Maine’s real estate market has felt like a broken record for months: declining sales, skyrocketing prices, high demand and paltry inventory.

May home sales figures released Tuesday by the Maine Association of Realtors tell a similar story, but realtors say a new chapter is about to begin.

Interest rates are climbing, and while listings are nudging upward, there has been no significant freeing up of the state’s tight inventory, particularly in the “affordable” range below $300,000.

The cooling effect has already begun, according to some real estate professionals.

Sales in Maine declined by about 12 percent last month over a year earlier, while the median sales price increased by 15 percent. May marked the 11th consecutive month of year-over-year sales declines.

The statewide median sales price for homes sold last month was $350,000. The median indicates that half of the homes sold for more money and half sold for less.

Sales for the past three months have been historically low, but there have been “small gains” in the number of homes for sale across the state, said Madeleine Hill, president of the association and designated broker at Roxanne York Real Estate in Harpswell.

“Some of that gain is our typical spring home selling seasonal increase, but we’re also seeing home buying demand impacted by rising mortgage interest rates and home price appreciation,” she said. 

Hill isn’t quite ready to declare a market change, but she’s watching closely. 

“As sellers and buyers adjust, time will tell if we are transitioning to a more balanced market with slower price growth and less buyer competition for for-sale inventory,” she said.

ANALYSTS EXPECT SLOWDOWN

Interest rates have more than bounced back from their pandemic-era lows to their highest since before the Great Recession.

According to Freddie Mac, the average rate included in buyer contracts for a 30-year, conventional fixed-rate mortgage was 5.23 percent in May, up from 4.98 percent in April. The average rate across 2021 was 2.96 percent, the organization said.

Mortgage rates have continued to climb. Last week, in the biggest one-week jump in decades, 30-year fixed-rate mortgages climbed to 5.78 percent, according to Freddie Mac. That’s a level not seen since 2008, and realtors estimate that will slow down buying substantially.

In Cumberland County, the median price was $510,000 for the three-month period ending May 31 – an increase of 17.8 percent from the same period a year earlier, and the highest median price in the state. But sales continued to decline at an even higher rate of 19.3 percent.

The Realtors Association also looks at three-month data for county-by-county comparisons to get a larger sample size of sale transactions.

Hancock County saw the largest decrease in sales. Between the start of March and the end of May 2021, Hancock County realtors sold 242 homes. In the same three-month period this year, they sold 139, a 42.6 percent decrease. 

Aroostook County saw the most dramatic year-over-year price increase for the three months – 43.5 percent – but with the average price at $155,000 the county still has the lowest-priced real estate in the state. 

Tom Landry, owner of Benchmark Real Estate in Portland, felt a shift two or three weeks ago, like a little bit of the air went out of the market. 

There will be a cooling off, especially as the higher interest rates take effect, Landry said, but it will be a few more months before that’s reflected in any sales data. 

List prices, initially high, are coming down as sellers reel in their expectations and buyers rethink how high they’re willing to bid. 

That said, these price reductions are coming after a roughly 50 percent price hike in some cases, Landry said, so the market remains strong.

He doesn’t expect to see a crash but is seeing the market start to pivot. 

“If you’re a seller, it’s a damn good time to get on it, but be reasonable,” he said. “Buyers, your time may be coming, and it may be coming in spades.” 

NO MORE FEEDING FRENZY

Others, though, aren’t as certain what the state’s housing market will do next.

Erin LaMarche, a Coldwell Banker realtor based in Kennebunkport, expects to see a seller’s market for at least another year or two.

“I think the economy would have to completely implode” for it to become a buyer’s market, she said.

Still, LaMarche said she has also felt a shift in market conditions.

Some first-time home buyers are having more success getting under contract, in part due to decreased competition from others who have decided to take a break from searching. It’s not the norm, by any means, but there’s been an uptick, she said.

LaMarche said she’s seen more price reductions in the past two weeks than she had in the previous two years. They’re especially common on properties that need a little more TLC.

“I think buyers are starting to decide, ‘If I’m going to be paying more on interest and prices are so high, I’m not going to be bidding on something that might need more work,'” she said.

There are signs a market shift may be starting, LaMarche said, and the next few months will be telling. She just doesn’t expect whatever it is to be drastic.

Michael Hitz doesn’t see a market crash on the way, but he is seeing changes, too.

The buyer interest is still high, particularly with move-in-ready starter homes, and the housing shortage is keeping the pressure on the price, but he said there’s not the jarring competition there once was.

“It’s no longer a feeding frenzy with insane numbers of offers on listings,” said Hitz, a broker with Maine Home Connection in Portland.

The high-interest rates are causing some people to hold off, he said, but if they’re waiting for the rates to fall, “buyers are going to be waiting for a really long time.” 

Those who are still in the game are a little more skittish and selective, Hitz said, which is helping to bring list prices back to a more realistic range. 

If change is coming, Hitz is ready to embrace it. 

“I welcome a little bit of a slowdown, because what we experienced in the last two or three years was absolute, pure insanity,” he said. 

NATIONAL MEDIAN PASSES $400,000

Nationally, home sales have essentially returned to the pre-pandemic levels after “two years of gangbuster performance,” said Lawrence Yun, chief economist for the National Association of Realtors. 

Nationally, single-family home sales were down 3.6 percent from April of this year and 7.7 percent from May 2021.

While sales have fallen for the past four months, prices are still on the rise.

The median U.S. single-family home sales price in May was $414,200, a 14.6 percent increase from a year ago. It marks the first time that the median price for existing homes has surpassed $400,000, according to the national association.

In the Northeast, sales in May were slightly higher than the month before, with a 1.5 percent increase, but were 9.3 percent lower than in May 2021. The median home price was $409,700, a 6.7 percent increase from a year ago.

Yun said further sales declines, spurred in part by an increase in mortgage rates in June, should be expected in the coming months.

That said, homes priced “appropriately” are still selling quickly, and Yun said inventory levels need to almost double before home price appreciation cools considerably and buyers have more options.

Leanne Barschdorf Nichols, a broker with Keller Williams Realty in Portland, also doesn’t expect to see any big changes until there’s more inventory.

There aren’t enough units, so prices are up, and she doesn’t see a lot of relief for buyers on the horizon.

“It’s all driven by demand, and what’s going to change that?” Nichols said.

If anything, the higher prices and interest rates have only served to box local buyers out of the market and make room for out-of-state buyers, she said. The spring market was significantly more “aggressive” than she thought it would be.

Like LaMarche, Nichols said everything would have to completely fall apart before the market swings in buyers’ favor.

There have been some price reductions, yes, but she said those are largely corrections from people who have gotten “ahead of their skis” and listed a property at an unreasonably high price.

“Until we see a significant increase in inventory, I think we’re seeing more of the same,” she said.