A national housing market outlook suggests that the Portland-South Portland market will have the second-highest increase in home prices in the country next year at 10.3%. A multiunit house on Cumberland Avenue was listed for almost $1.5 million by Tom Landry, owner of Benchmark Real Estate in Portland. Derek Davis/Staff Photographer
A real estate website is predicting that home prices in the Portland-South Portland market will increase at the second-fastest rate in the nation in 2023, bucking the recent trend of slowing increases.
The metro area would see a 10.3% increase in the median price for existing homes, according to the 2023 Housing Forecast released Wednesday by Realtor.com. That predicted growth is second behind that for Worcester, Massachusetts, among the country’s 100 largest metro areas. Nationally, the report projects a 5.4% increase.
But despite its high ranking, the projected increase in metro Portland would be a far cry from the staggering increases at the start of the pandemic. In fact, the more modest estimate reinforces a cooling in the market that real estate professionals have seen for months.
“After being overwhelmed in the housing frenzy of the recent past, homeowners, sellers, buyers, and renters may be underwhelmed in 2023,” the report says.
The number of Maine home sales has been slowing as prices continue to increase while inventory is in short supply. Recent mortgage rate surges have forced sellers to lower their expectations as they face buyers with limited buying power and greater hesitation about the market.
“The 2023 housing market could become a ‘nobody’s market,’ not friendly to buyers nor sellers,” the report said.
Tom Landry, owner of Benchmark Real Estate in Portland, sees a similar trend ahead. There’s almost a standoff between buyers and sellers right now, he said.
The Realtor.com report also anticipates fewer home sales in 2023 – possibly the least in a decade as the still-high prices and mortgage rates keep some would-be buyers and sellers at bay.
Tom Landry, owner of Benchmark Real Estate in Portland. Derek Davis/Staff Photographer
The Portland-South Portland area is expected to see a 6.4% decrease in home sales next year. The report did not include specific estimates of sales volume and prices. The findings are based on a variety of economic data and information from the website’s millions of home sale listings, using a proprietary forecast model, Realtor.com said.
Of the three metro areas where home prices are expected to grow 10% or more, Portland is the only one predicted to experience a decrease in sales volume.
Worcester, the metro area with the highest projected price increase at 10.6%, is forecasted to see a 2.5% increase in sales. The third-spot holder, Grand Rapids, Michigan, is expected to see a 10% price increase and a 1.6% growth in sales.
Last year, the report placed the Portland-South Portland metro area at the top of the list with a 10% increase and a more modest 0.2% sales decrease. It was the only metro area expected to see a double-digit price increase.
Home sales data for all of Cumberland County released by the Maine Association of Realtors in November shows that the median home price for the three months ending in October increased 11.5% over the same period in 2021. The number of units sold during the same three months declined 19.7 percent from 2021.
The Realtor.com report predicts an almost 23% national increase in inventory over 2022, but some Maine real estate agents say that’s unlikely to happen in Maine and could continue to limit sales.
“I don’t see where (the inventory) would come from,” said Holly Mitchell, founder of the ABODE Real Estate Group in Portland.
Many larger markets have developers building entire neighborhoods, offering incentives for buyers, but that’s not happening in Maine, she said.
Landry agreed. Developers are more hesitant and unwilling to build “on spec” because they’re worried buyers won’t be able to buy, he said.
Landry also expects to see fewer people moving next year. With such high interest rates, even downsizing could result in a higher mortgage payment.
“If I’m a seller … boy, I am going to think long and hard before I sell my house,” Landry said. That limited inventory also will serve to drive the prices up.
MANY CAVEATS
Landry said the market’s future really depends on the Federal Reserve. If interest rates continue to climb, sales will only slow further. If rates drop, the market could have a strong spring.
The report speculates that interest rates will be 7.4% through 2023, lowering to 7.1% by the end of the year.
According to the report, the monthly cost of financing the typical for-sale home will average more than $2,430 next year, a nearly 28% increase over the average mortgage payment in 2022 and roughly double the typical payment for buyers in 2021.
However, Michael Sosnowski, co-owner of Maine Home Connection in Portland, disagrees, and points to mortgage rates that are already on their way down.
Sosnowski also doesn’t buy into the projected 10% price increase for next year.
“There’s nothing to suggest that that’s going to happen based on recent sales,” he said. “Pricing has been steady to trending downwards. The rate of acceleration is decelerating.” He expects prices to more closely mirror the national trend, somewhere around 4% to 5%.
Last month’s sales figures from the Maine Association of Realtors seem to back up Sosnowski’s predictions. The statewide median sales price for homes sold last month was $332,000, a 7.8% increase from October 2021, and a slight increase from the September median of $330,000.
While he doesn’t expect a 22% increase in inventory, there are positive signs that things may be improving, he said, pointing to several larger housing developments in the works in the Greater Portland area.
Portland also continues to be a desirable location, with many people escaping cities and relocating to Maine during the pandemic, increasing demand and competition but so far having little effect on inventory.
Cross-market shopping – shopping for a home in a different location – soared this year. Even though many remote workers are returning to the office, home prices may be driving people to look outside of their current markets, especially those in the Northeast and the Northwest.
According to the report, more than seven in 10 cross-market shoppers from the Northeast and Northwest were looking at homes in areas at least 10% cheaper than their current location.
Landry, Mitchell and Sosnowski all said they’ve seen this trend, but that it’s frequently people seeking more affordable prices within the state and moving from the Portland area to somewhere like Bath or Biddeford.
The trend could spur home price growth in such secondary markets as well, the report said.
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