On May 24, Dan Brennan, Director of MaineHousing, was a commentator for the Maine Real Estate & Development Association’s (MEREDA’s) 2022 MEREDA Index. Dan’s comments on the Residential Sector follow Economist Charles Colgan’s analysis for 2021.
The MEREDA Index is a measure of real estate activity designed to track changes in Maine’s real estate markets. The Index is a composite of nine seasonally adjusted measures reflecting both new development and transactions involving existing properties and it covers both the commercial and residential markets statewide. The most recent edition covers the year 2020 and provides commentary on the Commercial, Residential, and Construction sectors. The MEREDA Index for 2021 is 116.3
THE RESIDENTIAL COMPONENT: 120.8
[Charles Colgan Analysis] “All components of the residential Index showed growth in 2021 over 2020. Existing unit sales and mortgage Originations grew by about 5% each, but demand clearly exceeded supply in the residential market because the median price index grew by over 14%. The median price for residential sales hit an all-time high of $303,000 in the third quarter. With an Index value over 150 in the second half of the year the median home price in Maine has grown by more than 50% since 2006. This high price probably suppressed sales of existing units to some extent, but it definitely had an effect on housing construction. The index for residential permits grew by 24% over 2020.”
[Dan Brennan, Director of MaineHousing] “Buying a house in Maine has never been harder. Home prices are soaring, and demand is at a peak. Unfortunately, this red-hot residential marketplace is leaving more and more Mainers out of the equation.That’s why affordable housing in Maine remains an important topic.
Creating enough housing to fill the ever-growing demand has never been more challenging than over the last two years of the Covid-19 pandemic. We also have never had a greater opportunity to make large gains in boosting our total housing inventory, thanks in large part to the support coming from both Augusta and Washington, D.C., as well as our municipal partners in places like Old Orchard Beach and Auburn. While the challenges are many, the future also looks promising with so many new projects on the horizon.
MaineHousing, along with partners across the affordable housing landscape, broke development records in 2021 and currently has the largest pipeline in our history. 524 new rental units were put online, creating more housing for families, older adults, the disabled, and those needing extra support. This represents a $121 million investment that is fueling economies from Belfast to Biddeford. Many of those new units have been opened in Maine’s larger service-center communities of Bangor and Portland, where the housing shortage has driven rents and home prices to astronomical levels.
MaineHousing staff, the construction community, and our development partners – both public and private – have adapted well to the challenges presented by ongoing supply chain and labor constraints. From advances in energy efficiency technologies to fast-tracked zoning changes, we have found innovative solutions that are helping us continue to produce units in these difficult times.
As we saw skyrocketing sales prices and an ongoing inventory shortage in 2021, our single family First Home mortgage products trailed off slightly. That said, we maintained record-low interest rates, below three percent, while issuing 725 new First Home mortgages totaling over $114 million. Most of those mortgages also qualified for our Advantage Program, providing eligible borrowers with a $3,500 grant for down payment and closing costs. That program alone provided $2 million in home buying assistance to 97 percent of those approved for First Home mortgages. While the market remains very challenging, we are optimistic we will eclipse our 2021 production numbers in 2022 allowing even more Maine
families to build equity in a home they own.”