Home Foreclosures in Maine Will Continue to Escalate, Analyst Says

My commentary on Portland Home sales on Maine Public Broadcasting Network's show Maine Things Considered. Read the story below:

Home Foreclosures in Maine Will Continue to Escalate, Analyst Says
August 13, 2009 Reported By: Josie Huang
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Home sales may be on the rise in Maine as first-time home buyers take advantage of government stimulus programs and lower prices. But there's debate as to whether the housing market is on the rebound, or if it has yet to hit bottom.

Originally Aired: 8/13/2009 5:30 PM

One analysis points to the latter. The online real-estate forecaster Housing Predictor says Maine's home values will deflate by 10 to 13 percent this year as foreclosures pile up and drag down prices."Foreclosures are going to rise over the next year to two years -- at least," says Mike Colpitts, editor of Housing Predictor. "For each and every foreclosure that occurs in any community, in any real estate market, the economy, locally, is damaged by $225,000, which is the average mortgage made during the real estate boom."Colpitts says Maine's foreclosure rate is lower than the national average, but will continue to escalate, even as it stabilizes in other states. He says that's because the effects of the country's subprime mortgage crisis have taken longer to show up in Maine. "Prices came up more slowly in Maine than they did in more populated markets where there were also more creative mortgages and more loose money, if you will." But not everyone thinks the outlook for real estate in Maine is so grim.

Bob King, a senior policy analyst with the Maine State Housing Authority, says those projected declines in home values sound too severe. He thinks the economy is on the rebound, pulling up home sales, and home prices along with it. "It appears from everything that I've seen in the last month or two, the number of home sales have started to tick up, and as demand ticks up then we should see prices stabilize or reverse - start going up again." King says first-time homebuyers are filling the market, driven by incentives such as an $8,000 federal tax credit and up to $5,500 from Maine Housing.

King is less inclined that some others to believe that these government incentives are artificially boosting the housing market and that once the programs run out of the money, the market will slide again. "If the economy is picking up -- and depending on how rapidly it picks up -- the natural lift that you get from a rising economy could mean that it isn't a false bottom."

Realtor Mike Woodard says that dire predictions about home values just don't seem accurate, particularly in Bar Harbor, where he is based. Housing Predictor projects a 13 percent decline in home values in Bar Harbor -- two to three points worse than in Maine's three largest cities.Woodard says that even if you factor in the bargain-basement prices for condominums, which are in oversupply in the area, home values have not dropped to those depths. "I think that we might have seen an overall drop of maybe seven percent from last year. Certainly, houses in the mid-three's have doing very well, and people are paying $340,000 to $390,000."Woodard says that housing markets for Bar Harbor and other communities on Mount Desert Island are bumping along the bottom, though other parts of Hancock County have not bounced back by as much.

One exception, he says, is Ellsworth, which offers a prime example of a segment of the housing market that is doing very well: homes under $200,000. "I do know that in Ellsworth that there appears to be a real surge in first-time homeowners taking advantage the $8,000 credit. That's helped that market a bunch and I've made a few sales off-island to young families."

Portland-based Realtor John Hatcher, a spokesman for the Maine Association of Realtors, said that strong activity in the $200,000 market is what's driving down the median price of homes being sold in Maine.So while some people take lower prices as bad news, Hatcher does not. "Median prices are down, it's just showing we're having higher volume of sales, it's just the lower end of the market that's selling as opposed to the higher end." But that is not to say that higher-end homes aren't still moving. Hatcher says he just sold a Portland home for $1.8 million -- a record for the city.