Maine Sellers Market
Maine homeowners have always had a strong interest for information about the local housing markets. "Are prices going up? How's the market? Is now a good time to sell?" they ask.
The Maine Real Estate market usually mirrors the national real estate trends. Some areas in Maine may be better or worse than what the national market indicates. Home prices may rise faster in some communities than others. They may also decline faster as well.
The Maine Real Estate Information Service provides research reports and local newspaper articles may also supply useful answers, but the information is usually buried in economic jargon. What is a "median price" anyway? What does "seasonally adjusted" mean? Does anyone understand "unsold inventory index?" “Absorption Rate?”
To help you follow the numbers, here are some helpful definitions:
An oft-cited indicator of the strength and direction of a housing market, a median price is the midpoint of all the prices of homes sold in a given area during a specified period. Midpoint means half the homes sold for higher prices and half the homes sold for lower prices. The median isn't the same as the average, which would be calculated by totaling all the prices and dividing by the number of prices.
The median price can be affected over time by the characteristics and sizes of homes sold as well as price trends. For example, if the market shifts from starter homes to luxury mansions, the median price will increase even if homes are not appreciating in value.
The Maine housing markets are naturally more active in the spring and summer months because people prefer to move during the longer warmer days and between school years. That pattern means it's difficult to make meaningful comparisons between results for different months or quarters of the same year. To overcome this hazard, economists statistically tweak the reported number of homes sold during various periods to reflect seasonal variations. The tweaked numbers are denoted as "seasonally adjusted."
Price discount or List Price to Sales Price Ratio
The "price discount" is the percentage difference between the seller's initial asking price and the actual purchase price of the same home. For example, if a home were priced at $200,000 and sold for $190,000, the discount would be 5 percent. Price discounts are usually reported as an average for a set of home sale transactions. A small percentage, on average, means the market favors sellers, while a large average discount signals a buyer's market.
Unsold inventory index and Absorption Rate
The” unsold inventory index” indicates the pace of the market, and is calculated by measuring how long it would take for all the homes currently on the market to be sold at the current rate of sales. A smaller index is a positive sign for sellers, while a higher number is good news for buyers. Many people have opinions on the state of the housing market, but the easiest way to understand current and future conditions is to monitor the movements in the real estate “absorption rate”. Mathematically, this is the measurement of current housing supply divided by the current rate of sales, expressed in months of supply.
For example, if 6 homes located in Brunswick priced between $200,000 and $225,000 sold over a period of 12 months, the absorption rate would be 1 home sold every 2 months. If there’s a lot of inventory in that particular price range, let say 20 homes for sale you could say Brunswick has over a 3 year supply and it could take several months to sell the property priced between $200,000 and $225,000. This will help home sellers determine how long it might take to sell their home.
So how do we put all this into perspective for the Maine market?
Consider this: The typical home seller would like to move within two to four months of placing their home on the market, so over time, we have developed expectations in real estate and have defined situations as follows:
- Sellers Market: 1 to 4 months supply of homes
- Neutral Market: 5 to 6 months supply of homes
- Buyers Market: More than 6 months supply of homes