The Maine real estate market has followed the same trajectory as its national counterpart. Namely, Maine real estate market trends are largely the result of the ongoing pandemic. Home values, in particular, are appreciating at a historic pace. Demand onset by lower borrowing costs, government stimuli, and a distinct lack of available inventory have increased local home values more than any other year in recent history. Therein lies the driving force behind the Maine housing market: lopsided supply and demand which favors sellers.
The impact higher prices are having on the real estate market are spilling over into the rental market. Prospective buyers are being forced to rent and simultaneously driving up prices and demand for rental units. The convergence of all these indicators has shifted the investing landscape in Maine. Instead of favoring flips and rehabs, for example, investors are now prioritizing long-term rentals. That's not to say there's no room for rehabbing in the Maine real estate market, but rather that today's indicators simply work better with long-term holds.
The Top Maine Real Estate Markets
While the best real estate market in Maine is up for debate, here’s a list of the cities investors may want to pay special considerations to:
Number Of Units Sold (January): 1,166 (-7.2% year over year)
Median Sales Price (January): $292,250 (+14.5% year over year
Median Rent Price: $1,219 (+9.8% year over year)
Price-To-Rent Ratio: 22.98
Average Days On Market: 94
Unemployment Rate: 4.7% (latest estimate by the Bureau Of Labor Statistics)
Population: 1,372,247 (latest estimate by the U.S. Census Bureau)
Median Household Income: $57,918 (latest estimate by the U.S. Census Bureau)
Maine Median Home Prices
The median home value in the Maine real estate market is $336,167. Real estate in Maine has appreciated beyond the pre-recession levels of a decade ago and is now testing new highs each month in 2022. Nonetheless, prices haven’t always been as high as they are today. A little more than ten years ago, Maine’s median home value bottomed out at around $168,000 during The Great Recession. Since then, however, home values in the state have appreciated by as much as 100.0%. Thanks primarily, in part, to a strengthening economy, increased optimism in the housing sector, and a lack of existing inventory, home values in Maine have been able to ride the same tailwinds as the rest of the U.S. real estate market.
However, it is worth noting that some of the most significant gains have happened throughout the pandemic. Since COVID-19 was officially declared a global emergency, the median home value in Maine has appreciated 35.0%. In the last year, prices have increased 21.7%. Prices have been increasing for more more than ten years, and the pandemic catalyzed faster rates of appreciation.
Moving forward, the Maine housing market is expected to continue appreciating. While it's too soon to tell just how much the average home will increase, it is safe to assume they will increase at a slightly tempered pace relative to last year. If for nothing else, new builds are expected to increase inventory and lessen competition.
Maine Median Rent Prices
Increases in home values have taken their toll on the rental market. At the very least, appreciation and low inventory levels have prevented a lot of buyers from participating in the market. Consequently, many Maine residents want to buy but cannot, which lends itself to another issue: more competition in the rental market is increasing rents.
According to the latest data released by Apartment List, the median rent in Maine has increased 9.8% in the last year and now sits around $1,219. The latest increase in rents hasn't kept pace with home value appreciation over the last year. As a result, renters can expect to pay the following in rents (for now):
For context, the national average rent price is about $1,312, or 7.6% higher than the average renter pays in the Maine housing market. The difference is relatively small, but appreciation forecasts suggest the discrepancy may grow in the foreseeable future—albeit minimally. Nonetheless, landlords will be able to justify rent increases as long as inventory is tight. If that's the case, the Maine real estate investing community still has time to get into the long-term rental space.
Maine Foreclosure Trends & Statistics
According to ATTOM Data Solutions’ January 2022 U.S. Foreclosure Market Report, “there were a total of 23,204 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — up 29 percent from a month ago and 139 percent from a year ago.” The January numbers represent the highest foreclosure rate across the country since the beginning of the pandemic.
“The increased level of foreclosure activity in January wasn’t a surprise,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM company.“ Foreclosures typically slow down during the holidays in November and December and pick back up after the first of the year. This year, the increases were probably a little more dramatic than usual since foreclosure restrictions placed on mortgage servicers by the CFPB expired at the end of December.”
