Real estate still real attractive

Tuesday, March 1, 2005

PULSE: Edward D. Murphy

Portland's real estate market is settling down from its robust nature of last summer, but it still remains very healthy.

For the year, prices increased 16 percent, according to figures from the National Association of Realtors, outpacing the national increase of 8.2 percent and the regional increase of 15.4 percent.

But the gain in the fourth quarter slowed dramatically from midyear.

Portland's gains in home prices led the Northeast region in the first and second quarters of 2004, but for the final three months of the year, the metropolitan area slid well back into the pack.

The area still saw median home prices rise 9.3 percent in the fourth quarter to $236,600, but that rate of increase was behind a dozen cities in New Jersey, New York, Connecticut and Massachusetts.

Part of the reason for the slightly slower rate of growth might be that the increase was so rapid a year ago. In the April-May-June quarter of 2004, for instance, home prices in Maine shot up 23.4 percent; it's unlikely that pace will be exceeded this year, so expect those numbers to show a "slowing of the market" in a few months, even if prices are still up over last year.

There's no sign that buyers are no longer interested in homes in Cumberland County, said Alan Peoples, president of Home Sellers of Maine.

Peoples said there's talk all the time that the real estate market must be cooling, but that talk never seems to translate into reality. "Every time I look at it and I start to break it apart, it's not going down," Peoples said. "It's holding its own."

Peoples noted that sales prices continued to increase in January and days on the market - the average length of time it takes for a house to sell - has barely moved for two years.

In 2002, a house was on the market for an average of 61 days. The next year, it was 67 days. Last year, the average length of time on the market was 69 days.

That suggests that houses are still moving - an extra week to sell over the course of two years does not suggest a market that is stagnating, Peoples said.

Peoples also pointed out that interest rates remain very low and are not likely to rise rapidly, although they are forecast to move up over the next year. The labor market in Portland is still solid, with unemployment well below national averages, and inflation remains tame, Peoples said.

The only ominous sign for real estate is that rising prices have made it increasingly difficult for local buyers to afford a home - but prices are being pushed up anyway because of buyers from away, Peoples said.

Peoples said those moving here from Boston or New York see the Portland area as safe, it offers a simpler and easier pace of life than many cities, it provides the cultural amenities of larger cities and it's in a great location near the water on the East Coast.

Those four factors, Peoples said, are enduring attractions that continue to attract people to the area. And, because many of them are moving here from places where home prices are even higher, the prospect of a median-priced home near a quarter of a million dollars isn't daunting.

For them, "the water's flowing in the right direction," Peoples said.