Ever since the pandemic’s inception and remote work becoming the new norm, sales volumes and Maine home prices have continued to soar. Houses are being sold twice as fast as a few years ago. Cash offers of more than $100,000 over the asking price are no longer uncommon. The intensity of the demand and the rise in home prices has left the community of homebuyers and Maine’s real estate market uncertain over what will happen next.
Let’s explore Maine home price changes and the reasons behind the increasing housing prices in detail!
Urgency in Maine Home Sales
Across the last seven years, Maine’s housing market has only trended upwards. In 2015, a single-family house would spend an average of 66 days on the market, but in 2020, the average number of days was merely 16. However, despite the competitive market, more and more people are choosing to find a house in Maine since it continues to be the region’s most affordable state.
Home Prices across Maine Counties
Data from the association shows that across Maine’s sixteen counties, the average home sale price has increased from $225,000 in 2019 to $256,000 in 2020 and $299,000 in 2021. In 2022, the average home price across Maine real estate sits at $341,268.
According to data by Realtor.com, Cumberland County has the highest median home price in Maine at $419,000, and York Country holds the second position with a median home price of $389,900. Meanwhile, Lincoln County, with its $368,000 average home sale price, is the third on the list, and Aroostook County, with its $149,900 average home sale price, is the lowest on the list.
Towns in Maine That Have Seen the Biggest Rise in Home Prices
Portland home prices have increased significantly in the state. The towns and suburbs in the city and in other parts of Maine that have seen the most increase in home prices are:
Kennebunkport is a popular summer destination that has seen a massive surge of more than $312,000 in home prices in Maine. In February 2020, the average price in Kennebunkport was $665,000, and in April 2022, it is $977,000, which is a 47% increase.
2. Cape Elizabeth
Cape Elizabeth is an affluent suburb in Portland. It has experienced over a $266,000 increase in home prices. In February 2020, its average home price was $550,000, and in April 2022, it is $815,000, which is a 48% increase.
Located in the north of Portland, Harpswell is a seaside community with land along with several islands. It has experienced a 52% increase in median house value. In February 2020, the average home value in Harpswell was $451,000. In 2022, the average value is around $658,000.
Reasons Why Maine Home Prices Are Soaring
Here are some reasons why Maine home prices are rising:
The Lack of Available Houses
Maine Association of Realtors released data in March, which indicated the number of homes sold in the state dropped by over 17% compared to March 2021. It means that supply isn’t meeting demand. The association’s president Madeleine Hill, based in Harpswell, said that in her area alone, including Bath and Brunswick, a lack of available homes essentially means that the prices will remain high. She believes that currently, there aren’t enough available homes to have the prices plateau.
Tom Cole, the former President of the Maine Association of Realtors, described Maine’s inventory of homes for sale as historically low. This phrase has been in use by Maine real estate insiders since around 2016. The market only continues to tighten with each passing year.
People Are Migrating to Maine
The assessment clerk in the Knox County town of Rockland, Dawn Overlock, stated that she was seeing houses sell at above-market rates even before COVID-19. However, now, with a lack of supply and a large influx of new out-of-state buyers, the market has expanded to rural state parts. Moreover, census data reveals massive immigration into Maine during COVID-19.
According to the Bangor Daily News, Maine’s approximate population in July 2021 was 1,372,000. It’s an increase of around 10,000 compared to a year prior. During the same time, deaths in Maine exceeded births by over 6,300, which means that this growth can also be explained by people’s migration to Maine.
Natalie Andrews, a Norway town assessor, has said that the surge in sales has caused home prices to spike as much as 50% since the beginning of the pandemic, especially among the lakefront properties, most of which are bought by out-of-state buyers.
New listings in Madeleine Hill’s area are getting over 25 showings and more than ten offers. It has become the new normal. Hill believes the pandemic isn’t the only driver since the market was heading in this direction anyway due to lower interest rates. However, the number of out-of-state buyers increased from 25% in 2019 to 33% last year.
According to Andrews, Maine home prices are reaching unsustainable levels for local residents. The amount that people continue to pay for these properties isn’t something local residents can afford since they don’t make as much money.
Labor Pool Shortage & Rising Building Material Costs
Maine’s labor pool for general contractors, plumbers, electricians, carpenters, and other individuals needed to build houses has always been shallow. In a state that historically faces challenges in recruiting and retaining younger workers, the labor pool is lacking. Construction companies struggle to find reliable help that will show up day in and out.
Moreover, the cost of building materials has also skyrocketed. Due to the higher global demand, the prices are pretty high. Since the world has recently seen and dealt with wildfires and floods, it needs more building materials. Due to the pandemic, factory shutdowns, and curtailed imports, the costs of these materials continue to soar. Thanks to the increasing prices and labor shortages, Maine is unable to currently meet the housing demand, which is also increasing the price of the existing houses available for sale.
Not Enough Economy of Scale to Draw Big Builders
Due to Maine’s low population, the state does not have the economy to draw in established national builders who can build thousands of new homes each year. It continues to impact the emergence of new properties in the state and drive the prices of established ones.
Another reason why there are not enough homes in Maine is the complicated geography of the state. It has several wetlands and ledges that are not ideal for building homes. The state experiences cold weather, moisture, and high radon levels, all of which can add to the construction cost of new homes.
The Bottom Line
Even though Maine home prices continue to rise, the state has seen an increase in smaller construction companies. The state saw construction employment increase by 1.7% between February and November 2021 compared to a 2.4% decline on a national level. The residential sector mostly drove this increase, but it brings about hope for a better future for Maine’s real estate market.