Maine real estate listings are expensive and scarce, with mortgage rate hikes underway

Maine’s housing market has been tough for moderate-income buyers since the pandemic began, and with limited inventory and rising interest rates on the horizon, the situation will only get worse.

Home prices continued to rise in the first month of the year, while the number of available homes continued to fall, after a multi-month trend of high demand and low inventory that makes the task of more tougher for middle-class homebuyers in Maine.

To make matters worse, real estate experts say an expected rise in mortgage rates will further squeeze an already tight market as the Federal Reserve tries to rein in rising inflation.

The number of homes sold in Maine in January fell from 1,256 in 2021 to 1,166 last month, a decline of 7.2%, while the median sale price fell from $255,300 in January 2021 to $292,250 last month, an increase of 14.5%. The median indicates that half of the houses sold for less than this amount and the other half sold for more.

In the three months ending Jan. 31, Maine home sales fell nearly 10% from a year earlier, and the median price rose nearly 12% to 300 $000.

Despite the overall decline, January sales remained 10% higher than before the coronavirus pandemic in January 2020, according to the Maine Association of Realtors.

Madeleine Hill, president of the association and broker at Roxanne York Real Estate on Bailey Island, said in a statement that markets remain strong across the state, but the low availability of inventory for sale remains an issue.

Nationally, home sales fell just over 2% in January from the same month a year ago, and prices rose more than 15% to a median sale price. of $350,300, the National Association of Realtors said.

Regionally, sales in the Northeast fell about 8% in January from a year earlier, and the median selling price rose 6% to $382,800.


Housing is not going to become more affordable anytime soon.

Mortgage rates have fallen to historic lows during the pandemic, making sky-high home prices a bit more palatable for some buyers, but real estate professionals say that’s starting to change.

The average interest rate on a 30-year fixed mortgage hit a more than two-year high of 3.92% this week, rising more than 25% just since Christmas, according to Freddie Mac. Further increases are expected as the Federal Reserve raises its benchmark rate in an effort to curb inflation, which is at its highest level in 40 years.

Investors expect borrowing costs to rise by at least 1.5 percentage points by the end of the year, Politico reported this week – the equivalent of six quarter-point rate hikes . The last time rates rose this much in a single year was in 2005, just before the peak of the housing boom and bust cycle in the mid to late 2000s.

The expected rise in mortgage rates will further limit housing stock, especially for entry-level properties. Homeowners, reluctant to give up an old, lower-cost mortgage for a higher mortgage in a new location, are more likely to stay put.

And even if they wanted to move, where would they go?

Without options, they likely won’t start packing, said Cricket Grobe, real estate agent at Re/MAX Shoreline in Portland.

“Is this the right time to sell? Yes,” she said. “But sellers are still a little hesitant to put the ‘for sale’ sign up front.”

On the other hand, higher mortgage rates aren’t likely to cool Maine’s hot housing markets anytime soon.

According to Chris Bedard, loan officer at Norcom Mortgage in Saco, demand from second home buyers and investors has never been better.

“Supply and demand just mask the problem of rising rates,” he said.

And they will go up. How much remains to be seen, but Bedard said he wouldn’t be surprised to see rates jump to 5% this year.

In theory, when inflation is high, the cost of borrowing has to go up to slow things down, he said, and in a normal market that would work.

“But the supply and demand right now is just ridiculous,” he said. “It’s a new market.


Homes will continue to sell like hot cakes, but the demographics of the people buying them are what are likely to change.

Median-income borrowers, who might have been willing to stretch their budgets when rates were low, might start to back off and wait for prices to drop, he said.

“It’s not a dark, doomsday scenario with how it’s going to affect sales,” Bedard said. “It’s just going to affect affordability.”

Leanne Nichols, broker at Keller Williams Realty in Portland, agreed that higher rates are unlikely to affect the current market much.

This will primarily impact people who are already struggling to afford a home in the new real estate market – people whom Nichols described as “payment sensitive”.

As interest rates rise, what people can afford will shrink, said Leo Bourgeault, realtor at Coldwell Banker in Saco.

“Instead of a $400,000 house, they’re going to have to buy a $300,000 house, which you won’t find,” he said.

Overall, real estate agents in southern Maine highlighted the need for more housing.

New units are on the way, but inflation has made construction more expensive, staff shortages and high demand are wearing down builders, and it’s unclear when and where relief might come.

“I’m worried,” Nichols said. “Affordability is a huge factor. Are we going to see homeownership rates go down? People just can’t find a home.

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