Real Estate: When will the market slow down?

By Matt Trudel 

That is a question many people are asking these days.  How long can this market sustain at this increasing pace it has been on?  Market values have been escalating consistently for the past 4 years and the last year and a half we have seen a solid 15 to 20 percent increase.  This of course means it is a great time to sell and cash in on your equity, but you have to have a place to live.  Renting may be an option if you can find one.  Just like the supply of houses on the market are low, rentals are hard to find.

The number of buyers that are out competing for homes is at an all time high because the inventory is so low.  More companies have learned that having employees working remotely is cost effective, and this has led to a lot of out of state people purchasing homes here in Maine.  The more buyers competing drives up the price and it turns into a bidding war.  A year ago, approximately 20 percent of homes would sell for more than the listing price.  This past month over 57 percent of homes sold for more than the listing price.

In order for things to slow down we really need more inventory.  There are a lot of houses being built right now, but most of those are already under contract.  Even with the cost of building materials skyrocketing, builders have no problem selling new homes.  Getting a building permit is a different story, especially in Windham.  That’s another article for another day perhaps.  Well, let’s just give you a quick explanation of what is slowing builders down.

In Windham, they only hand out a certain number of “Growth Permits” per month.  You need a growth permit in order to be able to turn that into a building permit.  The growth permits are not handed out on a first come, first serve basis.  It is done by a point system method.  If you are a resident of Windham, you get more points for every year you have been a resident.  I know someone from Casco who bought a lot in Windham in February to build a house on.  Early March he applied for a growth permit, and today he still doesn’t have one.   That’s four months he has been waiting, and the cost of building his house has gone up probably 20 percent.  He should be finishing the final touches and moving in, but instead he just has to wait while others get their growth permits because he lives in Casco.

I do not see any slowing down of this market anytime soon, and definitely not this year and it is very unlikely to slow down next year.  The demand is just too strong right now, and interest rates are still low.  When interest rates get up around 6.5 percent, that will likely slow things down, but we are a couple years away from that happening in my opinion.

This article was written by Matthew Trudel, Owner of Five Star Realty in Windham, Call him at 207-939-6971.