Oxford Hills real estate boom favors out of state, wealthier buyers, leaving young buyers in the cold

REGION — The real estate market has ridden a roller coaster parallel with the pandemic with no signs of slowing down.

According to Monica LaVerdiere of Barefoot Realty in Oxford, options are limited for first-time home buyers in Oxford Hills. Mark Simpson

Metro/suburban living and commuting are out. Personal space and working remotely are in. And that trend has left Maine – and especially its rural communities – with a big bull’s eye on it. The landscape has sellers, buyers and even agents spinning to keep up.

In mid-June Monica LaVerdiere, owner of Bearfoot Realty in Oxford, had four active for-sale listings and another six under contract. To counterbalance, she is also representing at least a dozen local clients looking to buy a home along with several more from out of state.

“There is not much out there,” for first-time buyers said Laverdiere. “Once in a while we’ll have something for around $200,000 but there will be so many buyers making an offer on it, those who are more established [financially] are making the strongest offers. There are a lot of people from Massachusetts looking to get out of the city, looking to change their quality of life.”

With housing inventory so tight buyers focus more on their housing needs than their wants, changing their expectations and placing fewer contingencies on their offers.

“The bulk of buyers are out of state,” said Brenda Birney, a Realtor with the Bean Group of Norway. “They’ve discovered that they can work virtually. Their companies are saying they can. So they’re getting away from heavily populated areas and cherry picking where they’d like to go. We’re less than an hour from the airport. You’ve got the coast an hour and a half away and the mountains on the other side. They tend to gravitate to this area and the lake regions.”

The rush has led to sharp increases in home prices, up 22% between March and May, the seasonal start of housing sales. In Oxford Hills, the average price for a three-bedroom, 1,400 square foot home was $150,000 – $160,000 two years ago. Today that same home would cost another $100,000 or more. Add a garage to the property and buyers are seeing prices $300,000 and more.

Buyers are not just facing sharp price increases when buying homes either. For people searching online, a real estate listing with a “new” tag can quickly change to “pending” and then disappear altogether before they can even schedule a showing to see it.

“Last year at this time, the average house was on the market for 50 days,” said LaVerdiere. “In today’s market it is eight days. And keep in mind that in order to qualify for most loan programs, the house has to be in good shape, all systems good, no peeling paint, no rot, no safety hazards — to name a few.”

The anecdotal war stories making the rounds about houses selling sight unseen are not exaggerations either. One of LaVerdiere’s clients moved from Utah to Oxford Hills to a house she had never seen.

“I had just sold my home in my old state (Utah) and had seen how desperate people were to find anything,” explained Gail Everett, who relocated to Norway. “So I knew that I’d have to offer above the asking price and would have to be fast. I started looking semi-seriously three to six months beforehand and started with Monica about a month before I put my own home on the market.

“Since pickings were so slim, I looked seriously at everything in my price range, including a lot that were really marginal.”

These market conditions have left fewer front doors open to younger, local buyers. Financing options like Maine State Housing, FHA or other rural development programs are getting squeezed out of contention by financially stronger consumers who are already approved for conventional mortgages, or who are able to make cash offers beyond the asking price and appraised value.

“Ten or more years ago when the market was low, the trend in real estate was to encourage buyers to go for a 100% rural development or other loan program,” said LaVerdiere. “We encouraged them to get a loan where they could put the least amount down. And we also encouraged them to ask the seller to help pay the closing cost.

“The trend was to get the buyer to keep as much money in their pocket as possible so they’d have more money to put back into the economy.”

In today’s market, that path to home ownership has largely disappeared. Sellers are looking for cash buyers or conventional financing, which means more money down, more money out of the buyers’ pockets and they are on their own to cover closing costs. The limits placed on first-time buyer programs in a low inventory market has made it even harder for them.

“Anything that’s in the price range for people going through Maine State Housing, is typically something that needs fixing or updating,” said Birney. “And those are ones that don’t necessarily qualify for those programs.

“It’s hard to find a home in the price range that these [buyers] can afford and qualify for.”

So what $200,000 options are out there for younger buyers in the current market?

“They are getting a manufactured, 3-bedroom-2-bath home on an acre of land,” LaVerdiere said. “An existing manufactured home, not new.”

“There isn’t a lot out there to offer them.” added Birney. “Usually there’s more than one person interested in a property and the seller is presented with multiple offers.

“Even homes built in the ’70s are going under contract for more than $200,000. Antique houses are the best buy on the market today. But they’re inefficient and the upkeep and maintenance that’s required? Young people really aren’t much interested in that.”

In previous real estate eras first-time buyers had the option to build new themselves, another place they are now priced out of contention. While lumber prices have eased just recently, during the course of COVID they had jumped by more than 100%. And due to shutdowns and trade wars preceding the pandemic, many housing materials and goods are still in short supply.

Not to mention that buyers from away are also snatching land.

“Raw land sales are busier than I have seen in years,” said LaVerdiere. “There is a class of buyers that will pay whatever they need to pay. These buyers are typically spending $350,000 and above for it.”

Many sellers in Oxford Hills walk away from closings happy but they too may have to make hard choices.

“The situation I’m running into is that several people that had planned on selling this spring, are not going to do it now,” Birney explained. “Often people want to sell so they can downsize. That’s usually what motivates many of them.

“But you do a market analysis on [the home] and tell them it’s worth a certain amount and they realize what their money will buy to downsize, they say ‘jeez, I’m not going to give up all of this to downsize to half the living space’ for similar money.”

Other local residents are left on the outside of the hot market looking in. Mobile home owners, especially those living in parks, are not part of the housing boom at all. No one from out-of-state is looking to relocate to older manufactured homes in close quarters.

Many analysis have referred to the current environment as a potential bubble. LaVerdiere can see it coming for homeowners who are still struggling after the economic downturn and have been protected by the federal government’s foreclosure moratorium.

“There are very few foreclosures [today] but I anticipate that changing,” she said. “There are a lot of people … that haven’t been paying because of the pandemic. They’ve been able to stay in that situation longer than they normally would. I believe that there will be more foreclosures coming on the market because of that.”

That inevitability will bring down prices and stabilize inventory but it may see recent buyers with upside down mortgages in the future.

One of LaVerdiere’s buyer clients considered that possibility as he made the change from renter to home owner. Todd Hussey spent six months on the hunt, making five offers that were not accepted before closing on his new home in South Paris. He is mostly satisfied with his purchase, feeling that the got the best house he could within his price range.

“The most frustrating experiences about buying is that homes are extremely overpriced,” he said. “The listing price is just the starting price. You may not make a profit or get all your money back if you decide to sell in the future. But [for me] the positive is owning a house is still cheaper then renting.”

For Everett, most frustrating was the period just before she was able to buy, seeing houses quickly go that she wanted to put offers on but was not able to. Then when she had cash in hand, days and days would go by where nothing new came on the market or her choices were beyond her price range.

“I compromised on size and layout,” she said, landing in a house much bigger than she needed with a “weird” floor plan. It will need more work down than she had expected.

“But it’s mine!” she exclaimed. “I’m confident that I got the best deal possible, and I love the neighborhood and having a yard again.”

“It’s not fun,” said Birney of the hot market. “It’s a hard situation because there are more people that lose out on the house than actually get the contract on it. It’s a big disappointment for them. I’ve had people that made offers on as many as three houses and none were accepted. It gets hard, and it gets old.”