Foreclosures are on the rise, and Maine isn't expected to be an exception. Not unlike everywhere else, foreclosure assistance is expiring in Maine, and delinquent homeowners will be expected to come current in accordance with their previous agreements. Of course, it's too soon to tell just how many foreclosures Maine will see filed throughout 2022, but it's safe to assume there will be a year-over-year increase. As a result, Maine real estate investors will need to have financing lined up to act as soon as possible. Doing so may net a deal under market value in a market with exorbitantly high prices.
Tax Lien Investing
Tax Lien or Deed: Tax Deed State
Redemption Period: Varies by county
Maine Real Estate Investing
According to ATTOM Data Solutions' third-quarter 2021 U.S. Home Flipping Report, "94,766 single-family houses and condominiums in the United States were flipped in the third quarter" of last year.
"Among all flips nationwide, the gross profit on typical transactions (the difference between the median sales price and the median paid by investors) stood at $68,847 in the third quarter of 2021. While that was up 2.7 percent from $67,008 in the second quarter of 2021, it was 1.6 percent less than the $70,000 level recorded in the third quarter of 2020."
Despite dropping 1.6% year over year, gross profits are historically high. Profit margins, on the other hand, continued their downward trend.
According to the Home Flipping Report, it "went down for the fourth quarter in a row, as the typical gross-flipping profit of $68,847 in the third quarter of 2021 translated into just a 32.3 percent return on investment compared to the original acquisition price. The national gross-flipping ROI was down from 33.2 percent in the second quarter of 2021 and from 43.8 percent a year earlier, to its lowest point since the first quarter of 2011."
With flipping profit margins on the decline, the Maine real estate investing community is turning to another strategy: long-term rental properties. Buy and hold rental properties offer investors the ability to offset today’s high prices with equally impressive rental rates. Given the right property with a proper cash flow, there’s no reason to avoid homes that cost considerably more than they did one year ago. Rent checks could easily make the acquisition well worth the price in a relatively short period.
In addition to increasing rental rates, real estate investors in Maine will find today's borrowing costs offer a unique advantage. With the average commitment rate on a 30-yer loan somewhere in the neighborhood of 3.45%, borrowing money remains affordable. Though rates have increased year to date, they can still offset higher acquisition costs and increase monthly cash flow from properties placed in operation. Consequently, if borrowers can lower their monthly mortgage obligations, they can pocket more of the money they earn in rent.
Maine Housing Market Predictions
The Maine housing market has managed to keep relative pace with national trends. Home values, recent appreciation rates, and forecasts predicting the next 12 months share similarities. Nonetheless, it’s good practice for investors to listen to what their local market tells them. Making educated guesses about where the Maine real estate market is heading could give investors the edge they need to succeed. It is entirely possible to take historical data and apply it to what may transpire in the foreseeable future. Therefore, let’s take a look at what is most likely to happen in the Maine real estate market sooner rather than later:
Plenty of reasons to remain optimistic: Real estate in Maine has become a commodity, not unlike just about everywhere else. Thanks to improving economic conditions, historically low interest rates, and many other positive indicators, Maine residents will remain optimistic about their own housing market. As a result, activity should remain healthy and help anyone involved in the market for the foreseeable future.
Prices will continue to rise: Not unlike the rest of the country, prices in the Maine real estate market are expected to continue rising. In the next year, median home values are expected to increase at a slightly slower pace than last year.
Inventory will remain tight: Inventory levels — or lack thereof — have served to increase prices across the United States, and real estate in Maine is no different. The state simply doesn’t have enough months of available inventory to keep up with demand. The lack of listings should continue to drive up prices until more inventory is brought to the market. More homes are being listed, but there’s still some time until Maine sees enough inventory to balance the market completely.
Interest rates will rise: The Fed has already said it's going to increase interest rates several times. While the number of times or exact increase remains unknown, rates will increase to combat inflation. In doing so, buyers may line up to buy before rates increase too much.
The Maine real estate market has kept pace with national trends for the better part of ten years. Like the rest of the country, Maine has seen prices appreciate at a historical rate, effectively building off indicators created by the pandemic. Not only that, but demand has remained intact, which suggests the market has some room to run. Anyone looking to participate in the local real estate market should find plenty of reasons for optimism, especially investors.
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