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Home Price Erosion Surges in Maine - Buyer's Market Rules

May 28, 2008 - PORTLAND -- Maine home sellers appear to have stopped holding out for top dollar.

After months of decline in the number of houses sold, prices in April finally followed suit, with the median cost of a single-family home dropping by 11.34 percent compared with last year.

The Maine Real Estate Information System Inc. reported Tuesday that the median price -- where half the houses sold for more and half for less -- fell to $178,200 in April, down from $201,000 last year. The number of houses sold dropped 23.13 percent for the month.

"I would agree that the market is in a process of correcting itself here in Maine," said Lou Demers, a Realtor with Maine Coast Properties. But he cautioned against reading too much into the monthly figure.

"When you look at 11 percent, while it may be disappointing, it's not alarming."

Since the beginning of the year, Maine prices had been falling in the 2 percent to 3 percent range, when compared to the same month a year earlier. The number of houses sold was off as much as 28 percent.

Tuesday's news came amid reports that prices also are down sharply nationwide -- by the biggest percentage in 20 years of calculations, according to one measure.

The Maine Real Estate Information System Inc. had no one available Tuesday to put the state drop into historical context.

"My feeling is the real estate market moves on a collective mentality," Demers said. "I think what's happening right now is buyers are hesitant to buy because they want to wait until we hit bottom. The question is where is the bottom? No one seems to know that."

Bob King, a senior research analyst with the Maine State Housing Authority, said Maine's numbers are "more in the magnitude of a correction rather than huge drops like have been seen in California and in other places, and it hasn't been statewide."

Strong spots include southern Maine and the Lewiston-Auburn area. Rural Maine has been weaker.

In southern Maine, for the three-month period through April, Cumberland County saw a 3.58 percent drop in median sales price, York County a 0.58 percent drop, Sagadahoc County a 13.45 percent drop and Lincoln County a 13.64 percent drop.

On Tuesday, the Standard & Poor's/Case-Shiller national home price index fell 14.1 percent in the first quarter compared with a year earlier, the biggest drop since the measure's inception in 1988.

Prices nationwide are at levels not seen since the third quarter of 2004, according to S&P.

"There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path," said David Blitzer, chairman of S&P's index committee.

The decline in price is good news for people trying to get their first house. King, the housing authority analyst, said his agency has seen a 20 percent increase in the number of sales through its first-time-buyer program, compared with last year.

"We think because of the price run-up over the last few years that a slowdown in the increase of prices makes it a good time, especially for the first-time home buyers, to get in the market," said King.

There are some signs of firmness in the market, too, according to Demers, who keeps statistics on the Portland real estate market.

"Yes, we're in a slowdown, but there are signs of life," said Demers. "We're starting to see more pendings, more houses under contract."

According to statistics he updated last week, the number of single-family homes under contract or pending sale was at 80, up a third from the previous month.

That said, it's still a buyer's market.

"Sellers that want to sell their properties are having to price them very competitively, but not only that, they've got to make sure they're in tip-top shape," said Demers.

Demers said he thinks a sign of a real estate recovery in Maine will be when the market has had several months of increases in unit sales. The prices will lag, he said.

"I predict the recovery we're going to have is not going to be a rapid one. It's going to be a slow, modest recovery when it begins," said Demers. "The recovery here in Maine is going to first begin with volume; the number of buyers returning to the market is going to be the indicator of the recovery."

The Associated Press contributed to this report.

By Staff Writer Matt Wickenheiser , Portland Press Herald


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