Where (Oh Where) has the “Middle Market” Gone?
Maine real estate continues to show very strong year-over-year volume growth numbers. The Maine Association of Realtors most recently reported a 25% increase in sales volume for the month of September which is more than double that reported at the national level over the same time period. Half of the homes in Maine sold for $173,000 or less compared to a northeast median sale price of $240,900 (39% higher) reflective of a long standing pattern of lower priced housing stock in Maine. Improvement in median pricing in the past year is lackluster with low single-digit gains for both Maine and the northeast region which is lagging the national data.
We see the “Middle Market” real estate as a segment that clearly has soon room for improved fundamentals given the emergence of Maine as a national and international lifestyle destination. I am not sure a definition for “Middle Market” homes in Maine exists. Maine is such a large state geographically, further complicated by a very high concentration of population centers in the southern and coastal communities. At Legacy Properties Sotheby’s International Realty, our expertise is primarily associated with coastal communities from York County through Hancock County including Cumberland, Sagadahoc, Lincoln, Waldo and Knox Counties. Although we do provide services to many other parts of the state as well. While there are many methodologies which could be employed, we are going to define the “Middle Market” as the broad price point segment between the active liquid real estate segment ($500,000 and lower) and the waterfront/luxury segment ($1 million and higher). This “Middle Market” segment consists of homes valued from $500,000 to $1 million. While it is actually quite a small part of the overall Maine real estate market, it is a critical element for so many of our buyer and seller clients and, therefore worthy of consideration.
There are 526 homes (and an additional 114 pending) which have sold in 2013 (YTD) between $500,000 and $1 million. There is a high correlation to coastal communities and southern Maine. “Middle Market” sales in York County and Cumberland County accounted for nearly 75% of the unit volume statewide. Even within these counties there are high concentrations of sales in a handful of towns with the most activity being in Portland and its suburbs of Cape Elizabeth, Falmouth, Yarmouth, Cumberland and Scarborough. York, Kittery and the Kennebunks were the beneficiaries of more than 60% of the “Middle Market” sales in York County. In addition to the coastal element, all of the above towns have close proximity to the economic centers of Maine, Massachusetts and/or New Hampshire. There is also a very high correlation to highly ranked public school systems, town services, infrastructure, cultural and outdoor amenities. Needless to say, the size of the community is a key indicator as well. For example, Camden Maine, with less than 6,000 residents, shares many of the attributes to support strong “Middle Market” activity despite being 30% +/- smaller than other cited communities.
Given the relatively small number of buyers in this broadly defined category, it can be more difficult and volatile with respect to pricing, and much more difficult to come to decisively similar comparable homes. After considering the location, the age of the home, design, maintenance and unique attributes (acreage, water views, marsh views, privacy), it often becomes a series of unique uncorrelated events between a single buyer and seller. While there are a dozen neighborhoods which are reasonably well defined and can be held to a mathematical standard of analysis, they are far and few between.
The “Middle Market” peaked in 2005 with sales reaching 820 units statewide. There was a decline of more than 50% from the peak to trough sales in 2009 with less than 400 homes sold. Despite significant improvements in overall market conditions, the “Middle Market” will likely only realize sales slightly above 600 units in 2013. We remain confident this relatively small but vitally important segment of the market will continue to show gains in coming months and years. It will be driven by both the national economy and the incredible lifestyle real estate values offered in Maine. The expansion in telecommuting will be a stable feeder of new Mainers looking for access to the many incredible and easily accessible arts, culture, outdoor and culinary offerings.
As for the market today, it will be a bit more of the same as the upturn in the “Middle Market” is not likely to be dramatic, but we believe it will be steady. It will require the ongoing patience of sellers recognizing there are only a handful of buyers in any given market at any particular point in time. Conversely, for buyers, it remains a market with a supply/demand imbalance. The supply of beautiful, well-built and well-located homes priced between $500,000 and $1 million, is well in excess of the number of buyers. This imbalance creates opportunities, that have long since dried up in other market sectors, for buyers to find a fantastic home at what will likely be considered a very good long term value.
Maine Listings is the source of data, its accuracy cannot be guaranteed.
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Objective, Perspective & Consequence
– Competitive Pricing –
Whether you are John Q. Public, the CEO of a Fortune 500 Company, an investment banker, a world economist, or a Phi Beta Kappa graduate, it is difficult to be objective about your own property. The accurate fair market value of a property can only be determined by using objective criteria.
A seller may assume they can anticipate what a buyer’s perspective may be. In reality, this is difficult to do, since the seller and buyer have very different perspectives.
Today’s buyer is sophisticated. With access to data on sold and competing properties, many buyers have done their own market analysis of comparable properties prior to scheduling a showing. They are able to judge and bracket value. Their estimate of “current fair market value” may even be more accurate than last quarter’s bank appraisal.
Buyers pay attention to competitively priced properties. And cooperating agents focus their efforts where they anticipate there will be a sale. When the distance between listing and selling price is more than 10 or 12 percent, it is hard to get the attention of buyers and agents alike. They may not have time to inspect all properties in their price range, and so will limit their search to those that are the most competitively priced.
There are consequences to every action. A positive consequence of pricing a property competitively is that the property sells.
George Ballantyne is a Senior Vice President with Legacy Properties Sotheby’s International Realty specializing is High Value and Hard to Value Maine Real Estate
Unless otherwise specified, all Maine real estate statistics were compiled using Maine Listings data. There is no guarantee of the accuracy and completeness of the data.
