On May 25, Leanne Nichols, a Broker with Keller Williams Realty, was a commentator for the Maine Real Estate & Development Association’s (MEREDA’s) 2023 MEREDA Index. Leanne’s comments on the Residential Sector follow Economist Charles Colgan’s analysis for 2022.
The MEREDA Index is a measure of real estate activity designed to track changes in Maine’s real estate markets. The Index is a composite of nine seasonally adjusted measures reflecting both new development and transactions involving existing properties and it covers both the commercial and residential markets statewide. The most recent edition covers the year 2022 and provides commentary on the Commercial, Residential, and Construction sectors. The MEREDA Index for 2023 is 115.8
THE RESIDENTIAL COMPONENT: 112.8
[Charles Colgan Analysis] “The weakest part of the MEREDA Index was the residential sector. Three of the four components of the Index showed declines on a year over year basis and on a 4th Quarter over 4th Quarter basis. The only component that continued to increase was the median sales price, whose index value grew 18% on an annual basis. At 174.3, the median price index reached its highest annual value. The highest quarterly value was 186.7 in 2022Q2 but the growth in the index value halted in the second half of 2022 falling to 170.0. The largest drop in residential Index components was in permits; the index value fell by more than 32% on an annual basis. This fall in the number of permits reflects higher interest rates. Both mortgage originations and the number of existing units sold declined, with their index values falling 18.3% and 17.1% respectively (year over year).”
[Leanne Nichols, Broker, Keller Williams Realty] “In 2022, the residential real estate market in Maine saw home prices soar to staggering new heights, further deepening the crisis many Mainers face to access affordable housing. The year started with an average mortgage interest rate of approximately 3%. As it became evident that inflation was not transitory, this interest rate more than doubled to a peak of over 7%, which affected affordability and forced many hopeful homebuyers out of the market. However, the low inventory and strong in-migration kept Maine’s market very strong for sellers throughout 2022. For example, I worked with buyer clients who finally closed on a South Portland home in September after four multiple offer situations. The home was listed for $680,000 and closed for $830,000.
This robust statewide sellers’ market resulted in a striking median sales price of $335,000 in 2022, an increase of 12.04% from the previous year’s median sales price of $299,000. Meanwhile, unit sales decreased by 17.49%, further impacting the acceleration in home prices. All 16 counties in Maine witnessed an increase in the median sales price and a decrease in the number of home sales compared to 2021, with 2022 home sales dipping below 17,000 units, for the first time since 2015.
The pandemic has played a significant role in these changes, including the impact of in-migration and work from-home trends. I worked with a couple that fled California who purchased new construction in Pownal. They work remotely and will be relocating their life here. A recent MoveBuddha report from November 2022 identified Portland as the #2 city to move to, and Maine as the #3 state for in-migration. This can also be seen in a statistical search from Maine Listings, which shows that pre-pandemic an average of 27.4% of out-of-state zip codes purchased Maine real estate. In 2021, it reached 35.4%, and remained steady at 34.4% in 2022.
Some of the trends in Maine’s residential market that accelerated during the pandemic could shift after a couple of exciting winters, or it could be that Maine has been discovered. If the latter is the case, Maine not only has an opportunity but an imperative to rethink its most recent sprawl-centric local zoning ordinances. We need to accommodate the influx of new Mainers while also taking care of the hard-working Mainers already here. Maine can embrace a new vision for itself – update aging housing stock and upgrade existing infrastructure – to build a future that all who choose to call Maine home can enjoy.”