My New Blog

Some exciting economic headlines have hit the news wires this week combined with strong support from the Investment community. Consumer Confidence is surging ("Consumer MOJO Lifts Profits"- WSJ 4/26/10), improvements in the Manufacturing segment of the economy ("Manufacturers See Rebound" - WSJ 4/27/10), a robust performance at the New York Stock Exchange (DJIA comfortably hovering around the 11,000 mark) and encouraging March home sale statistics. I continue to believe that is the most likely scenario for most of the Maine real estate market segments despite the very strong price and volume resurgence evidenced in the latest MAR home sales report.

The monthly press release from the Maine Association of REALTORS® clearly demonstrates that the market has come a long way from the depths of March 2009. The release headlined "Maine Home Sales up 46% in March - Statewide Median Sale Price increases nearly 10% since March 2009" was not unexpected or surprising given the very low comparable sales data from a year ago. What is a bit more interesting is that Maine significantly outperformed the national market statistics for the same period. Nationally, existing single-family home sales only rose 13.3% while prices were nearly flat (+0.6%). This can largely be explained by the fact that Maine did not see the rapid growth in new housing stock during the boom times of the last decade. As such, there is not nearly the excess inventory to be absorbed by the markets.

The parallel with the stock market performance is striking. The DJIA has had to rally more than 60% from the lows of March 2009 to settle at a level which is approximately 20% below the all time highs. Maine real estate prices have had a modest recovery from the lows, yet also remain near 20% +/- below the highs. Although there can be a significant difference between counties, towns, price ranges and housing stock, every sector of Maine housing has experienced a significant decline in value in this protracted downturn. The chart below exhibits the quarterly price performance for Maine for the past three years.

There are many encouraging signs on the horizon for a return to normalcy in the Maine real estate market. Interest rates have been and continue to be very attractive despite the federal government's retreat from supporting the secondary trading market for mortgages. This had been a concern on the horizon which we appear to have weathered with little negative impact on retail mortgage lending rates. With the "First Time Home Buyer" program ending today, there is renewed activity and interest in the middle market unrelated to the "Repeat Home Buyer Credit" to carry us forward. Consumer confidence continues to improve. Residential listing prices, which have been chasing the market down for four years, have increasingly come into line with the market realities. The US dollar is positioned to bring some foreign buying interest from England and Canada as our real estate looks to be good value for the discerning international buyer.

If I have learned one thing during this protracted market downturn, it is that thoughtful pricing of homes is absolutely critical for success. Unlike a year ago when the market dislocation made it virtually impossible to accurately price homes in nearly every price point, today there is more liquidity, more sales data, and more economic stability, leading to better pricing accuracy. Properties priced to reflect the current market pricing and conditions are selling while overpriced inventory continues to get very little buyer inquiry or showing activity.

Greetings from Maine

It is fair to say we have all endured a lot during the past months. The tumult following the financial meltdown from October 2008 through March of 2009 has had a lasting impact on the Global economy as well as Maine Real Estate. It does not seem possible that just a bit over one year ago, the Dow Jones Index traded below 6,500. The stock market had to rally more than 60% from the March 2009 lows to finish the year (2009) near 20% below all time highs. Maine Real Estate did not share in the wild swings of the stock market, and it seems to be settling to a more comfortable and stable dynamic, consistent with the net returns of the stock market. Whether that is simply a coincidence, or the efficiencies of the "invisible hand" adjusting to the new economic conditions is a topic for lively discussion. At the moment, we welcome the stability.

I have been saying for some time that the market volumes hit the lows of this downward cycle about a year ago. Maine Association of Realtors reports that "January (2010) marks the eighth month of positive gains in Maine's existing home sales market." Despite significant double digit increases in Volume, home prices continued to fall for most all of 2009. The December numbers revealed a small reversal in this trend, with the median home sale price improving 1.5%. The January median sales price increased more than 5% from January 2009 levels. Although the sales price improvements are measured against very weak market conditions last year, it seems prices have ceased their persistent decline.

Spring 2010 has a very different look and feel than just a year ago. The table below highlights a few of the changes:

I continue to be encouraged by virtually all of the positive signs for the spring market with low interest rates, government-led buyer incentives, re-priced inventory better reflecting current market conditions, mild weather and generally active buyer inquiry at most price points. Unlike most of the Eastern seaboard, coastal Maine had a mild, nearly snow free winter which already has golf courses opening, spring skiing conditions, and daffodils popping. The California real estate marketplace has done a complete and welcomed turn around which is beginning to also happen here in Maine. The average number of competing offers in California was recently reported to be five!

If I can help you find some good deals, call me (207) 687-2102 or send me an e-mail at mrt@larrycilley.com

So many For Sale signs everywhere you look… so many newspaper/magazine advertisements that rarely produce buyers… so many listings that have been listed for over a year… so many brokers hungry for listings with no real intention to spend any significant time finding a qualified buyer.

