As an engineer, I am often asked why I pay attention to the condominium markets throughout Maine or why I should be following the trends in condo design and maintenance practices. The answer is simple. It is because my clients care about these things as these matters can affect their net worth, their quality of life, and their future decisions. Often their condo unit is the largest asset they own, and it is key to their future financial security.
Maine’s condo and real estate values in general have recently gone through a change. Whereas in recent years Maine’s condos were in a seller’s market, today in many areas it is trending toward a buyer’s market. Engineers believe in empirical evidence. Condo unit inventory is taking twice as long to be sold as a year ago and the sales price is less than the asking price. The fault lies mostly with the sellers who are trying to set prices based on last year’s pricing.
Maine is no different than other sections of the country. It is all about location, location, location. Maine is a large state. It is about the same size as all the other New England states put together. Regarding real estate, Maine is subdivided into four regions. The Northern Region is Aroostook County. The Central Region is Kennebec County. The Mid-Coast Region includes Hancock, Knox, Lincoln, and Waldo counties. The richest and most populated Southern Region of York and Cumberland counties form the gateway to Maine.
Recent year-over-year comparisons found a change in offered prices and actual median sold prices for each region such as: Northern (+ 7.0% : $197,950); Central (+ 9.7% : $322,000); Mid-Coast (- 4.5% : $425,136); and Southern (+ 9.1% -: $535,000). The simplest explanation for the negative results for the Mid-Coast Regions is its housing inventory is in large part made of second homes on the coast and seasonal property which are always the most sensitive to poor economic news and high-priced properties not selling as they once did.
Greater Portland is still the largest and most vibrant Maine real estate market with $7 billion in new development under construction or permitted. Much of this is associated with high-end condos near Casco Bay’s waterfront or the Old Port and Back Bay areas on the Portland Peninsula. To meet the challenges of this new growth, record breaking federal and state grants have been released to fund increased infrastructure needs such improved bikes lanes on the city streets; elements to make the city more walkable including safer pedestrian crossings; and expanding the city’s public bus fleet with six additional buses. Despite these improvements, working families are leaving Greater Portland due to living affordability. At first their destination was the town of Scarborough to the south with its new moderately price condominium developments. More recently the preferred destination is the most rapidly growing community in Maine to the west, Gorham.
It is apparent all regions of Maine see its condo market cooling from prior years’ highly competitive market. So how does this affect condo associations and their boards? With the median days of units for sale on the market steadily increasing and pricing facing negotiation pressure, buyers will have more time for due diligence to review condo records, budgets, reserve planning, and pending capital projects with the potential of future special assessments.
Currently Maine does not mandate reserve fund studies. A lack of these types of studies will put off some buyers and wise board will correct this deficiency while improving the transparency of their records for both new buyers and current unit owners. Lenders across Maine are securitizing condominium association’s insurance coverage, financial statements, reserve balances, deferred maintenance, and meeting minutes.
The answer is boards need to be more initiative-taking in reviewing their management practices. This includes their insurance requirements with updated master policies, directors’ and officers’ coverage, contractor coverage, deductibles, and ordinance coverage. Legal council should review meetings and election procedures to meet today’s standards. Rules and regulation enforcement should become more consistent. Long term planning of capital projects should become more formalized. Many Maine condos are experiencing rising condo fees driven by increases in insurance, snow removal, and property management by as much as 20 to 40%, yet these are the services often needing improvement.
Maine’s current real estate market is balanced with both buyers and sellers having opportunities. Boards need to recognize their community’s strengths and weaknesses and make decisions to maximize their community’s position in the market for the benefit of the unit owners. No matter what Maine region a condo or HOA finds itself in, a responsible board will always plan for the long term but recognize how to address the short-term questions. If a lack of funds has resulted in deferred maintenance, then boards must establish a multi-year capital spending program and a corresponding fund-raising plan. Recognizing a problem and providing a solution is all that is needed for future success.
Written by Jack Carr, P.E., R.S., LEED-AP, Senior Consultant Criterium Engineers
Published in Condo Media