If you’ve been watching the economic news over the last month or so, you’re probably a little nervous about Maine mortgage rates, particularly if you’re planning on buying or selling a home in the coming year. Bad debt piling up in China has driven perceptions that Chinese financial markets, already weakened by the specter of an aging population and dominated by dodgy, overbuilt state-owned businesses, is about to crash.
If nothing else, this has made members of the financial press wring their hands and tear their clothes. And this, in turn, has caused stock markets around the world to dip, and it all looks a bit ugly so far in 2016.
And what is worse, from a Maine perspective, is the fact that the dollar remains strong against the Canadian dollar – currently pegged at 70 cents – which of course makes U.S. goods even more expensive for our Canadian neighbors. At a meeting of the Maine Real Estate & Development Association back in January, James Marple, Senior Economist & Director at TD Bank Group in Toronto, said the strong dollar will likely have an adverse effect on the tourist season, since Canadians will be more likely to stay home. And this, he said, is mainly because food and lodging will cost more due to the unfavorable exchange rate. A tough tourist season could do some terrible things to Maine’s economy, as it has in the past, and the effects could be felt for many years. So far, so bad.
However, said Marple, the overall effect of those events should have very little effect on the Maine real estate market itself, or at least not in the short run. Marple predicted that the Federal Reserve would continue to raise interest rates at a slow pace throughout the year, and that this would mean that mortgage rates, which are tied to the interest rates for 10-year Treasury Bonds are not likely to go up. He said he expect housing prices to rise slowly in 2016, which will be good news for Maine’s housing market.
Indeed, good news has fairly easy to find in Maine’s housing market over the last few years. The Maine Real Estate & Development Association (MEREDA) reported in January that the trade group’s index was 100 for the third quarter of 2015, which was down from 120 in 2014, but was still up over a three-year period. The MEREDA index is a measure of how well the commercial and residential real estate markets are doing, as well as new starts for the construction industry.
According to MEREDA, commercial real estate did remarkably well in 2015, and while construction starts were flat, residential real estate gained 9 percent on 2014. So given that unemployment is projected to remain low, and that the state is expected to gain 5,000 jobs in 2016, Maine’s real estate picture is looking pretty good right now.
If you’re looking for proof, consider that falling mortgage rates seem to be inspiring hopeful home buyers to apply for loans. Mortgage applications were up 21.3 percent from the previous year for the week that ended January 8, according to the Mortgage Bankers Association. And if all goes as planned, 2016 will be a measurable improvement over 2015. And that should make your average buyer or seller pretty happy. The National Association of Realtors (NAR) reported that the number of new homes sold nationally in 2015 was up 6.5 percent over 2014, or about 5.26 million homes sold. And this, they said, was the highest since 2006, but a little lower than the prior peak in 2005, which was 7.08 million homes sold.
NAR is predicting that existing sales will rise 1 or 2 percent nationally, and that prices will go up 5 and 6 percent in the coming year. NAR Chief Economist Lawrence Yun cites unfulfilled demand, continued job growth, and better inventory conditions for the improvement.
Last year, according to Maine Listings data, almost every county in Maine saw an increase in home sales. Median home prices fell slightly in Knox and Lincoln counties, but that only helped sales to stay strong. Ed Gardner, 2015 president of the Maine Association of Realtors, was pretty upbeat in an interview with The Free Press.
“The annual numbers,” said Gardner, “are very positive for the real estate market in Maine, likely due to continued low interest rates, and confidence in the economy. For the most part, prices were stable and increasing for the year. Some markets are experiencing tight inventory at certain price points and ‘days on market’ has decreased over data from a year ago. Only Maine’s most rural counties experienced slight sold price declines.”
What all this means, boiled down and served plain, is that there will be more buyers out there for sellers to woo, because a steady interest rate will make that new house all that much more attractive. So whatever happens in the world at large in 2016, Maine real estate should do okay.
“The data we’ve tracked suggests the greater Portland industrial market has fully rebounded from the recession,” said Justin Lamontagne, broker with NAI/The Dunham Group, in an article published in the Bangor Daily News in late January. “We’re seeing historically low vacancies and increasing lease rates. As a result, for the first time in years, I am forecasting increased interest in land sales and speculative building as our existing inventory struggles to keep up with demand.”
True, events in China and elsewhere in the world may ultimately have an impact on “Maine, the Way Life Should Be,” but 2016 should be a great year to buy or sell a house.
2 Point Highlight
Last year, according to Maine Listings data, almost every county in Maine saw an increase in home sales.
So given that unemployment is projected to remain low, and that the state is expected to gain 5,000 jobs in 2016, Maine’s real estate picture is looking pretty good right now.