There was a time when 35% of all real estate sales were the result of buyers riding around and seeing a For Sale sign on a property that seemed to be of interest to them. Today, the For Sale sign accounts for less than 10% of buyer motivation. Why? Most buyers don’t shop anymore by driving around or scanning advertisements. They shop on-line via those agency website that appeal to them and that offer useful information. www.Realtors.com is the largest resource of information and buyers become easily-addicted to previewing properties in the comfort of their home. They often contact the broker of their choice and partner to identify desirable locations, features and prices that fit their budgets. A good broker realizes that most of these prospective buyers will not be ready to actually purchase a property for six months or more. They are shopping to become better acquainted with what’s available and what prices are being asked for properties of interest to them.

Professional brokers use this time to develop a trusting relationship with these eventual buyers. Too many brokers are motivated by the quest of a quick commission rather than developing a relationship with buyers that will endure long after the closing because a friendship often evolves. The lead time can be used to answer questions, identify concerns, and obtain mortgage pre-approvals. It's also a time to have the broker visit properties of threshold interest for an on-site preview to take some pictures to send along to a shopping buyer by the regular exchange of e-mails.

Listings often languish on-the-market for long periods of time not so much because the property isn’t deserving of serious buyer interest, but all too often because the broker representing the seller hasn’t a clue as to what it really takes to make a mutually-satisfying sale happen. The mechanics of selling properties doesn’t require any special skills; it requires persistent and creative attention to staging the property (a la HGTV programs), emphasizing the best features, and overcoming the negative aspects of the property. Selling properties is more about matching properties to people’s preferences… not a churning process of employing smoke and mirrors tactics.

Residential:

• High-end waterfront properties ($1-4 million) don’t seem to be influenced by the recession since “owning a piece of deep-water Maine dirt with a quality home that affords unobstructed ocean views” will always be in demand for premium undiscounted prices. Buyers of these properties usually purchase with cash and they know that the property values will appreciate nicely. The best opportunities are often not formally “on the market.” I find that being a native Mainer and well-connected to those who have these showcase properties has allowed me to occasion some great opportunities for buyers who enter into buyer-broker agreement with me. The days of finding salt water farms with 20 acres of land on the ocean for $60,000 are gone forever. This is true no matter how far DownEast you go!

• Low-end properties ($100,000 to $200,000) are plentifully available at heavily-discounted prices varying from 20 -30% reductions in the asking price. Even lower contract prices are sometimes negotiated by buyer brokers if the seller is highly motivated. It’s now a “buyer’s market” and there are many attractive opportunities to gets good deals. That’s why most of my business results from representing prequalified buyers. About 30% of the buyers that I work with are looking to temporarily bank these properties until the market re-stabilizes itself and they will probably flip them for an attractive profit. The tax credit incentive of $8,000 for first-time home buyers doesn’t seem to prompt purchases since low-end buyers often have only skinny incomes to apply the tax credit to. Energy conservation tax credits are more popular especially for the old sea captain mansions in prime historical locations that are deserving of restoration. Those buyers that are on a fixed retirement/social security income and just want to be anywhere in Maine because of the quality of life, can still find good deals if they work with an experienced and knowledgeable local buyer broker.

• Mid-range properties can be grouped into two categories: Those from $200,000 to $400,000 and those ranging from $400,000 to $1 million. The former properties are available in a wide variety of settings with very attractive price reductions being possible but one needs to carefully inspect the condition of the structure using an experienced home inspector (Cost run about $350). The latter properties in the next higher price range are a very diverse group of opportunities, Some have water frontage or water views and motivated sellers are offering attractive values for the price, but the buyer needs to be shepherded by a Realtor with local knowledge and seasoned negotiating skills. If it’s on a spectacular piece of waterfront land but the dwelling is only a ranch home in good condition (such as one listing I now have in Edgecomb), I’m finding that oftentimes the buyers are several friendly families that purchase the property together an use it mostly during the non-winter months as a shared hub location to enjoy the many attractive vacation opportunities in Maine.

Land:

• High-end land (on the water or with a to-die-for vista view) …and having over 2 acres in size with available soils for a septic system, are now going for $200,000 to $500,000 depending on the quality and location of the property. It’s not often that these properties will be discounted, but they are, in my opinion, a good investment that should nicely appreciate in value. As Will Rogers said, they aren’t making anymore land.”

• Rural land which is suitable for building a summer cottage or year round modest home (on at least 2 acres) is available and usually at good-value prices (say $80,000 to $150,000). Many are being purchased by buyers looking for a second home “in Maine.”

Other Observations:

• Most of the foreclosure or bank short sales aren’t, in my opinion, worth seriously considering. I’ve had better luck with my insider seller information and coaching my buyer to make a take-it or leave-it cash offer without any conditions and a closing in 30 days. Cash is still king!

• Generally speaking, there is a pathology for “the mind of Mainers. They are genuinely friendly and welcoming if newcomers buyers treat them respect and a cordiality that does not try to promote “change.” Many Mainers are, in their opinion, 20 years behind the times… in the right direction. Your broker needs to know this mindset and be able to guide you to a satisfying real estate solution for you.

I’d like to think that this blog information is useful, especially to buyers who might want me to represent them in the MidCoast Maine marketplace as their buyer broker. Call me on my cell phone (207-228-3248) anytime if you’d like to know more about how I might be a useful resource to you in your search for a Maine home.