Maine Real Estate Sales in January - Not a pretty picture (condominiums, second mortgage)

[WhoFanMe]

Here is an excerpt from my blog, I've deleted my conclusions (as they might be construed to be advertising) to just report the numbers here. I drill down to Cumberland County, my specific area of expertise, but have quarterly data on the other counties as well.


Maine Single Family Home Sales drop 28% from January 2007

Sales of single family homes skidded to 495 in January compared with a total of 688 in the same month in 2007. These figures were released by the Maine Real Estate Information System, Inc. earlier this week.

More bad news for sellers - the statewide median sales prices for those homes dropped 2.22 percent to $185,000 vs. $189,200 in January 2007. The median sales price indicates that half of the homes were sold for more and half sold for less.

In Cumberland County for the quarter ending on 1/31/08, sales of single family homes dropped to 476 compared with 640 from 11/1/06 through 1/31/07, a drop of 25.63%

Maine's decline outpaced the region and the nation as the Northeastern United States experienced a 25.7 percent decrease in sales. Nationwide, real estate sales dropped 22.4 percent from January 2007. The National Association of Realtors reports that the median existing single-family home price dropped 5.1 percent to $198,700.

[moughie]

Wow, Maine looks like it is finally getting hit. I was wondering how delayed the reaction would be. Here in AZ we started vividly noticing it last year.

So sorry for anyone in the real estate. But, I know you are an honest professional with a strong sense of integrity. You will do just fine, I am sure!
Hang in there!

[Maineah]

Thank the banks and the sub prime loans for inflating all of the real estate prices in the first place. The out of control prices were just a reflection of the amount of money available to the people who could not actually afford these properties. When anyone can get a loan, anyone can buy a home and the demand goes way up. Rising demand equals rising prices. Now that reasonable control has been brought back in to play, people are buying properties they can actually afford. The banks are making loans based on real income and real interest rates now so there are fewer people who qualify for a loan. The prices naturally drop as the number of people who qualify for good loans drop. Fewer buyers equals more properties available and eventually lower prices......back to where they should be. This happened in 1986 when banks were lending money to anyone who wanted it to build speculation homes and condominiums, and to a lesser extent when home equity loans became all the rage. Suddenly everyone could buy the BMW or boat and second mortgage the house to buy it. Trouble was the BMW and boat depreciated faster than the value of the properties increased so a lot of people found themselves looking at some staggering debt when the smoke cleared.

Never hitch your wagon to the latest big thing in banking! (Or real estate!)

[kellysmith]

I agree the banks were out of control. When I heard of people taking out zero-principle loans, where they only made payment of interest and didn't touch the principle ever, I knew the end was in site. As Greenspan said of the dotcom boom just before the bust...irrational exhuberance!

[mainebrokerman]

you cant just blame the banks,, say a bank approved me for my million dollar dreamhouse,,,THAT DOESNT MEAN I WILL BUY IT,,,(if i couldnt afford it)
especially, on an ARM,,,knowing the rates will go up significantly,,

yes the banks were too lenient in loaning monies,,,but at the same time,,,what responsible person,,,will buy a house,,that they cant afford??
knowing thier payments would increase down the road (on an arm)

personal responsibility does play a part in this..



this is actually a good time to buy, the interest rates are reasonable,, plenty of inventory, its a buyers market,,,
dollar for dollar,,,might be better to buy now,,than a few years ago,,the interest rates are low,,AND the houses are priced realistically..

[starwalker]

Originally Posted by kellysmith

As Greenspan said of the dotcom boom just before the bust...irrational exhuberance!

With all due respect to Mr. Greenspan, I have another word for it: greed.

Somehow the idea that one can get that much MORE and put out that much LESS seems to cause some (many??) otherwise rational folks to put aside common sense.

Call me old fashioned or overly cautious, but at the beginning of all this... when the idea of adjustable rate mortgage first caught my attention, it just appeared to be based on a false premise, that what you cannot afford now, you will be able to in the future. While that MAY be true, it did not seem prudent to me to bet on it. But then living below ones' means does not stimulate the economy in the way "they" would have us do either, though it is a lot more do-able and comfortable, in my opinion.

[Mainer61]

Real estate people are as much (if not more) to blame as bankers...and I have been both so I feel that I can say that. In the midcoast, MBNA moved in and prices went through the roof...their executives would pay anything..when they left...the money went with them and prices are coming down. Thankfully I just sold my house (after an unbelievable 17 months on the market). However, I sold it for less than the appraised value, as I had to let it go. There are very overpriced homes still in this area. People need to become realistic...except that many paid too much and now will lose money when and if they sell. It's a mess.

[flycessna]

There are lot's of factors that can determine a homes value..........but ultimately the value of anything is whatever someone is willing to pay for it. I had felt like the increase in home prices here in Maine were a little hollow. Maine has not had a great economy, nor has wages been increasing. But I took advantage of it and tried to leverage myself by selling one of my properties. If the prices decline slowly, which still remains to be seen, I think everyone can wether it just fine and in fact maybe take advantage of some depressed sales. But if this market crashes....along with national economic stagflation...not to mention Maine's precarious economic state itself...who knows what could happen. Maine could very well end up like Michigan with 30% of the homes vacant and boarded up.

[Bydand]

Hate to break the news, but Michigan isn't 30% vacant and boarded up. Been there just recently, and know the areas I was in, this is far from the reality of the situation.

[K-Luv]

Originally Posted by mainebrokerman

you cant just blame the banks,, say a bank approved me for my million dollar dreamhouse,,,THAT DOESNT MEAN I WILL BUY IT,,,(if i couldnt afford it)
especially, on an ARM,,,knowing the rates will go up significantly,,

Many, many people did buy homes that they couldn't afford, partially because they were tricked into thinking that they could, but mostly because Economic Sensibilities 101 is something that is not taught in high school (and only in college to those that want to take it). Most Americans do not know jack about managing finances, and that is their own fault. I have no sympathy for anyone who puts themselves in debt without at least realizing the consequences first. Something like what, 70% of Americans with credit cards are an average of one payment late on their bill? Maybe this country needs a serious depression to wake itself up.

Ok, off the soapbox....

You know, for the amount of people who live in the state of Maine, and the lower-then-average incomes, I would have to say that just shy of 500 homes sold in one month seems pretty good. In fact, that is about 300 more then I would have thought to have sold. And 500 homes sold in the month of January, one of the coldest, snowiest months of the year. 500 seems like an excellent number for Maine. I dunno. Just how I see it.