The housing market has demonstrated remarkable resilience in the face of rising mortgage interest rates, and we are now past the usual lull we see in the weeks and months leading up to a contentious presidential election. Despite initial fears of a market downturn following unsustainable growth during the pandemic, the data now shows that the housing market is stabilizing rather than crashing.
Home mortgage interest rates are also anticipated to stabilize at an average of approximately 6.08 percent for a 30-year fixed-rate loan. Although a significant drop in home mortgage interest rates is not expected, the stabilization will bring much-needed predictability to buyers. Additionally, increased inventory for both existing homes and new builds will provide relief to those who have been sitting on the sidelines, discouraged by the competitive conditions of recent years.
One of the key trends affecting inventory has been the "lock-in effect." Many homeowners have felt tied to their current properties due to historically low mortgage rates of 2 percent to 3 percent, making the prospect of selling less appealing. However, this phenomenon is expected to diminish over time as market conditions normalize, encouraging more homeowners to list their properties and increasing the available inventory.
Currently, the median sales price for a single-family home in Windham stands at $580,000. Projections indicate that prices will rise modestly, with increases of 2 percent to 4 percent expected in both 2025 and 2026. These growth rates reflect a healthier balance between affordability and market value creating more opportunities for buyers to enter the market without facing the extreme price surges of recent years.
Research from the National Association of REALTORS® reveals that the average homeowner has gained approximately $147,000 in housing wealth over the past five years. This has widened the wealth gap between homeowners and renters, underscoring the long-term financial benefits of homeownership. As more inventory becomes available, improved affordability could help close this divide, making home ownership accessible to a broader demographic.
The majority of single-family homebuyers in the state are local, followed by buyers from Massachusetts, New Hampshire, Florida, and New York. Notably, single women have emerged as a significant group, accounting for approximately 24 percent of home purchases. Another growing segment includes multigenerational buyers and those pooling resources, reflecting broader social trends in family dynamics and economic cooperation.
Another development in recent years has been the increased use of home equity by buyers. Many homeowners are leveraging their accumulated wealth to make cash offers on their next property. Buyers are also. Some 25 percent of first-time home buyers used a gift or loan from a relative or friend for their home purchase and another 20 percent borrowed from their 401Ks or removed funds from other financial assets. This underscores the resilience of the housing market, as buyers find creative ways to navigate higher interest rates and other economic pressures.
However, challenges to affordability persist. The cost of homeownership continues to rise, influenced by factors such as increasing property taxes and rising homeowner's insurance premiums. These expenses add to the overall cost burden, particularly for first-time buyers who may already face difficulties saving for down payments. Addressing these affordability challenges will be crucial in ensuring a healthy and accessible housing market. By focusing on expanding inventory and addressing affordability challenges, the housing market can foster a more inclusive and sustainable environment for all participants.
Nicole Foster is a real estate Broker with nineteen years of experience helping buyers, sellers and investors in southern Maine. Follow Nicole on Instagram 207nicolefoster or facebook.com/sellingmaine. <
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