5 signs the real estate market is cooling in Maine
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Several key economic indicators are aligning in Maine and nationally that show the real estate market, which has been on a tear the past two years, is starting to cool.
Home prices are high, but sales in 2022 are expected to be down about 9 percent, mostly because of a tight for-sale market, Lawrence Yun, chief economist of the National Association of Realtors, said.
Rising interest rates also are a factor. If 30-year fixed mortgage rates climb from the current 5.48 percent to 6 percent, then sales activity could fall by 15 percent, he said.
Here are some signs that already indicate a market decline, and some metrics would-be purchasers and sellers should continue to watch.
Pending home sales
Pending contracts for homes, which reflect a more timely impact of rising mortgage rates than closings, fell for the sixth consecutive month from March to April by 3.9 percent, according to the National Association of Realtors, pending home sales index released Thursday. Pending contracts fell the most in the Northeast, by 16.2 percent.
Building permits and housing starts
Housing starts and building permits decreased both in Maine and nationally in March, according to U.S. Census Bureau data released last Wednesday. Building permits in Maine were down 52 percent from February to 414 permits in March after a sharp increase in January.
Builder confidence in the market for newly built single-family homes fell 8 points to 69 in May, according to the National Association of Home Builders index released last Tuesday, the fifth straight month it declined and the lowest reading since June 2020.
Days on market
How quick a home sells reflects market demand. So far, the days on market are relatively stable and low, but there are some early signs throughout the country that homes are taking longer to sell.
Still, homes in Maine continue to sell quickly at an average of 7 days in January, February and April, while taking 9 days in March, according to the Maine Real Estate Information System. Nationally, homes took 17 days to sell in March and April of this year and the same amount in April of 2021, according to the National Association of Realtors.
A decrease in multiple bids on homes as some potential buyers retreated from the market until it cools will help moderate prices and give buyers more of a chance. Multiple bid competition showed signs of a decline in March and April, according to online real estate marketplace Redfin.com.
Some 61 percent of home offers written by Redfin.com agents in April received multiple bids compared to 63 percent in March. The April figure was the second consecutive monthly decline and the lowest rate since March 2021.
Maine single-family home sales decreased for the third month in a row in April after reaching a high in January because of a shortage of available homes for sale, according to the Maine Association of Realtors. Some potential sellers are sitting out the volatile real estate market as they face a tough time finding new housing for themselves.
At the same time, Google searches for “homes for sale” were down 9.7 percent during the week that ended on March 19 compared to the same week in 2021. Searches for “homes for sale” were flat as of late January, and searches for “homes for rent” and “real estate” also dropped, falling 9.6 percent and 5.1 percent, respectively.