January 26

Maine's real-estate industry slowly recovering

By Tux Turkel tturkel@mainetoday.com
Staff Writer

PORTLAND — Maine’s real-estate industry is slowly recovering from the recession and displaying some bright spots, but will continue to face challenges in 2012, speakers told the state’s largest gathering of real-estate professionals.

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“I believe the worst is over,” said Karen Rich, a commercial broker at Cardente Real Estate in Portland.

Rich presented her outlook for southern Maine’s retail sector at the Maine Real Estate & Development Association’s annual forecast conference here today. The sold-out event drew a record 650 attendees.

The conference took place against the backdrop of a national economic recovery that’s making gradual progress, but in which home prices and real incomes continue to decline. That hurts affordability, according to Charles Colgan, the University of Maine economic forecaster, and will keep the market from improving significantly before 2013.

In an economy driven by consumer spending, the retail sector is an important indicator, and Rich saw some encouraging trends in Greater Portland. The area’s vacancy rate, which had peaked at nearly 11 percent in 2009, is falling. The rate last year was just above 6 percent, Rich said.

Windham has emerged as the region’s healthiest retail area, with a 3.7 percent vacancy rate.
Some big holes remain in the area, such as the former Shaw’s Supermarket space in Falmouth and the former Filene’s department store at the Maine Mall. But new franchises have set up shop, filling some empty spaces, including Books-a-Million, which replaced Borders at the Maine Mall, and Urban Outfitters, which occupies a once-empty building on Middle Street in the Old Port. Several eating establishments, including Five Guys and Elevation Burger, have opened.

“Mainers love their restaurants,” she said.

Looking ahead, Rich said more big-box store closings are possible, as the Biddeford Lowe’s home improvement store did last year. But she also expects more expansion from banks and credit unions, Starbucks and thrift stores.

Greater Portland’s office market also is recovering. Buyers and tenants can still find favorable deals, but the overall vacancy rate has basically stopped climbing and hung last year at just under 13 percent, according to James Harnden of Malone Commercial Brokers. The office market absorbed 90,000 square feet of net space last year, the first positive number since 2008.

Conditions will remain essentially flat this year, Harnden indicated. But the mood is more optimistic and a handful of new projects are being proposed, including those at Thompson’s Point and West Commercial Street.

On the housing front, the multi-family market is a mixed bag, according to John Graham of Sullivan Multi-Family Realty. Short sales and bank-owned properties continue to make up a substantial portion of the market. Condominium conversion is flat.

But the picture is very area-specific. Portland rentals are stable, with some rent increases. A recent landlord survey in the city found two-bedroom apartments averaging $1,021 with heat, $897 without. By contrast, more than half the sales in Biddeford-Saco are short sales or bank-owned. Sale prices there are expected to continue their decline.

For single-family homes, 44 percent of buyers last year were first-time purchasers and 15 percent of sellers offered incentives, according to Nicholas Dambrie, a broker at Re/Max by the Bay. Elements that will influence sales this year include foreclosures, bank-owned properties and short sales, the job market and the ongoing migration to the city from the suburbs.

Trends are pointing to a stabilizing housing market. Sales of existing, single-family homes in Maine rose nearly 7 percent last fall compared to 2010, contributing to six months of positive figures. But median prices continue to slide, off nearly 3 percent last fall to $165,000, according to the Maine Real Estate Information System.

David Banks, who owns Re/Max by the Bay, said median prices will stabilize when sellers set asking prices closer to what today’s buyers will pay. While some asking prices remain unrealistic, Banks said he’s seeing stability around Portland.

“Anything I sold six months ago, I’d get the same price today,” he said.

Maine Report  from the National Association of Realtors 

The global economy has continued to sputter in the last year as it attempts to rebuild from the global economic recession. Stateside household net worth has rebounded from lows seen in the recession and is slowly growing. However, the job market continues to be bleak as the unemployment rate stays firmly between 9 and 10 percent and the underemployment rate continues to grow. For the economy to move forward, many policymakers and households are looking to a cure in the job market.

