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.