June 2012 Newsletter A New BULL MARKET for Maine Real Estate?
Dear Friends,
It is nearly impossible to engage a newspaper, blog, e-mail, radio and/or television news without encountering an article about the miraculous recovery in the national real estate market. After enduring 6 years of media scouring the country looking for the most depressing stories available, it feels good to have the media looking at the other side of the coin.
A word of caution, the media’s exuberance in the face of improving real estate statistics may again be overly dramatic. It is much too soon for “pats on the back”, “high fives”, and “attaboys” with respect to the Maine real estate market. We have seen very encouraging statistics and market activity, but there are still hurdles to vault.
MARKET BRIEF
A mild winter and early spring weather has been very kind to the real estate markets in Maine. Tired of bumping along the bottom for the past couple of years, we are seeing clear signs of recovery fueled by ever lower record interest rates, more attractive mortgage lending terms and conditions, renewed buyer confidence and lower listing prices more consistent with the structural changes in market conditions.
The Maine Association of Realtors reported an increase in both single family Sales Volume (+8.71%) and Median Sale Price (+4.48%) for the month ended April 30, 2012 as compared to the same period last year. Robust figures for New England reveal an increase in sales volume of nearly 20% and a price increase of more than 8% as reported by the National Association of Realtors. It is safe to say that Maine real estate will lag the New England market on the way up just as it lagged the decline of recent years. All told, the positive momentum is clearly moving its way to Maine which historically is characterized by a more stable pricing environment.
MAINE CONDOMINIUM MARKET REPORT
We would like to focus our discussion on the Maine condominium market. Condominiums in Maine are a segment of the market which is often overlooked by new buyers coming to the state, yet condo sales made up 10% of the total residential sales in the past year with nearly 1100 units closing.
The sweet spot for Maine condo sales is in the price range of $150,000 to $250,000 with 37% selling in this range. In general, the average selling price for all condo sales was $212,000 with an average of 1,350 square feet. This represents a pricing factor of $157 per square foot. The Maine condo market has managed to keep a strong underlying tone despite unit volume sales declining by 35% from the same period in 2006-2007. Average selling prices are only down approximately 8% from the frenetic real estate market experienced 6 years ago.
Maine Condominium Sales
Over the Last 12 Months
While price per square foot is a key ingredient in the determination of condo prices, there are several other factors which can complicate the valuation. We are fortunate to have a diverse inventory ranging from the “cheap and cheerful” to spectacular waterfront/beachfront locations with amenities such as tennis, golf, swimming pools and private dock space for your boat. Portland is the hub of the Maine condo market accounting for approximately 20% of the sales statewide. If one includes additional sales in Old Orchard Beach, South Portland, Ogunquit, Wells, Brunswick and Scarborough, the sales volume is nearly 50% of all Maine condo sales.
Historically, Maine is known for its classic New England Shingle-style homes. As the “Baby Boomer” bubble ages, we are clearly experiencing a demographic and generational shift in the demand for more high quality condominiums. With property developments such as the oceanfront Atlantic House in Scarborough, the Anchorage in South Portland,Botany Place in-town Brunswick, pristine Great Diamond Island and spectacular Portland loft style living, Maine has a condominium to suit most tastes. The Highland Green 55-plus active adult community is an attractive lifestyle setting in Mid-coast Maine with a special ecological component and 9-hole golf course. The Portland House sited on the Eastern Promenade offers spectacular views of Casco Bay and additional amenities such as indoor covered parking and a full time door man. Suffice to say that there are so many options available, we would welcome the opportunity to introduce you to the type of condominium and the location you seek.
We would encourage all of you who have yet to find us on facebook, to take the time to locate www.facebook.com/legacysir and follow our daily postings. We are quite active in announcing all of our new listings, pending sales and closed property sales. You will also find real time information specific to the Maine real estate market conditions, trends and data.
Our best client is a well informed client.
F E A T U R E D C U R R E N T L I S T I N G S
Click on the office name to view all the listings for each office.
Kennebunk | Portland | Brunswick | Camden
An Evening to Remember…
Where Fine Art Meets Fine Properties
Efficient Markets
The importance of correctly pricing a property at fair market value – using objective criteria, and right from the beginning of the listing – cannot be overemphasized. Markets are efficient. Competitively priced properties sell, while overpriced properties remain on the market. If the listing price represents fair market value, there is a 90 percent probability the property will sell.
Properties priced at fair market value typically go under contract within 30 to 90 days. Which particular end of that range depends on the property’s price range, geographic location, and whether that area’s market consists mainly of primary or second residences. The time it takes for a market to embrace or reject a listing price can be measured by calculating the average number of days on the market for properties from their last price reduction
Value
The value of a property is directly tied to the benefit it provides, rather than the cost to provide the benefit. There is seldom a correlation between cost and market value. Market value is not based on what a seller wants to net according to their investment cost or mortgage balance, or what a buyer can afford to pay.
The question then becomes where to begin in setting the listing price. The answer is the highest price that can be supported by objective criteria such as relevant market data and comparable sales. A price that can be supported this way is much more likely to generate an acceptable offer.
Buyers will not pay more for a property if another lower priced property is available that is a reasonable substitute. They want the property they buy to be surrounded by properties of comparable or greater value. If their plans change, they want reasonable assurance that they will be able to sell the property for the best possible price.
Very seldom does a property sell for a price below market value. A prospective buyer will scan the market on an ongoing basis to see what is available. When a property’s listing price correlates to market value price, it is likely to go under contract. Until a property’s listing and selling prices are in close proximity, the property falls off the buyer’s radar.
Not all sales have equal value. Because of the opportunity cost incurred, a property sold after four price reductions and two years on the market has a lower net present value than a property sold at its listing price within 30 days. General statistics on sold properties do not give the complete picture without an analysis of each property’s listing history.
There are diminishing returns to the value of increasing amounts of things like a property’s size, amount of shorefront, and interior square footage. The first acre contributes more to the value than the next acre, and the first 3,000 square feet of interior space contributes more to the value than the next 3,000 square feet.
George Ballantyne is a Senior Vice President with Legacy Properties Sotheby’s International Realty specializing is High Value and Hard to Value Maine Real Estate
Unless otherwise specified, all Maine real estate statistics were compiled using Maine Listings data. There is no guarantee of the accuracy and completeness of the data.