In 2014, the Maine housing market improved on a year-to-year basis. Click here to read a past forecast for the Maine housing market for comparison. Home sales in the Portland area rose by 4.2 percent compared to 2013. The 551 single family housing units purchased in 2014 comes close to the 2005 record of 570 and also marks the city’s third consecutive year of increasing sales numbers. However, this performance is still lower that the 21.3 percent improvement in home sales that Portland recorded in 2013. On the upside, this slowdown in Portland sales rates brings the city’s average to a level below state averages, as well as below the numbers clocked in several other communities across the state. Median sales prices in Portland increased by a subtle 2.1 percent and the average price now stands at $238,000. This marks the fourth year in row with selling price improvements on the Portland single family home market. At the same time, the 2014 median selling price in Portland sits above the state average, which stagnated last year. Although the city’s evolution is not entirely reflective of activity throughout the state, it is relevant, since Portland remains by far the largest real estate market in the state. And it also provides some clues as to how the market will evolve statewide this year.
One of the leading events in forecasting the 2015 evolution of the Maine housing market took place in late January. At the yearly Maine Real Estate & Development Association conference (MEREDA), the outlook was largely positive, if dotted with some less stellar signs for some market segments. According to keynote speakers at the event and as outlined above, the Maine housing market evolved for the better in 2014 and the forecast remains optimistic for the current year as well.
The industrial property and hotel segments have especially low inventory numbers, as does the multi-family housing sector. Though the former two sectors are not the focus of the present article, it’s worth mentioning that the Bangor area has seen some important job losses since December 2013 onward. This directly impacts the commercial activity of the Bangor Mall, as well as the economy of the state as a whole. Most of those jobs were lost at the local mills and they affected residents in 136 local communities. Unfortunately, the job market has not regained all of those jobs. Most of them were manned by male workers aged 50 an over, with no more than a high school diploma. However, with average yearly income packages of $80,000 (comparable to a statewide wage level of $50,000), the loss was important. Consequently, the residential market in the area has seen a downfall. Though its exact impact is difficult to gauge, we should mention that certain homes in the area list for $2,500, according to commercial real estate broker Bev Uhlenhake.
In terms of the state’s economic outlook, the senior economist at TD Bank, Michael Dolega, says things are looking up. The global picture looks positive: 2015 is pegged as the first year when the growth of the United States’ economy will outpace the global economy. Of course, this should impact the housing market nationwide and also reflect back on the development of the Maine housing market. Here are additional factors we collected at the national and state level. These factors will likely influence the market’s evolution:
- Long-term mortgage premium rates will most probably maintain their current low levels. That’s because although the global economy is poised for growth, it’s still developing at a slow speed. At the end of the day, the dollar will come out as one of the world’s strongest currencies, which makes the housing market environment all the more likely to yield positive outcomes.
- Job growth has been an issue in Maine for several years now and in 2015 it will still unfurl at half the average pace at U.S. level. However, there’s a silver lining to this news: the state has recently added no fewer than 7,000 new jobs. In turn, economists predict that this year will be the strongest Maine has seen since 2000 in terms of employment development. Obviously, Portland remains the strongest economic hub with a 1.6 percent rate of job growth; Lewiston sits at the opposite end of the spectrum, with a .2 percent slowdown in new jobs.
- Unemployment should not provide cause for concern. Although it tipped upward by a small margin over the past few months, we expect jobless rates to improve ever so slightly in 2015. Portland tops this chart too, with a 4.7 percent unemployment rate and what has been described as a ‘tight’ labor market. The ‘softest’ markets are in Lewiston (5.4 percent unemployment) and Bangor (5.6 percent).
- Local businesses in Maine may see some fallout following an unexpected January cut in key overnight loan rates from the Bank of Canada. The lender shaved .25 percent off this rate, bringing it down to .75 percent. Since some 50 percent of all Maine imports are traditionally pitched for Canada, it’s likely that exporting companies will have to deal with some negative after effects of this decision.
- The manufacturing industry in Maine, which has remained robust in the aftermath of the recession, will continue to strengthen in 2015. Industry payrolls, especially in wood manufacturing and shipbuilding are likely to increase at a significant pace.
As far as predictions for the new year go, MEREDA has some good odds riding on the hospitality and residential sectors in Maine. Both segments witnessed sharp growth in Q3 of 2014 in central Portland. Several relators confirmed assumptions based on MEREDA index figures for that span of time, with one asserting that housing demand in Portland is going strong. Both the rental and the buying market did well late last year, with the rental sector appearing stronger. Demand for new high-quality apartments for rent has reached unprecedented peaks over the past year’s third quarter. There is a similar situation unfurling in terms of new building activities: the new residential construction sector only picked up steam in late 2014; however, the fall of the same year saw an unexpectedly high number of potential buyers expressing interest in projects that would start building in the spring of 2015.
Based on its performance last year, the residential sector in Southern Maine is poised to fare well in 2015 as well. Sales numbers for multi-family homes improved by 17 percent in Portland and by 26 percent in Saco/Biddeford. There were slight slowdowns in South Portland, Westbrook, and Lewiston/Auburn, according to the president of the Southern Maine Landlord Association. The multi-family housing segment saw even bigger increases last year: up 27 percent in South Portland, 26 percent in Portland, and 5 percent in Saco/Biddeford. It went down by a relatively significant (yet low) 11 percent in Lewiston/Auburn and by 3 percent in Westbrook. Median sales prices were flat in Saco/Biddeford and Lewiston/Auburn, but up in South Portland (by 19 percent), Westbrook (18 percent), and Portland (5 percent).
Massive capital infusions brought on by out-of-state investors caused these important increases in Portland’s multi-family housing unit sales. The Portland peninsula high-priced end of the market is expanding for the first time in several years. In turn, this expansion brought home prices up throughout the area. Among others, a multi-family housing unit recently sold in the Portland peninsula for $4.2 million! The area also witnessed growth across the board for smaller multi-family sectors: two-unit and three-unit properties witnessed a growth in sales for the first time in three years. Average selling prices for three-family and four-family units also grew. What’s more, Portland also saw its high-end rental market segment develop, which is bringing in new investments. It prompted several renters to consider purchasing a home.
Buyer demand is expected to increase in 2015 as well, especially for properties for two to four families. In tow, the prices for such houses will likely see some slight upward adjustment. Portland will probably continue to see high sales numbers this year, provided the sellers are still on the market. The forecast for the rental market includes a projected growth of 5 percent, with new units spending ever shorter spans of time on the market. Finally, the Westbrook and Saco/Biddeford markets are pegged to develop, thanks to an increase in rental prices and the completion of new building projects respectively.