Maine Real Estate News

Recently the FHA announced changes in risk-based premiums. Surprisingly, for the first time in history credit scores will be utilized by the FHA in lending. Announces Risk-Based Premiums

Let’s take a closer look at the ten primary changes to the FHA guidelines:

Borrowers with either no score or at least 500 may get an LTV >90%.
Borrowers with a score less than 500 get a maximum LTV of 90%.
Borrowers without scores will require manual underwriting.
Upfront Mortgage Insurance Premiums will range from 1.25% to 2.25%, depending on score.
The Monthly Mortgage Insurance will range from .50% to .55% depending on score.
The premium is based on the borrower with the lowest score.
If one of the borrowers has no score, then the Non-Traditional credit grade is used.
Credit rescoring is allowed to improve a borrower’s credit grade.
All FHA Secure refinances >95% LTV with delinquencies have a 2.25% UFMIP and .55% MMI.
These changes apply to cash-out, rate & term, and non-delinquent FHA Secure refinances.

The credit scoring model seeks to quantify the likelihood of a consumer to pay off debt without being more than 90 days late at any time in the future. Credit scores can range between a low score of 300 and a high score of 850. The higher the score, the better it is for the consumer, because a high credit score translates into a low interest rate. This can save literally thousands of dollars in financing fees over the life of the loan.

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In a contentious meeting Monday evening, the Portland City Council approved a preliminary agreement between the city and The Olympia Company for the continuing development of the Maine State Pier. The 7-1 vote set final contract talks in motion and came after eight long months of negotiations.

Critics of the plan focused specifically on the $18 million loan granted Olympia from the Finance Authority of Maine to fund repairs to the aging pier. According to the agreement Olympia will not be required to pay rent for the first 20 years of its 75-year lease.

Although a claim was made that Olympia received no tax breaks in the deal, it is hard to understand how a 20-year rent abatement is not considered a public subsidy. This entire project has been decided along political lines, with little regard for what is best for the city and decisions such as this, and the ensuing criticism from all sides, should not be a surprise.

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In a recent post we reviewed the absorption rate of several southern Maine towns and cities for YTD 2008, with a comparison to 2007. However, we did not go into a great deal of explanation of exactly what the absorption rate is and how it has an impact on buyers and sellers.

The ABSORPTION RATE is the mathematical representation of the relationship between supply and demand. The total amount of available homes for sale is divided by the total amount of homes sold in the previous period (in our case the first 7 months). The resulting number represents the number of time (measured in weeks) it would take to sell the entire inventory.

Normal Market conditions exist when the Absorption Rate is between 5 and 6 months.

Sellers Market conditions exist when the Absorption Rate is lower. (1-4 months)

Buyers Market conditions exist when the Absorption Rate is higher. (7+ months)

When reviewing the results, several important factors must also be considered, such as:

1. To have real meaning you first must consider overall results, then continue to break them down – by town, by price range, by specific neighborhood.

2. The ratio reflects a general condition. That is, it is not specific. Specific property features, condition, and price will do more to determine how fast a property will actually sell than any mathematical formula.

Failure to look at the data at its most discrete level can result in an unclear picture of the market.

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Hope your summer is going well! It’s hard to believe that August is already here and school will be starting in just a few weeks. Maybe if we’re lucky we will still have a few nice days without rain!

Our friends and family often ask us about the health of the real estate market. People who have recently purchased a home are concerned about its value, while those who are contemplating selling are rightly apprehensive about the prospect of actually getting a sale completed.

Given the current status of Maine’s real estate market, we are reminded of the something said by John F Kennedy years ago and repeated by other more recently:

“When written in Chinese, the word “crisis” is composed of two characters - one represents danger, and the other represents opportunity.”

Recently the word “crisis” has been used frequently in describing the economy, the energy situation, international relations, the real estate market and just about anything that is in a state of flux. When it comes to homes sales in Maine, certain truths are undeniable:

Is the market today difficult – Yes
Are there more homes on the market – Yes
Have home prices dropped – Yes

Yet within this sea of gloom there are positive signs. Homes are still selling, prices have adjusted to reflect the current market rather than plummeting as in other parts of the country and there are tremendous values available for those with the courage to seize the opportunities and make a purchase. On a more long term basis, for those who did recently make a purchase, appreciate over the long haul still looks promising in Maine.

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When it comes to energy expense, Maine homeowners are in line with the rest of the country – investing in projects designed to encourage conservation and efficiency. This is especially true given our colder winter weather!

It comes as no surprise then that according to the results of the National Association of Home Builders’ (NAHB) quarterly Remodeling Market Index (RMI), 33 percent of surveyed remodelers report that they are increasingly requested to improve the energy efficiency of their client’s homes. The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects.

Additionally, the increased interest in maximizing home performance with green remodeling options comes at a time when the NAHB is preparing the National Green Building Standard, which features the only consensus rating system for remodeling. This standard provides a practical guide for green remodeling and assures consumers that remodelers know how to plan and complete authentically green remodels.

