Good news if you're in a sufficiently stable financial situation to think of bailing from greater Portland's rental-housing morass (more in a moment on what, exactly, that financial situation might look like): Tucked into the hulking economic stimulus bill approved by Congress last week and signed by President Barack Obama on Tuesday is an $8000 tax credit for first-time homebuyers. Local realtors and bankers are excited about what this means for housing newbies in Portland."If I had extra cash, I would be buying up a storm," says Cape Elizabeth realtor Jennifer DeSena, who cites the volume of houses on the market, the fact that sellers are willing to negotiate, and "interest rates that are phenomenally low" (they're hovering below 5 percent at the moment) as positives for the first-time buyer. "Now you've got this tax credit," she adds, referring to the stimulus bill (which was backed by all four members of Maine's congressional delegation), "and that's like free money."
There's no question that the national economic crisis has affected Maine's housing market — the state's realtors sold nearly 23 percent fewer homes in November 2008 as in November 2007, according to the Maine Real Estate Information System; the values of those homes have decreased; there have been foreclosures in every part of the state (last year the number of foreclosures in Maine jumped more than 200 percent, but we still have one of the lowest rates in the country — with more than 2800 foreclosure filings in 2008, we rank 41st); and mortgage lending has changed significantly.
But even while Portland and Maine have remained somewhat insulated from the sub-prime mortgage lending fiasco that decimated other parts of the country, the landscape has changed. If you considered buying a home as recently as a year ago, we're happy to tell you that while you might have to restart your reconnaissance, you're more likely to get a better home at a better price, with a lower interest rate.
In fact, it's an ideal time for young people to embark on their first homeowning adventure — assuming they have good credit (rule of thumb: higher than 700) and a job they're not in danger of losing, of course. Here's why: "[H]ome affordability is better for homebuyers in the Portland area than at any time since before 2003," says Dan Simpson, of MaineHousing, the state's housing authority.
For one thing, median sale prices for single-family homes are on the decline, which is bad news for sellers but great for those who are buying. In Cumberland County, the average sale price was $300,000 in 2007 and $275,000 in 2008.
"The national economic climate has created an excellent market for Greater Portland's first time buyers to enter a market where [mortgage-interest] rates are nearing 40-year lows and a multitude of affordable homes are available at the lowest prices in years," says Rita Yarnold, who serves as president of the Maine Association of Realtors.
Indeed, while Jane Irving, mortgage development manager of Bangor Savings Bank, admits that "mortgage lending in the current economic environment has taken on a new face," she stresses that "we have money — we are lending."
To avoid the mistakes — and fates — of reckless lenders who contributed to the economic crisis by lending money to people who were (or became) unable to pay it back, Irving says that "responsible lenders are taking time to verify income, job stability, residual monthly funds ... and taking time with borrowers to fully explain" the terms and features of their mortgages.
"With the predatory and less traditional lenders out of the market there has been a 'return to quality,'" MaineHousing's Peter Merrill said in an e-mail to the Phoenix.
Borrowers, too, are coming to the table more informed and logistically prepared, brokers and bankers say. (See the sidebars for thoughts from real homebuyers.) They're coming to lenders with a solid idea of their credit history and available funds. Many are taking advantage of the hoMEworks first-time homebuyers' course offered by MaineHousing — a low-cost class that qualifies its participants for lower loan interest rates. And now, they have an $8000 tax credit to add to their toolkits. This tax credit (check with a tax pro for the details, but generally it reduces the amount you owe in income taxes, and may land you a tax refund) is substantially less than what some real-estate observers were hoping for — a heftier $15,000 credit. However, unlike the $7500 tax credit passed in the middle of last year with a similar goal in mind, the one bundled into the stimulus bill does not have to be repaid over time.
Of course, none of this matters if lenders don't feel secure in whom they're lending to. This is a vivid reminder of how closely linked the job and housing markets are. (Maine's unemployment rate, 7 percent, is almost at the national average of 7.1 percent.) No one will buy houses in Maine if they can't support themselves, and vice versa. As Portland homeowner Jed Rathband points out, "I'm not as concerned about the value of my house — though it is less than what I currently owe — as I am worried for my ability to continue working in Maine."
Deirdre Fulton can be reached atdfulton@thephoenix.com.
