Maine home sales increased year over year last month, ending a more than two-year slump of declining sales.

It’s a positive sign that the low inventory that has held the housing market in a vice-grip may be easing, but February sales were still too low for comfort and real estate experts say Maine’s not in the clear just yet.

Just 789 houses changed hands last month, an 11.4% increase from the 708 in February 2023, according to data released Thursday by the Maine Association of Realtors.

Despite the change in sales trajectory, prices continued their steady rise, closing out last month at a median of $354,000, a 7.5% increase from the same month last year.

Paul McKee, president of the Maine Association of Realtors, celebrated the end of 31 months of year-over-year declines and said listing activity has started to increase – something that usually doesn’t happen until March or April when the busy spring market gets underway.

But the market is still far from balanced, with just a 3.2-month supply of housing, according to McKee, a Portland-based broker with Keller Williams. A balanced supply would be six months.

“Buyer demand remains steady and strong, outpacing supply in many local markets, which maintains pressure on pricing,” he said.

While McKee said the single-digit price increases of recent months are welcome after double-digit hikes earlier in the pandemic, appreciation is still boxing many would-be buyers out of the market. And it will only continue unless more housing is built.

“If we can’t develop (workforce) housing then we’re still going to have the housing supply problem, which will keep the appreciation problem growing,” he said.

A report by the state’s housing authority in October found that Maine needs 84,000 more houses in the next seven years to accommodate its existing population and the people expected to move here. The total number of homes in Maine – not just the number of new homes being built – needs to increase by about 11%.

Officials estimate Maine needs approximately 38,500 homes to remedy historic underproduction and will need an additional 37,900 to 45,800 homes to meet expected population growth and household change by 2030.

“(Real estate agents) are working with state and local governments across Maine advocating for increased housing supply through new development and adaptive reuse to bring a better balance to our housing markets,” McKee said.

Nationally, year-over-year sales dipped 2.7% in February, according to the National Association of Realtors, while the median sale price increased about 5.6% to $388,700.

Regionally, home sales in the Northeast dropped 7.7% and the median price increased 11.5% to $420,600.

McKee said interest rates may have played a role in February’s sales increases. 

During the height of the pandemic, interest rates plummeted to record lows – 2.65% in January 2021.

But then rates shot up and last year hit a nearly 25-year high of 7.8%. 

The rapid increase gave many prospective buyers and sellers pause. Buyers suddenly had less purchasing power and faced higher payments, while sellers were reluctant to give up their lower mortgage payments and faced paying a lot more for less space. 

The latter remains true, contributing to the inventory squeeze, but rates have settled. This week, the average 30-year mortgage rate was 6.9%, according to mortgage buyer Freddie Mac. Rates have hovered in the mid-to-high sixes for several months.

“People are finally settled in the (idea) that interest rates aren’t going to drastically change,” McKee said. “There was a lot of shock (initially) but a year later, this is what normal is.”

Buyers are feeling more confident. 

And some of the urgency in the market may be ebbing, too. Maine homes stayed on the market for 32 days on average, in February. The prior month, they lasted about 25 days. In June, they stayed on the market for less than a week. 

The Maine Association of Realtors also looks at three-month data in county-by-county comparisons to get a larger sample size of sale transactions. It’s unclear whether the additional day in February this year had an impact, but sales dropped by about 0.04% between Dec. 1 and Feb. 29, compared to Dec. 1 through Feb. 28 last year. Prices increased 8.3%.

Sales figures swung dramatically across the state. Knox County saw a 25.47% decrease in sales, while Lincoln County saw a 26.9% increase. Sale prices also varied, though not as dramatically. Prices were flat in Androscoggin County, with a median cost of $300,000 in both years, while Somerset and Franklin counties both experienced sharp increases of 22.2% and 23.5%, respectively.

Cumberland County continues to be the most expensive in the state, with a median price of $513,250 – an 11.8% increase from the three months last year.

“There’s no magic bullet for the housing situation,” McKee said. “The good news is, we finally had unit sales go up. There was single-digit appreciation. The rest of it we have to work on.”

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