Barbara and Frank Galardo decided to sell their Portland home – a 2003 colonial in a “fantastic” neighborhood – in April.
The market was red hot, and it was the perfect time to sell. They just had a few projects to finish up and then they would list the house.
The house hit the market on June 1, Barbara Galardo said, “but by then the cooling process due to rising interest rates and gas prices had already begun.”
Their house sold, and sold quickly, but it wasn’t the dozen-offer, above-asking-price sale that has characterized Maine’s real estate market for the last couple of years.
Real estate professionals say this is becoming the norm.
June home sales figures released Wednesday by the Maine Association of Realtors show a familiar pattern of declining sales and rising prices. Real estate agents say rising interest rates are giving prospective homebuyers pause.
Sales in Maine declined 9.8 percent last month over a year earlier, while the median sales price increased by 16.4 percent. June marked a full year of consecutive monthly declines in year-over-year sales.
The statewide median price for homes sold last month was $360,825, meaning that half of the homes sold for more than that and half sold for less.
Real estate agents across Maine have said they’re experiencing a slowdown in their market areas, said Madeleine Hill, a broker with Roxanne York Real Estate in Harpswell and president of the state real estate association.
“We are beginning to see homes staying on the market for weeks instead of days, price adjustments and fewer buyers competing for new for-sale listings as rising mortgage interest rates have cooled some segments of buyer demand,” she said.
While the market shows signs of normalizing, the demand is still off the charts, said Holly Mitchell, an agent with Keller Williams.
The pace is changing, but Mitchell still regularly sees houses selling within 72 hours and with multiple offers.
According to Maine Listings, the average single-family home in Maine is on the market for one week. In Cumberland County, it’s only five days.
In June 2019, before the pandemic, the statewide average was 14 days. If a house is on the market for two weeks now, someone assumes it has a defect, Mitchell said.
Galardo had a prospective buyer come by her house before it was even listed.
Her agent, Laura Sosnowski, co-owner of Maine Home Connection, sent out a “coming soon” notice that the house would be listed in three days. Four hours later, two people showed up at the door, interested in buying that afternoon.
Ultimately, Galardo declined and decided to go through with the scheduled open house.
“Our big fish may have gotten away,” she said, but the house still sold within five days.
It went for the asking price, with just one offer, which Galardo attributes to the rising interest rates and gas prices.
RISING INTEREST RATES A DETERRENT
According to Freddie Mac, the average rate included in buyer contracts for a 30-year, conventional fixed-rate mortgage was 5.52 percent in June, up from 5.23 percent in May. Rates peaked at 5.81 percent on June 23 but have since declined, and as of July 14, the average mortgage rate for a 30-year fixed-rate mortgage was 5.51 percent.
The average rate across 2021 was 2.96 percent, the organization said.
These rising interest rates are particularly hard on first-time home buyers, said Michael Sosnowski, co-owner of Maine Home Connection.
“When rates go up, people can afford less house,” he said. “If you’re buying your third house and you have a ton of equity, it doesn’t matter as much, but when you’re already borrowing from Granny to afford a down payment,” it can shut someone out of the market entirely.
Michael Meserve is breathing a sigh of relief.
After seven months of searching and four rejected bids, he and his wife went under contract on a house in Falmouth last week.
They have been wanting to move into a bigger home, their forever home, for a while, Meserve said, and when they started looking, interest rates were really low.
They concentrated their search in the Cumberland, Falmouth and Scarborough areas, wanting to be in a good school district for their growing family, but homes were selling quickly, in cash, for way over the asking price.
“We were putting in big offers, too, by our standards, and they were getting just crushed,” he said.
But as their search dragged on, the market started to shift.
Meserve credits the rising interest rates with their ability to land the new home.
It had been on the market for 12 days, and their offer, which was below asking price, was the only one.
He declined to disclose the sale price while the home is still under contract.
Now Meserve is concerned that the high-interest rates that helped him buy his new house in Falmouth will work against him when they list their South Portland home.
“We’re going to rush to get our house on the market as quickly as possible,” he said.
They’ve kept an eye on sale prices for comparable homes in the area, and he hopes that window of opportunity hasn’t closed.
A NATIONAL ISSUE
Nationally, the low housing inventory and high-interest rates continue to take a toll on potential home buyers, said Lawrence Yun, chief economist for the National Association of Realtors.
“Both mortgage rates and home prices have risen too sharply in a short amount of time,” he said.
Nationally, single-family home sales in June were down 5.4 percent from May and 14.2 percent from June 2021.
While sales have fallen for the past five months, prices are still on the rise.
The median U.S. single-family home sales price in June was $416,000, a 13.4 percent increase from a year ago. It is the second month in a row that the median price for existing homes has surpassed $400,000 and is the highest median price on record.
In the Northeast, sales were essentially unchanged from the month before but were 11.8 percent lower than in June of last year. The median home price was $453,300, a 10.1 percent increase from a year ago.
Yun said that if inflation continues to rise, mortgage rates will follow suit.
Rates will only stabilize when signs of peak inflation appear, he said.
There are positive signs that some of the national inventory crunch might be lessening, and while that is helping to lower prices in some cases, it also means houses are getting snapped up faster.
According to the national association, total available housing inventory increased 9.6 percent from May and 2.4 percent from the previous year.
At the same time, properties remained on the market for the shortest period of time since the organization began tracking it in 2011: an average of 14 days last month, down from 16 in May and 17 in June 2021. Nearly 90 percent of homes sold in June were on the market for less than a month.
“Finally, there are more homes on the market,” Yun said. “Interestingly though, the record-low pace of days on market implies a fuzzier picture on home prices. Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”