Buying a home in Maine is more affordable now than at any time in the last two decades. Growing rental rates and moderate home price increases are just two reasons why this is happening. But the opportunity may be limited. As more Mainers look to buy a home, prices will creep up and affordability could slip. This is why it’s important to take advantage of this unique period of affordability while it lasts.
June is National Homeownership Month, and MaineHousing is recognizing the positive changes in the state’s housing landscape. Interest rates are low, including our First Home Loan rate, and our research shows that statewide housing is affordable.
Each year, MaineHousing measures the affordability of buying or renting in Maine. It’s called the “Affordability Index,” it looks at whether homeownership is in reach on a statewide and countywide basis. During the last two years, MaineHousing’s statewide affordability index indicated a household earning median area income could afford to buy a median priced house. This hadn’t occurred since the index was first developed nearly 20 years ago.
Why is this happening now? Slowing home sales in the aftermath of the 2007-2008 recession and a shift in preference to renting drove rents higher. These two factors, combined with a less-than-confident consumer, resulted in a slow housing market recovery. Though this certainly hasn’t been good for the real estate industry, for those households at median income and up, it’s created a great opportunity.
Homeownership is a strong aspiration. Having a home gives us a sense of independence and security. It provides a place to raise children and an opportunity to become part of a neighborhood. Stronger neighborhood networks in turn have benefits for all of us. It’s also a long-term investment that can be handed down.
Maine is different from the nation as a whole when it comes to the housing market. In April, home prices increased by 6 percent nationally, 4 percent in the Northeast, but only 1 percent in Maine. Maine has a history of slowly lagging into economic downturns, which is good. Unfortunately, Maine recovers slowly as well, but it does recover. Within Maine the housing market is recovering and as a result there are areas where home buying is not as affordable. But from a statewide perspective it still is.
Also in April, home sales showed great promise, up more than 24 percent compared with April 2015, according to the Maine Association of Realtors.
Penobscot, Aroostook, Washington, Piscataquis and Waldo counties are considered affordable, according to our Affordability Index. Last year, 170 of the 750 buyers who purchased a house using MaineHousing’s First Home Loan were in these counties. Within Penobscot County, more urban communities such as Bangor, Veazie and Orono may be more challenging, but surrounding towns such as Hermon, Hampden and others are not.
MaineHousing has created an opportunity to make buying a home more affordable. Since 2015, our First Home Loan program has included $3,500 in down payment and closing cost assistance. We required that buyers take a hoMEworks-approved homebuyer education class because we believe successful homeowners are educated ones. Last year, more than 2,100 homebuyers took a class, up nearly 70 percent in one year.
But that’s not all that MaineHousing is doing.
Because it’s National Homeownership Month, MaineHousing is offering a below-market, 30-year fixed rate of 2.99 percent (3.966 percent APR, 0 points) for June only.
Active-duty military and veterans receive a 0.25 percent discount to that fixed rate. It’s now 2.74 percent (3.726 percent APR, 0 points) for June only, and the first-time homebuyer requirement is waived. This presents a rare opportunity for Maine’s estimated 120,000 veterans to buy their first home or move up. The First Home Loan is available from participating Green Key Lenders. A list is on our website, mainehousing.org/homeloan.
Going into the busy sales season, our home loan numbers are outpacing last year’s at this time. They, too, are solid indicators that the housing market is providing a buying opportunity that should not be missed.
John Gallagher has served as director of MaineHousing since 2012.