It’s the big question — will all of this activity and rising real estate prices lead to a bursting bubble? — but State Economist Amanda Rector isn’t watching for one, yet.

“The current conditions are different than any pre-Great Recession housing bust,” Rector said. “Mortgage lending is using much tighter credit standards, for example, and, instead, the rapid price increases now are driven largely by an extreme shortage of available housing. The issue I am monitoring is the supply of workforce housing, as low supply could deter people from moving to Maine for work.”

Andrew Crawley, an assistant professor in the University of Maine’s School of Economics who founded the Maine Regional Economic Forecast Lab, doesn’t see a “huge” Great Recession-like fall ahead, but anticipates prices coming down generally, with one caveat.

“Certain areas will still remain high,” he said. “Although cities might appear to have been badly affected during the pandemic, they still have the amenities that will always keep them popular.”

Back then in 2008, Maine’s median sales price for homes hit $180,000, dropped off and took seven years to recover, according to Maine Association of Realtors statistics.

After a few more years of steady growth, enter pandemic buying in 2020: The median sales price rose nearly 14%, to $256,000.

Numbers haven’t been tallied for the year to date, but between March and May 2021, the median sales price statewide was up almost 22% to $285,000 over the same period last year.

Also changing sharply, who’s buying: Between July 2019 and May 2020, 23.5% of home buyers here were from out of state, according to MAR.

From July 2o2o t0 May 2021, it’s 33.4%.

“Maine clearly was seen as a safe place to be during the height of the pandemic, with all parts of the state, including the more rural areas, seeing increased sales,” Rector said. “We still don’t have enough information about the demographics and intentions of the (recent out-of-state) buyers to know whether this is part of a sustained increase in migration into the state or an increase in part-year residents who have been seeing this as an opportunity to purchase second homes.”

The Maine Consensus Economic Forecasting Commission’s April report saw room for optimism “in the coming years as telework becomes part of the ‘new normal’ and people look for less densely populated places to live.”

But, that could bring mixed news for office space, as well as increased pressure on affordable housing.

Consumption, in general, has been much stronger than originally anticipated during the pandemic, Crawley said, but with that comes the double-edged sword of keeping the economy going but contributing to inflation.

“Ideally, more housing will come on the market – as the supply increases, price increases should slow,” Rector said. “Some of the growth in home sales may also be driven by low interest rates; as those rates increase, it may start to dampen sales, but this won’t really help the housing affordability problem as lower prices may be offset by higher borrowing costs.

“There isn’t a clear-cut answer on what the overall impact will be to the economy,” she added. “As with so many things, there are both upsides and downsides to the recent growth in real estate sales.”

Related Headlines


Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.

filed under: