Housing market still on the ropes
The chief economist for Freddie Mac expects home sales in Maine will continue to climb, as the state rides a national tide of increased housing affordability and historic low-interest mortgage rates. But Frank Nothaft, chief economist for the government-backed company that provides the secondary market for mortgages, says all is not rosy as the impact of mortgage delinquencies will be felt for years to come here and throughout the country.
“There are some powerful headwinds pushing against booming house sales,” he said.
Nothaft shared his expectations for the housing market at a breakfast sponsored by Bangor Savings Bank on May 1. In his introduction of Nothaft, bank President and CEO Jim Conlon noted the bank has loaned more than $1.5 billion in mortgages since 2008, a reflection of interest rates that nationally are at a 65-year low.
Nothaft said he expects the Fed will keep 30-year fixed rates below 4% for another year before responding to pressure and increasing them slightly. Those low rates mean increasing affordability for home sales, which are expected to increase 8%-10% this year over 2012 figures. From Q1 2012 to Q1 2013, homes sales nationally rose 8%; in Maine, the average was 8.3%, with Portland coming in at 8.6%, the Bangor area at 9.1% and Lewiston-Auburn at 4.6%.
Even an 8%-10% spike expected for this year won't boost sales into the realm of “booming,” said Nothaft, given that 2012 sales didn't approach the volume transacted in 2000. Nothaft said increasing concern over unemployment and shaky consumer confidence this far into an economic recovery means “people aren't feeling too good” about the economy.
There are also lingering effects from foreclosures depressing market activity. Nothaft said Maine default rates are at 5.4% — above the U.S. average of 4.3%.
“Because Maine is a judicial foreclosure state, it takes a relatively long time to get distressed properties through the foreclosure process,” he said, adding he expects it will be another two to three years before distressed sales are out of the Maine market.
Carol Coultas
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