That’s the big question: will all this activity and rising house prices lead to a bubble burst? – but state economist Amanda Rector isn’t looking for one yet.
“The current conditions are different from any real estate crisis before the Great Recession,” said Rector. “Mortgages use much stricter credit standards, for example, and instead, rapid price increases are now largely due to an extreme shortage of available housing. The issue I’m watching is the supply of workforce housing, as a low supply could deter people from moving to Maine for work.
Andrew Crawley, assistant professor in the School of Economics at the University of Maine who founded the Maine Regional Economic Forecast Lab, doesn’t see a “huge” drop similar to a Great Recession, but predicts a general drop in prices , with a caveat.
“Some areas will still remain elevated,” he said. “Although cities may appear to have been badly affected during the pandemic, they still have the amenities that will always keep them popular. “
At the time, in 2008, the median selling price of Maine homes hit $ 180,000, fell and took seven years to recover, according to statistics from the Maine Association of Realtors.
After a few more years of steady growth, enter pandemic buying in 2020: the median selling price has increased by almost 14%, to reach $ 256,000.
Numbers have not been tallied for the year to date, but between March and May 2021, the statewide median selling price rose nearly 22% to $ 285,000 from the same period last year.
Who also buys: Between July 2019 and May 2020, 23.5% of home buyers here were from out of state, according to MAR.
From July 2o2o to May 0, 2021, it is 33.4%.
“Maine was clearly seen as a safe place during the height of the pandemic, with all parts of the state, including more rural areas, seeing increased sales,” Rector said. “We still don’t have enough information on the demographics and intentions of buyers (recent out of state) to know if this is part of a sustained increase in out-of-state migration or an increase residents of part of the year who saw it as an opportunity to buy second homes.
The April report from the Maine Consensus Economic Forecasting Commission has given way to optimism “in the years to come, as telecommuting becomes part of the” new normal “and people seek out less densely populated places.”
But, it could bring mixed news for office space, as well as increased pressure on affordable housing.
Consumption, in general, has been much stronger than expected during the pandemic, Crawley said, but with it comes the double-edged sword of keeping the economy going but contributing to inflation.
“Ideally, more homes will come on the market – as the supply increases, price increases should slow down,” Rector said. “Some of the growth in home sales may also be due to low interest rates; As these rates rise, this may start to dampen sales, but it won’t really solve the housing affordability problem, as lower prices can be offset by higher borrowing costs.
“There is no clear answer on what the overall impact on the economy will be,” she added. “As with so many things, the recent growth in real estate sales has both advantages and disadvantages.”
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