Demand Will Keep Prices Strong – The Legacy Collection Vol. 16
We present our latest edition of the Legacy Collection, a digital magazine showcasing extraordinary homes for sale across Maine, including an opening letter from our President on why demand will keep real estate prices strong through 2022. Happy Holidays from our homes to yours.
Each Legacy Collection magazine takes on customized distribution which has included the Wall Street Journal, the Boston Globe, Down East Magazine, and Maine Home and Design, in addition to local and regional Maine-based publications. The digital Legacy Collection is also shared with hundreds of thousands of our followers via email, social media, and this Maine Real Estate Blog.
Read the opening letter from our President Chris Lynch below.
Why Prices Can’t Go Down…
There is hardly a day that passes without someone saying, “Hey, the real estate business must be great.” Depending on the amount of time we have to discuss it, my answer can range from a simple “Yes” to a ten-minute dissertation about the complexities of working in a disrupted marketplace. In today’s market, the number of buyers and the amount of money targeting Maine greatly exceeds the pace of new listings coming to the market.
Many are referring to the situation as an “inventory shortage,” when, in fact, the number of units sold in Maine has increased from 2019 to 2020 and again in 2021. This year is shaping up to set another record in terms of the number of homes sold and we are estimating that sold inventory has increased by approximately 20% since 2019. However, the solid growth rate in inventory has still not been nearly enough to satiate the dramatic increase in demand.
The real problem is that we have too many buyers at the moment. It is easy to see why Maine has been the beneficiary of such an extreme surge in demand. I have said for many years that “people live in Maine because they can.” Because Maine is a small state dominated by a small DIY business economy, it has historically been difficult for many to live here, as the job opportunities are simply not abundant enough to attract those seeking our incredible lifestyle. That being said, the recent rise in popularity of remote workplaces and spaces has opened the door for many current and future buyers to live in Maine.
I feel that we are already bumping along the top of the market in terms of pricing, and I have to admit that I am hopeful that prices will stabilize at current market levels. If prices stop going up, that does not mean they will go down either. In fact, my thesis is that it will be years before we will experience a meaningful drop in prices.
It should be obvious that the past two years have been nearly impossible for the first-time homebuyer to get involved in purchasing a home in many parts of the country and Maine is no exception. What is not obvious is that there are many deserving buyers beyond the first-time homebuyers that are having trouble buying a home under what could be considered “normal purchase terms.”
In today’s market, sellers are very reluctant to accept offers that require mortgage financing, making it very difficult for many well-qualified buyers at all levels of economic success. Additionally, if you are a buyer that has to sell your home to buy a new home, sellers again do not want to take undue risk while there is still a deep market of cash buyers. And even if your offer is accepted, there are additional closing risks that may leave you with two homes or worse, no home for some extended period of time. Lastly, if you are an experienced homeowner, you may want to have a home inspection to ensure that the home is what it appears to be. However, the fierce competition has led many prospective buyers to waive the inspection contingencies to lock up the purchase. Of course, the seller will gladly comply.
It is clear that current demand is high and there are still so many more buyers out there who have to finance, sell to buy, or want to have inspection contingencies that are waiting in the wings to buy their precious piece of Maine. One day soon, we should also see a return of the international buyer base that has been regulated out of active participation in the market. Although the international component of real estate buyers has been relatively small in recent years, they are the group that, on average, spends the most money for a Maine home.
Suffice to say, I see a deep bench of well-qualified buyers who are not able to compete and bid up prices at this time, and I am confident that they will continue to be there to support the market as it stabilizes for years to come.
All the Best for a Happy and Healthy Holiday Season,
Chris Lynch, President
Legacy Properties Sotheby’s International Realty
Explore the digital Legacy Collection and browse our luxury real estate listings across Maine.