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November 26, 2013

Hot summer home sales growth expected to cool in 2015

By Darren Fishell

Maine home sales have climbed steadily from under the weight of recession, but the state’s top real estate industry representative anticipates the trend will level out over the coming months after modest growth in October.

This summer produced consecutive months of double-digit increases in single-family home sales volume compared with last year, which Maine Association of Realtors President Bart Stevens attributes partly to growing consumer confidence from people jarred by the housing market collapse and recession.  

“Our market this year is being driven primarily by first-time home buyers who have been missing for the past three or four years, in some cases intentionally,” Stevens said. “They witnessed the fallout in 2007 and 2008.”

That strong summer showing was also partly due to what Stevens said was a rush to lock in low interest rates before the summer. Pending sales peaked this year in May at about 2,900, up from 1,600 in January. Approval then for a 3.5% interest rate was no problem, Stevens said, and rates rose to around 4.25% through the summer.

In September, Stevens said pending sales remained at 2,300, but closings in October signaled slowed growth from 2012. October home sales rose just 5.5% over last year after a strong September, when real estate agents closed sales on 25% more homes than in 2012. Growth closer to October’s is what Stevens said he expects through the end of the year and most of 2015.

“We’ll be quite pleased as long as it's positive growth,” Stevens said. He anticipates single-digit growth for sales volume and median sales prices in 2015.

Nationally, The Associated Press reported, home sales are expected to remain roughly flat next year as building permits for apartments were the highest in five years in October. This year, the National Association of Realtors expects single-family home sales will land 10% higher than 2012, at 5.1 million. 

The national projection for the years ahead in single-family home sales falls in line with the broader assessment by Charlie Colgan, a professor at the University of Maine’s Muskie School of Public Service, who recently identified the housing market in Maine as a “key part” of the prospect for recovery from the recession.

Stevens said the trends this year were also driven by the state’s real estate market shedding foreclosed and distressed properties, which stood to boost sales volume but dragged on the median sales price. The state’s Bureau of Financial Institutions reported the third quarter of 2013 marked a 10-quarter low for the total foreclosures in process at Maine’s 31 state-chartered banks and credit unions and the first quarter since late 2006 when completed foreclosures outpaced initiated foreclosures.

Shedding that inventory stands to raise the median home price in the coming years, but Stevens said the overall market remains weak for homes $200,000 and higher.

“A lot of the homes bought by first-time homebuyers were foreclosures or short sales or by those who were downsizing or relocating,” Stevens said. “We’re not seeing a lot of middle America moving up to that next step.”

Stevens is wary of saying things are returning to normal, but the market will look to a new normal in the years ahead.

“There's room for it to be more normal, but we’re back where we were in the late ‘90s and early 2000s and we seem to be somewhat comfortable,” Stevens said. “As much as the Realtors and others loved that [boom] — 2004, 2005, 2006 — we don't love it enough to see it happen again.”

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