The home buying rate during the survey period of the report, mid-2010 to mid-2011, dropped to a low following the expiration of the Home Buyer Tax Credit. Buyers who could purchase in the two years prior to the expiration typically did with the tax credit from the federal government for the added push into the market. Thus, buyers who were buying a home during this survey period were often in a situation where they needed to purchase a home for family changes or a job-relocation. However, while sales declined, home values appear to have found more solid footing with several measures of prices showing little change compared to the year before.

Distressed sales continue to account for a large share of home sales in some local markets. The rise in foreclosures is well known as is the concentration of foreclosures in a small number of states that experienced a rapid rise in prices and sales in the middle of the decade. In these areas, many investors are purchasing these homes, often making all cash purchases

For more than one-quarter of home buyers the number one reason for buying a home, is the plain desire to own a home. Homeowners, who purchase a property as their primary residence, are also buying in to a neighborhood. A long and distinguished body of academic research has shown that homeownership strengthens the community; homeowners have a stake in the community and are likely to invest through their participation in civic activities such as voting or volunteering their time. Moreover, it is now well documented that homeowners and their families benefit in a number of ways ranging from more positive feeling about the future to better health. Although the financial aspects of homeownership are important, they do not stand alone as the primary motivators for the purchase of a home.

Highlights

The real estate market offers a variety of choices, opportunities and challenges for home buyers, sellers, and real estate professionals helping them with their transactions. For home buyers, there are numerous ways to search for and find a home, a variety of mortgage products to finance their home and a growing list of services that their agent can provide to assist them in the process.

Home sellers can choose to sell their home themselves or enlist the professional assistance of an agent who can provide various levels of service to best suit each home seller’s needs. Because the real estate market is always evolving, it is important for real estate professionals to have a clear picture of today’s home buyers and sellers. The 2011 Profile of Home Buyers and Sellers describes the characteristics and motivations of recent home buyers and sellers in Maine and in so doing helps real estate professionals track the changing demands of consumers in a dynamic market.  

 Forty-four percent of recent home buyers were first-time buyers in Maine, compared to a national level of 37 percent - a drop from 50 percent in 2010.

 The typical buyer in Maine was 43 years old, while nationally the typical buyer was 45-years-old, a jump from 39-years-old in 2010.

 The 2010 median household income of buyers was $63,900 in Maine and $80,900 nationally. The median income was $52,500 among first-time buyers and $73,500 among repeat buyers, compared to $62,400 among first-time buyers and $96,600 among repeat buyers nationally.

 Nationally, 64 percent of recent home buyers were married couples—the highest share since 2001. In Maine, the figure was 53 percent. Eighteen percent of recent home buyers were single females nationally—the lowest share since 2004; 23 percent were single females in Maine.

 For 27 percent of recent home buyers nationally, the primary reason for the recent home purchase was a desire to own a home. In Maine, this was the primary reason for 32 percent of recent home buyers.  

 New home purchases continue to drag at a share of 16 percent of all recent home purchases on a national level. This is reflective of conditions in Maine, where 11 percent of homes were new.

 Nationally, the typical home purchased was 1,900 square feet in size, was built in 1993, and had three bedrooms and two bathrooms. In Maine, the typical home purchased was 1,500 square feet, built in 1979 and had 3 bedrooms and 2 baths.

 Seventy-three percent of home buyers purchased a detached single-family home in Maine, compared to 77 percent of home buyers nationally.

 The quality of the neighborhood, convenience to job, and overall affordability of homes are the top three factors influencing neighborhood choice; however, neighborhood choice varies considerably among household compositions.

 When considering the purchase of a home, heating and cooling costs were at least somewhat important to 87 percent of buyers and commuting costs were considered at

least somewhat important by 73 percent of buyers nationally, compared to 94 percent and 80 percent of buyers in Maine respectively.

