Many Portland area residents would need to double their income to buy a home.

Grace Rote in the apartment she shares with her husband in downtown Portland on Thursday. The couple recently purchased a home in North Yarmouth after several months of searching at a time when housing affordability in southern Maine is at an all-time low. Brianna Soukup/Staff Photographer

Looking to buy a home in the Portland area? You will need to earn over $130,000 to make this happen.

This is a problem for many prospective homebuyers in southern Maine, where the median household income is less than $62,000.

A new report from Harvard University’s Joint Center for Housing Studies illustrates the growing struggle of buyers and renters across the country and in Maine, where the typical home is unaffordable for middle-income residents in all four of the state’s largest metro areas.

The survey, released on Wednesday, also highlights the sharp rise in the cost of ownership or rent and how competition to obtain such homes has intensified. But there are signs that the housing market could begin to cool as interest rates rise, new homes are built and affordability pressures mount, although obstacles remain for first-time buyers and low-income families, the report states. .

The average price of a home in the United States has exceeded $400,000, making home ownership less affordable for the average buyer. In the Portland-South Portland metropolitan area, which includes Cumberland and York counties, the median home price is now $472,790, a price that calls for an annual income more than double the area average.

A decade ago, an income of just $58,000 was needed to buy a typical Portland home for about $230,000. The income needed to buy a home in the Portland area jumped from $92,600 in April 2021 to $130,000 this year as average home prices soared 20%.

“Having a 20% increase in a year is dramatic and has a big impact in terms of affordability,” said Daniel McCue, senior research associate at the Joint Center for Housing Studies and one of the authors of the report.

Over the past year, Beth Tembreull and her husband, Jarrod, have seen how high prices and stiff competition make it nearly impossible for first-time buyers to get into a home. The couple, who rent in Portland’s West End, began looking for a home in April 2021 after he finished his residency at Maine Medical Center and got a job as a doctor at Midcoast.

They initially wanted to buy a duplex in Portland so they could rent the second unit. They made what they thought was a competitive bid on a duplex, but lost to an offer just $200,000 above the asking price. They shifted their focus after realizing that, as first-time homebuyers, they couldn’t compete with investors with capital and cash who are buying multi-unit buildings.

“Jarrod has just come out of 13 years of training and I’m a teacher,” said Beth Tembreull. “We’re trying to save money, but we don’t have the capacity to save as much and we can’t be competitive in this market.”

But his search for a single-family home — first in Portland, then in other areas closer to Androscoggin County — was just as frustrating. They’ve gotten a little burned out in the process and wonder how others will fare in the real estate market.

“If we, as doctors and teachers, can’t find a place to live, how will the stream of immigrants arriving in Portland find a home?” she said.

‘MORE DIFFICULT TO OVERCOME FAILURE’

Rising home prices kept prospective homebuyers from renting, adding to the home rental crisis that has been building up in Maine for several years. At the same time, increased competition for limited rental offerings has accelerated the year-over-year increase in typical rentals from 0.8% in December 2020 to 16.2% in December 2021, the report states.

Portland’s rental affordability gap has been growing for years. A 2015 investigation by the Press Herald found that average market rents rose by 40% in five years — after accounting for inflation — and that renters’ incomes declined over the same period. At the time, the average family of tenants would need to spend 59% of their monthly income to live in an average two-bedroom apartment for sale in Portland.

Grace Rote in the apartment she shares with her husband in downtown Portland on Thursday. The couple started looking for a home in the Portland area last October and finally signed a lease for a five-family house in North Yarmouth five days ago. The process was ‘quite a ride’, she said. Brianna Soukup/Staff Photographer

Large increases in rents make it more difficult for prospective buyers to save for a down payment, further delaying the transition to home ownership, according to the report. One in five Maine tenants pays more than half of their income towards housing costs, far exceeding the standard 30% considered affordable by housing advocates.

“It’s harder to fill the gap and for tenants to own a home,” said McCue, co-author of the Harvard report. “The inequalities that are increasing are quite substantial and staggering.”

