Homes in Maine are One of the Hottest Investments in the Country
As COVID-19 spiked nationwide in December, Maine real estate values surged
Maine has traditionally had a somewhat sleepy real estate market. With 61% of Mainers living in rural areas, which is the largest percentage of any state in the country, and a fairly stagnant population with births and in-migration barely outpacing deaths and people moving away, home prices have generally meandered their way in dull correlation with the national market but at dampened prices. A home that might typically sell in southern New England for $500,000 might go for $300,000 in southern Maine, $170,000 further up I-95, and still less in parts west, north, and east. In Bangor, Maine, you can still buy a great family home for well under $200,000, that is, if you can find one on the market.
Sure, there have always been people willing to fork over ungodly sums of money for private access and pristine views along Maine's iconic rocky coastline (often displacing some of Maine's traditional industries in the process, which you can read more about in Colin Woodard's fascinating history of the coast of Maine, entitled The Lobster Coast). But with the exception of lavish coastal purchases, a recent pre-COVID mini-boom in the greater Portland area, and previous back-to-the-land migrations from large metropolitan areas in the 1970s, the Maine real estate market has been typically vanilla.
But from the very outset of COVID through its peak in December 2020 and now into the first and second quarters of 2021, the story has been quite different: the Maine real estate market is on fire. Long-time Bangor-area real estate agent Emily Ellis described it recently as a "feeding frenzy" with the number of buyers far outpacing sellers and little inventory on the market. "I've never seen anything like it in all my years of doing this,” she says.
According to the Maine Association of Realtors, the average median sale price in Maine over a three-month rolling period from December 2020 to February 2021 rose 12.9% over the same three months of the previous year. At the exact time COVID-19 was surging nationwide, Maine real estate values were skyrocketing. But what was particularly interesting is that prices surged the most in some of Maine's most rural counties:
Aroostook County (+42.37%)
Hancock County (+41.40%)
Waldo County (+40.21%)
Even Piscataquis County, which has a geographic area nearly the size of Delaware but a population of just 17,000 people, saw prices rise 19.21% over the previous time period. In Washington County, a particularly rural county that is the easternmost county in the United States, prices rose a more modest 9.61%, but the number of transactions jumped by 67.90%!
The greater Portland area also remains strong. Dan Weber of Portside Real Estate Group says that not only are prices in southern Maine going up, but with a rush of would-be buyers operating in such a competitive landscape properties are going under contract faster than ever:
"When we compare the first quarter of 2021 to the first quarter of 2020, median days on market is down from twenty-two to six and the median price has increased 15% from $329,900 to $380,500. With the same parameters in mind for York County, the median price is up 17% from $299,900 to $350,000 and the median days on market is down from twenty-seven days to seven days.”
According to a recent report from Redfin, Portland, Maine is one of the most competitive housing markets in the country. The report also notes that among people leaving Massachusetts, the single most popular destination is Portland. Dan Weber is seeing this, noting that nearly 32% of his clients are coming from out of state.
What has changed?
What is driving all of this sudden interest in Maine? To begin with, Maine actually is a great place to live. Comparably speaking Maine has a low cost of living, recreational opportunities for people of all ages, easy access to some of the most beautiful places in the world, four distinct seasons (if you count spring, which can be vanishing short), and generally nice communities with kindhearted people (although Mainer's reticence about so-called people "from away" is well known).
Maine is also correctly perceived as a particularly safe place. Crime is low, the drinking water and air are both clean, and the state is refreshingly free of poisonous and predatory animals and natural disasters, unless you count ice storms, an occasional blizzard, and the corresponding power outages.
The Maine real estate market, like other parts of the country, has also benefited from a prolonged period of record-low interest rates. Buyers have been able to borrow for sometimes less than 3.00% at a 30-year fixed rate, which historically speaking is very cheap money. Lumber prices are also quite high right now, which makes building a new home less viable at least for the time being. When you factor in pent-up demand from consumers steadily recovering from the Great Recession over the last decade, younger buyers coming of age who are now entering their home-buying years, and extremely low inventory on the market from Mainers reluctant to make a move, it all adds up to a recipe for rising prices.
But perhaps the biggest driving force of all in pushing Maine real estate values higher right now is, of course, COVID-19.
The impact of the pandemic
As COVID-19 spread in 2020, people began leaving the country’s largest cities as many of these were seen as COVID hotspots. Fueling this exodus has also been a reformulation of the way we work. Working remotely had already begun to be more prevalent prior to COVID, but it accelerated into a phenomenon as the pandemic took hold. Some businesses have told their employees they can work from home as long as they want, possibly even forever.
If you can make New York City wages or San Francisco wages but you don't actually need to live in those places, why not live in Maine? That seems to be what many people are discovering.
Maine’s response to COVID-19 has been generally praised thanks in large part to its intelligent, affable, and communicative CDC Director Dr. Nirav Shah. Now one year into the pandemic, Maine has vaccinated a higher percentage of its population than any other state in the country, further bolstering Maine’s reputation as a safe state (though to be sure, COVID-19 has been impactful in Maine on both a human and economic level and nearly 800 Mainers have died).
Recently I interviewed Earl Villanueva for my podcast about the decision he and his wife made to live in Maine. She is a physician and he is, among other things, an architect of Amazon’s 5G platform. They now live just outside of Bangor and he does all of his work from home, traveling in and out of Bangor International Airport for the meetings he needs to attend around the world. Although they moved to Maine several years before COVID-19, their story is being replicated throughout Maine now by people who are choosing to make Maine their home while working remotely.
Real estate agents throughout Maine are seeing this play out. Emilie Bronson Blair of Better Homes and Gardens Masiello Group notes:
“The market has been booming since this time last year. With more and more people realizing they can work from anywhere, we have seen a lot of out of state buyers. There is a huge crunch on listings making a highly competitive sellers' market.”
Dan Weber from Portside has noticed this as well:
“COVID has allowed people to work from home from anywhere in the country and Maine has been a huge beneficiary of this, as people continue to migrate here for the awesome work life balance that Maine has to offer. We are seeing anywhere from five to thirty offers on a home depending on the property. We have also seen homes sell for $100,000+ over the asking price.”
In recent years, economic clusters in the sciences, healthcare, and technology have been blossoming in Maine, complementing Maine's economic reliance on its more traditional industries. Maine's hospitals and healthcare institutions and colleges and universities also provide bases of employment and fuel the economic well-being of many Maine communities. These businesses and organizations are now primely situated to attract top talent to live and work in Maine. And in the case of Earl Villanueva, a company does not even need to be based in Maine for its employees to live here.
The Future
Maine entrepreneur and former State Representative Marty Grohman, who is now the Executive Director of The Environmental & Energy Technology Council of Maine (E2Tech), correctly identified the opportunity for Maine relatively early on in the pandemic:
The Bangor Daily News also hit on the issue in a July 2020 editorial entitled, “Need to social distance or work remotely, come to Maine!”
But eventually the exodus from the big cities will end and probably reverse to some extent. If Maine wants to ensure that that the COVID-sparked work-from-home migration to the Pine Tree State continues to have legs it will have to take on things like the expansion of high speed broadband internet, which has been a perenniel goal of communities and policymakers alike. Now thanks to support from both federal and state leaders, Maine might finally be on its way to developing a robust broadband infrastructure, which would be an absolute game changer for the state’s economy. As much as the interest has spiked among homebuyers to live in rural Maine, many parts of the state remain economically distressed and continue to grapple with the impacts of globalization and automation on traditional industries. Broadband will help along with deliberate and proactive economic development efforts.
For now, real estate agents and buyers alike wonder when the fever pitch will subside. Inventory remains low, the cost of building is high, and there are far more buyers than sellers in the market, which means home prices are likely to continue to rise in the months to come. Many buyers are frustrated, getting beat out on purchases by offers far above asking price or transactions taking place on properties that did not even reach the market.
If there is hope for buyers, it may come from broadening one’s geographic target plus a combination of luck and patience. One successful buyer, David Grant, noted that home prices were so exorbitant on Mt. Desert Island, which is where he and his fiancé were originally searching, that they started looking in some of the smaller communities off the island, successfully finding and acquiring their first home in nearby Sorrento. “It was a pretty comfortable process for us. If we stuck to Mount Desert Island, though, it would have been different.”
One thing is clear, though: Maine is in the midst of a rare and robust influx of new residents. Existing homeowners have seen a once-in-a-generation surge in their home values and for sellers it has been a boon. And it has been an extremely busy year for anyone involved in real estate (e.g. real estate agents, title companies, appraisers, inspectors, tradespeople, banks, etc.). How long will it last? Only time will tell, but for now the frenzy is on.
Ben Sprague lives and works in Bangor, Maine as a V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Follow Ben on Twitter, Facebook, or Instagram and subscribe to his weekly newsletter by clicking below.
Further Reading:
Downeast Magazine ponders Mainer’s historically uneasy relationship with outsiders: https://downeast.com/issues-politics/is-maine-ready-for-an-influx-of-homebuyers-from-away/
Nate Wildes, Executive Director for Live + Work in Maine, expounds upon the nationwide urban to rural trend and why it is good for Maine: https://thehill.com/opinion/technology/548259-live-here-work-anywhere-how-the-pandemic-is-reversing-rural-trends
From the Newsletter Community…
Feedback and impact from Newsletter #1, “How Artists, Musicians, and Gig Workers Can Access Billions of Dollars in Unused PPP Funds.”
“Thank you so much for posting this article about PPP for artists. I had no idea. I met with my bank and submitted an application for a $7,500 PPP loan!”
“I have sent this article about PPP for self-employed to all my people. I am going to make them apply. THANK YOU.”
Message from Ben to newsletter readers:
Thank you to everyone who read, subscribed, and shared Newsletter #1. I appreciate it very much and am overwhelmed by the support. Thank you for reading Newsletter #2. I hope you enjoy it and find some value in it. Thank you to Emily Ellis, Dan Weber, Emilie Bronson Blair, and David Grant for providing content. See you all next week for another edition!
Oliver Sprague, the son of the author, days before they sold their own house in Bangor in July 2020 to move several houses down the street.