 For 35 percent of home buyers, the first step in the home-buying process was looking online for properties and 10 percent of home buyers first looked online for information about the home buying process on a national level. In Maine, 40 percent of home buyers looked online for properties as a first step and 11 percent searched for information about the process online.

 The use of the Internet in the home search dipped slightly on a national level to 88 percent from a high of 90 percent in 2009, as the demographics of home buyers shifts to slightly older repeat buyers from younger first-time buyers. In Maine, this number was 87 percent.

 Real estate agents were viewed as a useful information source by 99 percent of buyers who used an agent while searching for a home in Maine, compared to 98 percent of buyers nationally.

 The typical home buyer in Maine searched for 9 weeks and viewed 6 homes, compared to12 weeks and 12 homes on a national level.

 Nine in ten recent buyers were satisfied with the home buying process nationally while 87 percent of buyers were satisfied with the process in Maine.

Financing the Home Purchase

 On a national level, 87 percent of home buyers financed their recent home purchase. Among those who financed their home purchase, the buyers typically financed 89 percent. In Maine, 97 percent of buyers financed their recent purchase and 95 percent of the purchase was financed.

 The share of first-time buyers who financed their home purchase was 95 percent compared to 82 percent of repeat buyers, nationally. In Maine, that share was 100 percent of first-time buyers and 95 percent of repeat buyers.

 Nearly half (46 percent) of home buyers nationally reported they have made some sacrifices such as reducing spending on luxury items, entertainment or clothing. This also holds true in Maine.

 Nationally, 23 percent of buyers reported the mortgage application and approval process was somewhat more difficult than expected and 16 percent reported it was much more difficult than expected. These numbers are roughly equivalent to the Maine numbers, where 26 percent of buyers reported the process was somewhat more difficult than expected and 17 percent reported it was much more difficult than expected.

Home Sellers and Their Selling Experience

 The typical national seller lived in their home for nine years. The median tenure has increased in recent years. In 2007, the typical tenure in home was only six years. In Maine, the median tenure is 9 years.

 Eighty-seven percent of sellers were assisted by a real estate agent when selling their home nationally, and 73 percent were assisted in Maine.

 Nationally, recent sellers typically sold their homes for 95 percent of the listing price, and 61 percent reported they reduced the asking price at least once. In Maine, recent sellers sold their homes for 97 percent of the listing price and 66 percent reduced the asking price at least once.

 Forty-one percent of sellers offered incentives to attract buyers nationally, most often assistance with home warranty policies and closing costs. In Maine, 15 percent of sellers offered incentives.

 Nationally, 39 percent of sellers who used a real estate agent found their agents through a referral by friends or family, and 22 percent used the agent they worked with previously to buy or sell a home. In Maine, the share of sellers found their agents through a referral was 24 percent and 28 percent used an agent they had worked with before.

 Two-thirds of home sellers only contacted one agent before selecting the one to assist with their home sale on a national level, and this was also true in Maine.

 Ninety-two percent of sellers reported that their home was listed or advertised on the Internet nationally; this figure was 96 percent in Maine.

 Among recent sellers nationally who used an agent, 85 percent reported they would definitely (69 percent) or probably (16 percent) use that real estate agent again or recommend to others. In Maine, 82 percent of sellers reported they would definitely (77 percent) or probably (5 percent) use the real estate agent again or recommend to others.

Home buying and selling remains an important segment of the national and local economies, especially due to the housing sector’s unique power to revitalize the economy during challenging times. With historically low mortgage rates, buyers and sellers continue to have opportunities to trade up, trade down, relocate or purchase a second home. First-time buyers are now 50 percent of the market, are discovering and capturing the benefits of homeownership, which contributes to significant wealth accumulation, among other financial, social, and personal rewards.

Consumers rely on the experience and expertise of real estate professionals to assist when buying and selling a home. Working in an extremely competitive environment, agents and brokers provide high levels of service to meet the varied needs of home buyers and sellers. The value that consumers place on the services offered by real estate professionals is reflected in the large majority of both buyers and sellers who would use their agents again or recommend them to others.

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