2024 Spring Update

2024 Spring Update

So much about real estate involves short term questions such as: What is the interest rate today? What houses are available to see right now? What just sold? And the answers to these questions shape how much a buyer can afford, how much over asking their offer may need to be, and the value placed on a property by an appraiser. In other instances, like in sections of this report, it is a year-overyear analysis, but how incredibly useful it is to zoom out further and compare this spring with the last “normal” (pre-pandemic) spring market of 2019.

The contrast, as you can see in the chart below, is striking. In the four large counties of Southern Maine, the prices almost doubled since 2019. And when you add in the many home buyers and re-financing homeowners who locked in ridiculously low interest rates during the pandemic, our collective sense of “normal” is now actually quite warped. For decades before this blip, interest rates averaged around 7% and the typical appreciation rate of homes averaged 4% a year. So, in a positive run of 5 years, a home valued at $290,000 could be worth $352,000 after 5 years – not the median price point of $525,000 we see for Cumberland County. Today across all of Cumberland County there are only 20 homes listed for $290,000 or less, and most of them are older mobile homes, while the 3 single family homes are all being sold “as-is” and unable to qualify for traditional financing.

What is “normal”?

While the prices have jumped substantially, the number of homes sold in the first quarter of this year is much more similar to 2019. This seems at odds with the idea of supply and demand at first glance. Digging deeper another number impacts this story. In York County, the number of homes for sale in the 1st quarter of 2019 was 2,066 and in 2024 that number was sliced almost in half with only 1,143 homes for sale. So we have a market with less homes for sale, at dramatically higher prices, and much more of the listed homes sell. This past weekend there were only 2 homes for sale in the $500-600k range across five towns including Yarmouth, Cumberland, Falmouth, North Yarmouth, and Freeport - and both of them are small 1950s cape cod style homes. Based on the crowds at the open houses and deadlines for submitting offers, there seems to be far more than 2 sets of buyers out there.

The demand is not spread equally as you can see on the chart on the opposite page, which is a year-over year breakdown from last spring. The most popular places including Portland and nearby towns experienced price jumps. However, some towns, such as Cape Elizabeth show dramatic increases because half of the 20 homes sold this quarter of 2024 sold for over 1 million, and one those sold for 6.2 million.

For those who own homes, or as they say in the UK, enjoy a position on the “property ladder” all these statistics about the increased value of real estate can feel positive, especially if you own real estate and have a low mortgage rate. However, even if you are well positioned, you surely know someone who is struggling to gain that foothold and that may likely be someone younger.

Wealth held in real estate is heavily weighted towards older Americans as you can see in this chart below from a recent Wall Street Journal article.

Those under 40 have a very small slice of the pie and home-buying affordability has dropped to its lowest level since 1985 as the median household has to dedicate more than 40% of its income to cover the payments on a median priced home.

Americans’ overall assets have shifted greatly over the past 30 years. Those between the ages of 40 to 54 own less than quarter of all household assets, down from 40% in 2001. Those age 55 and up now own nearly 70% of household assets, up from 31% three decades ago. These are dramatic changes, especially combined with the challenges of homeownership.

If you are a homeowner and would like to help a relative gain entry to the housing market, there are multiple strategies we can discuss. And we can also advise you on the best lawyers to assist with estate plans that allow you to pass along your assets in the most tax protected manner, or to assist your parents with their property plans. With so much net worth tied up in real estate, professional advice is truly priceless.

Cite article: ‘Priced Out of the American Dream’ Wall Street Journal, April 29, 2024

Median Home Prices Q1 2023 vs 2024