Rick Bisson“I moved away 50 years ago. Now I’m back. I don’t know why I ever left. It’s absolutely perfect here. It feels so good being back in my hometown. So much is the same, yet so much is all the better. What a thrill to reconnect with old friends and classmates of Morse High School. I feel like a kid again.”

The above is a recent paraphrased conversation from a member of the Morse High School Class of 1968 who recently purchased a home in Bath. He, like many alumni who leave the area, have a desire to return. Some will pursue a vacation home, others will return to a year-round home. Some will purchase a vacation home that will ultimately become their permanent home.

Morse High School Alumni celebrate the pride and history this weekend of what is believed to be the nation’s oldest and largest high school alumni associations in the country. For those alumni who are contemplating a return to the area, consider the following housing forecast from the Realtors Legislative Meetings and Trade Expo in Washington, D.C., in mid-May.

According to Lawrence Yun, chief economist of the National Association of Realtors, a moderate and multi-year increase in home sales is likely ahead. After accelerating 3.8 percent in 2016, existing home sales rose only 1.1 percent to 5.5 million in 2017 and are forecast to finish 2018 at a pace of around 5.6 million (up 1.8 percent). Yun projects 5.7 million sales for 2019.

“Overall fundamentals remain solid, driven by a growing economy and steady job creation, which will sustain home sales in 2018 slightly above last year’s pace,” Yun said.

“The worsening housing shortage means home prices are primed to rise further this year too, hindering affordability conditions for home buyers in markets across the country.”

Yun said the widespread shortage of homes for sale is the major factor limiting the total number of home sales from being higher. While home sales have risen modestly since the start of the year, Yun said without more supply to fully satisfy demand and alleviate the upward pressure on prices, contract activity is likely to remain flat and will more or less continue sideways through the end of the year.

Total housing inventory at the end of March was 1.67 million existing homes available for sale, which is 7.2 percent lower than a year ago.

Inventory has trended down steadily for the past five years, said Yun, and the country is now experiencing the lowest inventory levels in a generation; unsold inventory is at a 3.6-month supply at the current sales pace, down from 3.8 months a year ago.

Home price growth, up 48 percent from 2011 to 2017 and likely to rise an additional 4 percent in 2018, is far out-pacing income growth, up only 15 percent during the same time frame.

Increased home prices on top of rising mortgage rates—Yun anticipates rates will rise to 4.6 percent in 2018 and 5 percent in 2019—puts affordability at a six-year low, according to NAR’s Housing Affordability Index, and will likely continue to fall in coming months.

“Challenging affordability conditions have prevented a meaningful rise in the homeownership rate after having fallen to a 50-year low a few years ago,” said Yun.

“To increase homeownership, more home construction is needed, which could be boosted by delivering regulatory relief to community banks, removing the lumber tariff, re-examining stringent zoning laws and training more workers for the construction industry.”

On the topic of homeownership rates, Jessica Lautz, NAR’s director of demographics and behavioral insights, presented findings during the forum from her thesis from Nottingham Trent University: “Is the Dream Still Alive? Tracking Homeownership Amid Changing Economic and Demographic Conditions.”

According to Lautz’s doctoral work, the affordability crisis has heavily impacted those with student debt.

“The homeownership rate amongst some ethnic groups hasn’t rebounded since the recession, and the ongoing affordability crisis has hampered potential buyers under 35, especially those with student debt, from accessing mortgage credit and making home purchases,” Lautz said.

Student loan debt has risen dramatically and is a massive barrier to homeownership, Lautz said, and it is delaying home purchases among Millennials who are paying their debt by a median of seven years. Her research found that consumers with student loan debt who were successful in buying a home costing 17 percent less than those without any student debt.

While the lack of supply and challenging affordability conditions is chipping away at home-buyer optimism, buyers aren’t giving up their dreams of purchasing a home. New survey data reveals three-fourths of recent shoppers who started their home search in 2017 are still in the market in 2018.

“Buyers know it’s tough, 35 percent of shoppers anticipate a lot of competition, but they remain optimistic, and more than 70 percent expect to close in 2018,” she said.

Yun said affordability conditions would improve measurably if homebuilders increased their production of homes, especially in the affordable price ranges. He forecasts starts to come in around 1.3 million units in 2018 and reach 1.4 million units in 2019, but that is barely above year-ago levels and well below demand.

Across the United States, Maine, the Midcoast region and Bath-Brunswick, home sales and home prices are expected to continue rising throughout 2018. However, the rate at which home sales will increase will be hindered by low inventory and pressure on affordability.

There’s no doubt that the current real estate market is inundated with its own unique challenges. If you, like many, want to make the Midcoast region home again, be sure to contact your trusted, expert, alumni Realtor. They’d be thrilled to bring you back to the land of the Blue and the White.

This column is produced by Rick Bisson, Class of ‘81, and his family, who own Bisson Real Estate with Keller Williams Realty of Midcoast and Sugarloaf.