McCue said Maine’s trends are similar to other parts of the country, but Maine faces extra pressure because it’s an attractive destination for people who have the geographic flexibility to work remotely.

For buyers who can enter the market, many need to expand their search outside of Portland to find more affordable options.

Dava Davin, founder and director of Portland-area real estate agency Portside Real Estate Group, said she sees a “drive until you can pay” trend as home prices in Portland and South Portland have increased year over year.

“This is driving people out of Portland more and more to find comfortable, affordable housing for them,” Davin said.

Davin saw first-time buyers with varying budgets entering the market, including some potential buyers with budgets of $750,000. Even with interest rates rising, she said, there are still loans with lower interest rates available to first-time homebuyers.

“I think not everything is doom and gloom. There are some positive things happening in this space for people with a lower price and first-time buyers,” Davin said.

Madeleine Hill of Harpswell-based Roxane York Real Estate said there is not enough inventory to meet the high demand from buyers, which she credits to a combination of people moving to Maine to work remotely and the increase in population. in the state.

“I think buyers are feeling low and a lot of people I’ve worked with have broadened their search criteria geographically to maybe exit the Portland market if something is more appropriate for their funding and budget,” Hill said.

Grace and Joseph Rote started looking for a home in the Portland area last October and were finally hired for a home in North Yarmouth five days ago. The process was “quite a ride,” she said.

The couple started their search closer to Portland, but quickly expanded it to 30 minutes from the city. When looking at the houses, they all seemed to cost $575,000, even those that were small or required a major renovation, said Rote, an architectural lighting designer.

When the Rotes started making offers, they found themselves outmatched even when they offered $75,000 above the asking price, a situation she described as “just outrageous.”

“As interest rates are going up, I’m sure house prices will start to fall, but just from what I’m seeing from the people I’m talking to, I don’t see demand going down. ” said Roth. “Everyone in my mid-millennium age group, late 20s to 30s, is just starting to look for a home now. And if prices go down, I can’t see how demand is going to go down. And I’m worried that it will stay that way for much longer.”

SOME POSITIVE SIGNS

First-time homebuyers still face huge hurdles in getting their own home. As prices continue to rise along with interest rates, the savings and income needed to qualify for a home loan have soared for first-time and middle-income homebuyers, the report states.

At today’s prices, a first-time homebuyer would need to make a down payment of $27,400, or 7%, on a mid-priced home.

“Without help from family or other sources, this requirement alone would exclude 92% of renters, whose average savings are just $1,500,” the report said.

If the required down payment is reduced to 3.5%, the monthly mortgage payment would still be more than $2,000. In combination with rising prices, recent interest rate increases have raised the minimum income required to pay these payments from $79,600 last year to $107,600 in 2022. This effectively prices about 4 million households of renters in across the country, the report says.

But there are some positive signs that potential homebuyers could get some relief from rising prices and stiff competition, according to the report.

Housing construction has reached a new record, with the start of construction of single-family homes reaching 1.1 million in 2021, passing the million-unit mark for the first time in 13 years, according to the report. Multifamily home starts are at a 30-year high of 470,000 units. The last time production was nearly as high was in 1973.

The strong influx of new homes, along with rising interest rates, should help to slow the rise in home prices and rents, according to the report. If the Federal Reserve manages to tame runaway inflation without causing a downturn, the short-term outlook for housing is largely positive, the report’s authors say.

“Demographic changes are favourable, unemployment is low and wage growth remains strong. Supply-side conditions are also encouraging, with supply chain delays decreasing and a record number of homes due for completion in the coming months,” they wrote. “However, it will take time for the additional supply to catch up with the demand and produce any significant improvements in affordability.”

Staff writers Halina Bennett and Sam Pausman contributed to this report.


Use the form below to reset your password. When you email your account, we’ll send you an email with a reset code.

” Previous

Next ”

Leave a Reply

%d bloggers like this: