April 14, 2020 at 6:11 am
by: Dava Davin, Principal, Portside Real Estate Group
When I presented at the 2020 MEREDA Real Estate Forecast Conference in January, I was full of good news and positivity in the residential market. I shared that 2019 represented the eighth straight year of rising home prices in Maine resulting in a record-breaking year with the median price for a single-family home topping out at $225,000. In 2019 prices rose 5.4% in Southern Maine. The highest home prices in Maine’s history!
I predicted that prices would continue to rise in 2020 at a rate of 3%-5%. I also forecasted that this spring we would see buyers battling for homes and houses selling for over the list price as a result of multiple offers. The low inventory would make home buying for first time home buyers and folks looking in the median home price range (around $300,000 and below in Southern Maine) very competitive. I spoke about the election having little effect on Maine’s real estate market. I thought we might see more price reductions this year as sellers attempt to test the market, and that overall, 2020 was poised to be another great year for sellers as well as buyers with low mortgage rates giving buyers more buying power!
And then…the world was flipped upside down in what felt like an instant as Covid-19 crept into every aspect of our lives. The Southern Maine real estate market has been, and will continue to be, adversely affected for the near future. My forecast has changed but this time I don’t have data and trends to back up the shift caused by something of this nature and magnitude.
Here is my take…
As of today, April 8th, for the most part we are seeing a real estate “pause’’. We will experience a temporary slowdown as people practice social distancing protocol and wait to see if their job situation changes over the next few weeks. This will most likely create pent up demand for when the crisis ends. People may wait now, but the need won’t go away. People will take action when things return to normal. What will help Maine’s real estate market is the trend of stock market volatility leading people to invest in real estate as they diversify their portfolios. We will also see new reasons for Mainers to list their homes and search for new ones as feelings toward their home may change (weeks of sheltering in place) and desires for home offices, home gyms, and more or less space. We are also expecting to see in-migration to Maine from more densely populated areas.
Sadly, we will also see temporary and permanent job loss or job shifts causing Mainers to list their homes. Maine has seen a tremendous amount of job losses very quickly and it could get worse, but once the crisis is over many jobs will be restored. Nationally, economists are projecting the unemployment rate to be 15% in the third quarter of 2020, flattening to single digits by the fourth quarter of this year, and then just over 6% percent by the fourth quarter of 2021. A quicker turnaround than we have seen with other financial crises. This should benefit the housing market rebound. We have had more buyers than sellers in Maine for several years, so this shift may create a balance in the market that has been overdue.
For cities like New York, new real estate transactions have come to a screeching halt. In southern Maine, real estate professionals are placing all of their virtual strategies into extra high gear, in order to prevent that from happening. Real estate is deemed an essential business in Maine with most aspects able to be done virtually – negotiating, signing of contracts, video tours, etc. The showings, closings and inspections are being done with strict guidelines for safety. We have seen a significant slowdown but new properties are still hitting the market and some are still selling quickly and in multiple offers.
We are entering what is typically the busiest season for real estate, that usually lasts through the end of the summer. I am confident that the busy season will extend through the fall, and possibly through the winter.
Momentum is building: once the stay at home mandate is lifted and our world begins to shift back into normalcy, the demand will be strong. We are bracing for a tough Q2, with an improving Q3, and ending the year with a strong Q4.