It has been a challenging real estate market for the high end over these past five years, but it seems increasingly likely that 2012 was the bottom of the market, and 2013 will be the leading edge of the recovery.
We keep coming back to the old adage “all real estate is local”, and it’s as true today as ever. Specific markets that attract foreign investment, such as New York, Miami, and San Francisco, are all experiencing robust recoveries. Primary home markets in many affluent areas are also rebounding, and markets such as Houston barely slowed with the downturn. As we wrote in our last letter, 2012 turned out to be a good year for Camden/Rockport as well as for select other Maine coast markets. There were a number of sales of high-end properties, and a fair amount of excess inventory was absorbed. Just as certain markets in Maine and further afield are again showing some activity, we are confident that the midcoast region will soon be on its way to a solid recovery.
We would caution, however, that recent sales activity has been fueled in large part by the perception of tremendous value. Now buyers are coming back in to the market with slightly more reasonable expectations—in the last two years, we have seen a shift from buyers demanding rock-bottom bargains to buyers who are willing to pay a fair price for a good property in good condition. However, there is most definitely a new standard for value, and sellers who cling to expectations of 2006 market highs are typically finding their properties languishing on the market.
The market for second and third homes on the Maine coast is so seasonal that first-quarter numbers don’t reveal much about the actual state of the market. We remain encouraged by the shift in thinking about the market—indeed, it seems that everyone we talk to thinks that the real estate market is again thriving. The numbers don’t yet bear this out. The market above $1,000,000 in Maine last year was slightly better than in 2011, but the market above $2,000,000 was way down. Certain communities had encouraging clusters of sales, while others were completely flat.
We have not seen enough activity so far to understand what 2013 will bring, although we do feel confident that the worst is behind us. We are pleased to have weathered the storm, and LandVest is well-positioned meet the next upward cycle.
The big question remaining is still about demand, and the spring and summer markets ahead will reveal whether sufficient numbers of buyers will step back in and generate a rebound with real strength and momentum. Our best guess is that a slow and steady recovery will be driven by the newly predominant buyer group, younger buyers aged 35-50. As the overall economy improves, their confidence about the future will grow, and we believe they will move into the real estate market in meaningful numbers.
This entry is brought to you by Terry Sortwell and Shannon Thompson, in our Camden office, who assist and advise real estate buyers and sellers of fine homes and estates and farms throughout mid-coast Maine.
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