Housing Market Stirs as Rates, Prices Fall
September 17, 2008 -
PORTLAND -- After watching housing prices moderate this summer, Eric DeVaudreuil decided his time had come.
DeVaudreuil signed a contract in August to buy a condominium at Riverfront Lofts in Westbrook. The price he's paying -- $197,000 -- is $8,000 less than what a comparable unit in the renovated mill complex sold for earlier this summer.
"We're probably at or near the bottom of the market in Maine," DeVaudreuil said.
That's a matter of opinion, but one thing is clear: DeVaudreuil is benefiting from his timing. The Federal Reserve's weekend takeover of the Fannie Mae and Freddie Mac mortgage finance giants is leading to lower interest rates, just as DeVaudreuil is poised to lock in. His mortgage company had financing available Tuesday at 6 percent, down from 6.75 percent last Friday.
Easing home prices and lower lending rates appear to be bringing some welcome energy to southern Maine's hobbled housing market, Realtors and lenders say. That has led some people -- including first-time buyers, such as DeVaudreuil -- to see opportunity in a market that has been hammered by big drops in unit sales, slipping prices and consumer pessimism.
Some agents say they're getting multiple offers on well-priced homes, competition largely absent over the past few years.
This optimism, however, is cautious and set against a darker backdrop of high energy prices, rising unemployment, a shaky national economy and the uncertainty of a presidential election. With summer vacations over and the typically busy autumn home-selling season under way, the question is whether the current bump in activity is an early indicator of a trend, or just a false start.
The actual direction of the market won't be clear for months, however, because of the time lag in sales closings and data collection. The most current figures available in Maine are from July.
Media attention to the distressed markets of California and Florida may give the impression that home prices have taken a deep dive in Maine. That's not true, according figures gathered by the Maine Real Estate Information System. The statewide median home price has fallen less than 2 percent since July 2005, to $192,000 this past July.
But the perception that prices have been falling more quickly recently is more accurate, according to MREIS. The median price fell 3.5 percent in July, compared to the same month in 2007, when it stood at $199,000.
In Cumberland County, the median price fell in July to $239,900, a 6 percent drop over last year; the price in York County fell to $228,500, nearly 5 percent down.
The price drops have been accompanied this year by a double-digit slowdown in sales.
These trends hurt people who paid top dollar at the peak of the market and are trying to sell today. But they are good for buyers.
"Anything that's priced right is going," said Cathy Manchester, a broker with Keller Williams Realty in Gray. "The great deals are selling. The good deals are sitting."
Manchester said she and two other brokers in her office have closed 26 sales in the past three months. First-time buyers who were priced out of the market two years ago are returning, she said, helped in part by attractive terms on government lending programs, such as the Maine State Housing Authority and Federal Housing Authority.
"First-time buyers are out in force," said Marie Flaherty of The Flaherty Group/Prudential Northeast Properties in Westbrook.
Flaherty, who helped DeVaudreuil find his condo, said buyers with decent credit scores should be able to find financing today.
DeVaudreuil, who is 24, has been living with his parents. But he has a steady job, paid off a car and is paying student loans. He was able to find financing at Port City Mortgage and plans to lock in the rate this week.
DeVaudreuil said he was ready to move from his parents' home but couldn't have bought a condo if prices hadn't come down.
"A year ago," he said, "I probably would have been looking for an apartment."
Beyond prices, lower interest rates also may attract buyers who have been on the fence.
The federal government's rescue of troubled mortgage buyers Fannie Mae-Freddie Mac, announced Sunday, has had the effect of lowering interest rates. It pushed the average 30-year fixed rate below 6 percent for the most credit-worthy borrowers, for the first time in five months, according to Bankrate.com.
"It was just enough of a move that it has caused a flurry of activity," said Richard Morin, owner of Consumers First Mortgage in Kennebunk. "Whether it's sustainable, I don't know."
Morin, who represents the Maine Association of Mortgage Brokers, said the three-quarter percent drop since last week would make a difference to the buyer of a $240,000 home, the median price in York County. Assuming a 20 percent down payment, a buyer would pay $1,182 a month at 6.5 percent and $1,120 at 5.75 percent, the average rate Morin was tracking Tuesday.
"Today, an extra $62 a month in someone's pocket isn't bad," he said.
No one can say, however, what will happen to interest rates. The Federal Reserve is set to meet Sept. 16, amid speculation that lower oil prices and inflation will lead the central bank to seek to stabilize rates.
The rate-cut reaction to the government's takeover move "helps some people on the cusp," said Steve Kaminski, a senior vice president who manages mortgage products at TD Banknorth. But factors such as oil prices that remain historically high, coupled with a lack of personal income growth in Maine, he said, will continue to limit the revival of the housing market.
"All of these issues are still sticking out," Kaminski said.
These and other concerns make it premature to read too much into the market reaction, according to Anne Weigel, a Realtor at Coldwell Banker Residential Brokerage.
Weigel, who prepares an annual outlook report for the state's real estate community, said she's seeing "periodic spurts of activity." But these bursts of business have happened before, only to peter out.
"We're all seeing a pickup in activity," she said. "But the impact on the market, it's way too soon to tell."
By TUX TURKEL, Staff Writer, Portland Press Herald, September 12, 2008
Regions: Sebago, Sanford
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