Maine home sales increased again in March and prices neared historic highs

Maine home sales increased for the second consecutive month in March even as the median sales price neared a historic high, dampening hopes that a loosening of the inventory squeeze would put downward pressure on prices.

March saw the early arrival of the busy spring real estate market with more homes hitting the market and continued strong buyer demand, but professionals worry that as the season heats up, prices could become untenable.

Just 888 houses changed hands last month, a 3.5% increase from the 858 sold in March 2023, according to data released Thursday by the Maine Association of Realtors.

Despite another month of increased sales, prices continued their steady rise, closing out last month at a median of $380,000, a 12.6% increase from the $337,500 median in March 2023.

Paul McKee, president of the Maine Association of Realtors, celebrated the second month of sales increases after a 31-month run of decreasing sales, but he’s not ready to call it a trend yet.

“I want to wait 30 more days before I say that,” he said.

An early spring and summer market is good news for sellers – McKee said appropriately priced homes are selling fast and often receive multiple offers – but it’s a bad sign for prospective buyers.

Monthly home sale prices usually peak in the summer.

Last July, the median price hit $385,000, the highest on record.

If prices see a similar March-to-July spike this year, it could put home ownership even farther out of reach for many Mainers.

“That’s scary,” McKee said.

For a time, it appeared that prices, while not dropping, might be slowing down. But March brought back double-digit appreciation, and McKee said he’s not optimistic that the trend will reverse any time soon.

“We know we cannot stay on that trend, that is not sustainable,” he said, “(but) I don’t see price stagnation or depreciation for a long time.”

McKee blames the continued price increases on the inventory squeeze that has been brewing for well over a decade. And it’s not just in Maine.

Last year marked the lowest volume of home sales in the country since 1995, according to the National Association of Realtors.

“We have 100 million more people living in the country and we haven’t increased our sales,” McKee said.

The problem is being felt acutely in Maine. 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.

While there’s been a concerted effort in the state Legislature to boost housing stock, it isn’t enough to reverse the damage of historic underproduction.

“We need to develop workforce housing/affordable housing and there isn’t enough of that going on throughout the state to make things right or whole,” McKee said, adding that overregulation and public resistance is hampering development. Even without those roadblocks, ongoing worker shortages in the trades also hinder building efforts.

“It’s a vicious cycle we’re in right now,” he said.

Nationally, year-over-year sales dipped 2.8% in March, according to the National Association of Realtors, while the median sale price increased about 4.7% to $397,200.

Regionally, home sales in the Northeast dropped 3.8% and the median price increased 9.9% to $434,600.

Lawrence Yun, chief economist for the national association, said in a statement that there are nearly six million more jobs now than there were before the pandemic, which suggests more home buyers are in the market. But they aren’t buying homes.

“Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any more moves,” he said.

MORTGAGE RATES REMAIN HIGH

Mortgage rates have hovered between 6.5% and 7% for several months and on Thursday hit 7.1%, according to mortgage buyer Freddie Mac. It was the first time this year that the mortgage rate surpassed 7%.

“As rates trend higher, potential homebuyers are deciding whether to buy before rates rise even more or hold off in hopes of decreases later in the year,” Freddie Mac said in a statement. “It remains unclear how many homebuyers can withstand increasing rates in the future.”

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.

Sales increased by about 4% between Jan. 1 and March 31, compared to the same period last year, while prices increased 10.6%.

Sales figures swung dramatically across the state. Waldo County saw a 33.8% decrease in sales, while Androscoggin County saw an almost 40% increase.

Sales prices also varied, though they were up across the board. Oxford County saw the most modest price increase, up 1.7% from $299,950 between Jan. 1 through March 31 last year to $305,000 this year. Piscataquis saw the sharpest increase – a 43.6% hike from $165,000 and $237,000.

Cumberland County continues to be the most expensive in the state, with a median price of $533,500 – a 13.5% increase from the three months last year.