Market for single-family homes may slow in Maine, but interest in multi-units is growing

The sale and construction of multi-unit buildings, predominantly in cities other than Portland, will continue to grow in 2022, while the growth in sale prices of single-family homes will begin to slow down, leading Maine real estate professionals predicted Thursday.

Industry leaders offered projections for how the market may change this year at the Maine Real Estate and Development Association’s annual real estate forecast conference. The conference hosted between 600 and 650 attendees in person at Portland’s Cross Insurance Arena and virtually.

Dava Davin, founder and CEO of Portland’s Portside Real Estate Group, said Maine, and especially southern Maine, continued nearly exponential housing growth in 2021.

The median sale price for a single-family home in Maine last year was $299,000 and homes stayed on the market for an average of eight days. It’s only taken about five years for the state’s median home price to increase by $100,000, she noted, while the previous $100,000 increase took 19 years.

In York and Cumberland counties, the median price was $419,000 and the average home sold in just six days. Of those sales, about 35 percent were to out-of-state buyers.

More than 75 percent of single-family homes and more than 80 percent of condos sold at or over the asking price, continuing the pandemic-born trend.

The number of single-family homes sales in 2021 increased 2 percent over the previous year.

The start of 2022 will likely be a difficult one for buyers, Davin said. Last month, there were 22 percent fewer homes listed than in December 2020, as demand held steady and inventory declined.

“It is going to be a battle out there,” she said.

There is some hope on the horizon, though.

According to Davin, land sales were up 85 percent from pre-pandemic levels in 2019, and of those sales, 37 percent were for more than 10 acres, meaning more multi-units or developments are likely on the way.

New construction was also up and accounted for 11 percent of home sales in 2021, despite continued high costs for labor and materials.

There was actually a decrease in new single-family homes built (about 7 percent), but new condo construction, which Davin called the “comeback kid,” rose 82 percent.

New single-family homes cost an average of $479,000 to build in southern Maine, and the average building cost of new condos was $487,000.

Luxury home sales in southern Maine – those that go for over $1 million – have tripled since 2019, Davin said, with the average number of days on the market decreasing from 63 days to 10 days.

Southern Maine’s multi-unit market, particularly in towns and cities outside Portland, also had a busy year, according to Brit Vitalius, founder of Portland’s Vitalius Real Estate Group.

Portland is still a hot spot for owner-occupied multi-unit buildings, Vitalius told conference attendees, but investors are beginning to cast their nets elsewhere, looking to towns like Westbrook, Saco, Biddeford and Lewiston-Auburn.

Multi-unit sales increased 43 percent in Portland, but were up 63 percent in Westbrook and 59 percent in both the Saco-Biddeford and the Lewiston-Auburn areas.

The median prices also went up, with a more modest 14 percent increase in Portland, and a 43 percent increase in Westbrook, a 35 percent in Lewiston-Auburn and a 25 percent increase in Saco-Biddeford.

The less robust increases in Portland were likely influenced by Portland’s status as a rent-controlled city, Vitalius said, as well as high property taxes and high price points serving as a barrier to entering the market.

The median sale price of a two-unit home in Portland increased from about $460,000 in 2020 to $596,500 in 2021, while a two-unit home in the Saco-Biddeford area increased from $306,000 to $350,000.

Renters in multi-units have seen a roughly 25 percent increase over the last few years in municipalities like Westbrook, Gorham, Windham and Brunswick, among others, he said.

These increases in both sale price and rental costs will likely create a new, high-end market for these towns, he noted, but may also displace current residents.

But despite the dramatic increases nearly across the board, Davin expects that 2022 will see more modest increases.

Instead of a 20 percent increase in single-family home prices, she estimated that increases will be between 7 and 10 percent. She also expects to see higher interest rates, more growth in rural areas, and a leveling off of out-of-state demand, which new construction will help ease.

Last year was another strong one, she said, “but is it going to be our last?”