According to the survey, remodelers have installed a number of efficiency-enhancing products in recent months, including:

Windows - 73% of surveyed remodelers installed more energy-efficient windows that are insulated to prevent outdoor heat exchange.

Insulation - 65% completed upgrades such as insulation replacement and spraying foam or fiber insulation into enclosed walls and roof cavities, while 27% insulated foundations and 52% installed insulated exterior doors.

High-efficiency HVAC systems (56%)

High-efficiency kitchen appliances (47%)

Water-saving faucets and fixtures (46%)

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Although driving this summer might be somewhat cost prohibative, it is still less expensive than flying. The southern Maine coast has always been a favorite summertime destination, and this year expects to be no exception.

At the heart of what makes Maine unique is the charming city of Portland - a special sea side meca that combines a vibrant downtown, easy access to the ocean and countless outdoor activies. The video below includes some of our favorite sites of the Portland area.

Southern Maine Video

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As with most other parts of the county, Maine has also experienced an increase in short sales – but in many cases the average homeowner does not really understand what a short sale is and what are the potential benefits compared to foreclosure or bankruptcy.

In the most fundamental of terms, as short sale occurs when a home’s sales value is less then the outstanding mortgage debt plus sales costs (sometimes called an “upside down Mortgage”), and the bank holding the note has agreed to write off a portion of the outstanding loan debt in order to consummate the sale. Lenders will entertain such an option if they believe they will usually receive a higher percentage of their principal back as compared to forcing the property into foreclosure and run the risk of property neglect or damage, and additional delays and costs, and the long-run possibility of property owner bankruptcy.

The consummation of a short sale can be difficult, as we have learned first hand from processing such transactions in recent months. Additional paperwork and intricate negotiations between the real estate agent and the mortgage banker are the norm. Basically, the real estate professional must prove to the lender that the homeowner has a financial hardship and as a result cannot stay current with monthly payments. Financial duress can due to job layoffs, illnesses, divorce, or even the unexpected large increase in mortgage payments due to interest rate resets are all valid reasons.

Many lenders, however, will not commit to a short sale until there is a valid and firm purchase offer in hand from a qualified new buyer, and a knowledgeable broker who can negotiate the transaction. At a minimum the information required will include the purchase offer contract, buyers detailed loan qualifications, a realistic and detailed analysis of the fair market value of the home, current local real estate market conditions, and financial information and hardship letter from the homeowner.

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As reported in MaineBiz, Boston Financial Data Services, a financial services firm that employs 3,000 people across the eastern United States, will move into the former MBNA building in Rockland and expects to employ 250 people at the facility within two years. For more information on the Rockland area, visit MaineHomeConnection.com.

Boston Financial, based in Quincy, Mass., will lease the entire 70,000-square-foot Rockland Harbor Park Center. According to a press release from the company, it plans to hire 100 people this year and employ 250 in the next two years. However, Matt Jacobson, president and CEO of Maine & Co., a Portland firm that was integral in bringing the company to Rockland, and a columnist for Mainebiz, said this morning that the firm could eventually employ as many as 400 people. The jobs will be “high-end call center work,” Jacobson said.

The firm was attracted to Rockland by the facility, a demonstrable workforce and a team effort, Jacobson told Mainebiz. Besides Maine & Co., the Knox/Waldo Regional Economic Development Council, the city of Rockland, Gov. John Baldacci and the Department of Economic and Community Development were heavily involved in wooing Boston Financial.

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Atlas Investment Group of Boston is moving forward with plans for the $35 million Bay House Condominiums, an 82-unit, five-story building on the former Village Café restaurant property. Demolition began Monday with hopes of beginning construction by late summer. It is believed that Atlas still needs financing for Bay House and city approval for slight design modifications.

Bay House started as a 250-unit, five-building proposal in 2005 but has since been scaled back to its current 82 unit configuration, consisting of two buildings. Prices range form approximately $200,000 for a studio to more than $500,000 for a three-bedroom unit. This is Atlas’ first project in Maine but the firm has experience in New England. Project in the Boston market include the $66 million Gateway Terrace Condominiums and the $22.4 million Minot Hall condominium conversion.

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In a statement prepared by MREIS March 24, 2008, Maine continues to be ahead of national sales figures in February 2008 - This despite a small decrease in the median sales price and number of units. A harsh winter season slowed sales of Maine real estate by 20% from a year ago during the month of February.

Prices, however, dipped a slight two percent. A total of 555 single-family, existing homes sold in Maine during the month of February 2008. One year ago, 698 homes sold during the same period. The median sales price (MSP) for February home sales was $190,000, a decrease of 2.04% from February 2007’s MSP of $193,950. The median sales price indicates that half of the homes were sold for more and half sold for less. According to NAR nationwide sales of existing single-family homes fell 22.9% in February. The median national sales price decreased 8.7% to $193,900. In the regional Northeast, home sales fell 26.4 percent. The regional median sales price rose 0.4% to $264,800.

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