right time, she said. More time might allow someone to improve their credit score and build savings.
“After buying a house there will be additional expenses, new furniture, a lawn mower, fixing the deck,” Boise said. Those purchases should not be made by running up credit card debt. “Ultimately you should never rush to buy a home on any one factor.”
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