Home sellers lower price or learn to chill

Staff photo by Gordon Chibroski

Bruce Thistle listed his home on the Windham/Falmouth town line for $259,000 last August. He finally got it under contract this month, for $216,000. "A year ago, if you told me I'd sell the house for that price, I would have laughed," he says.

The number of single-family homes for sale in Maine has hit record levels, industry figures show, with inventory continuing to climb this summer.

More than 26,000 homes currently are on the market, according to statistics from the Maine Real Estate Information System, compared to roughly 18,000 at this time last year, and 14,000 in 2004. Inventory has grown by more than 1,000 in just the past month, figures show.

This plentiful supply of homes has outpaced demand in many areas, and that is pushing down prices, further proof of a market that is shifting in favor of buyers.

In response, sellers are trimming their asking prices, and some real estate agents are becoming more creative to get their properties noticed, particularly in southern Maine. One Realtor in South Portland offered a free 24-month lease on a new car to buyers who closed on select homes. An agent in Saco drew traffic to an open house - and put the home under contract - by slashing the price from $249,000 to $199,000.

The National Association of Realtors said last week that 28 states and the District of Columbia were reporting spring sales declines. Double-digit drops were noted in former boom areas, such as Florida and California. At the same time, states that saw only moderate price increases during the past five years, such as Arkansas and North Carolina, had sales heading up.

Maine recorded a slight sales gain during the spring period of 1.5 percent, the group reported. But it may be too soon to answer one of the big-sky questions about Maine real estate: Has the market cooled so much that median home prices - which rose by double digits for three years - will actually decline?

The median sales price means half of the homes sold for more, half for less. Between 2001 and 2002, median prices rose by 15.14 percent. They were up 12.23 percent between 2002 and 2003; up 12.18 percent between 2003 and 2004; and up 9.14 percent between 2004 and 2005, according to industry figures.

Taken together, the statewide median sales price rose from $125,500 in 2001, to $189,000 in 2005.

Then the brakes came on. For the first six months of this year, the median price has edged up just 2.91 percent, to $194,500.

Real estate markets are local, so it's hard to make generalizations. But in some areas, in some price ranges, Realtors are calculating that it would take 12 to 18 months to sell current inventories, based on the rate of sales activity over the past year or six months.

"Some sellers haven't come to the reality that it's a buyer's market," said Cathy Manchester, a Realtor at Keller Williams Realty in Gray. "They're still trying to get higher appreciations. But the record inventory means it's a fantastic time to buy. Everything is selling, if it's priced right."

What does it mean for a house to be "priced right?" Take Bruce Thistle's home in Windham.

Following appraisals from three real estate agents, Thistle listed his split-level, beautifully landscaped home with a right-of-way to Collins Pond last August for $259,000. He finally got it under contract this month, for $216,000.

"A year ago, if you told me I'd sell the house for that price, I would have laughed," he said.

Thistle only had one showing during the first six months his home was for sale, even though he dropped the price $9,000 during that period. In the meantime, he and his wife were renovating his father's former house nearby and had moved out of their home of 37 years.

When Thistle's listing contract expired in March, he switched Realtors and went with Manchester. She started the process at $240,000 and cut the price three times before finding a buyer.

Thistle's house was appealing because it's well maintained and has extensive gardens. It finally sold, Manchester said, because the price was right. That combination made it stand out in a market with too many homes for sale and not enough buyers.

Consider the inventory in Windham. Over the past six months, the town has had 52 homes for sale that were priced from $220,000 to $250,000. Thirty-three of them sold during that period, Manchester said. That translates into an inventory of 5.5 months' worth of homes in Thistle's price range.

"Right now," she said, "what's driving the market is inventory, not historic prices."

That's a tough reality check for many sellers, who have a hard time accepting how quickly the market has changed.

Noah Smith is a Realtor with Coldwell Banker in Saco. He listed a three-bedroom property in Hollis that featured four acres, a sunroom, barn and inground pool. The owner insisted he price it at $299,000. That was more than a year ago, before Smith was able to convince the owner to go down to $249,000.

After three months without an offer, Smith had another idea. He set up an open house and invited fellow Realtors via e-mail. The draw: A drastic price cut to $199,000.

Smith and the seller reasoned that the bargain price would attract attention, and it did. More than 30 parties came to the event, and the house finally is under contract. Smith wouldn't disclose the contract price, but said his strategy was to generate enough buyer interest to receive bids above the asking price.

In today's market, Smith said, sellers need to be realistic about the condition of their homes and the asking price. That's especially true in York County, where inventory has continued to grow in recent weeks.

With so much competition in the marketplace, some agents are trying novel ideas to break through the clutter.

Kevin Cloutier, a Realtor with Keller Williams Realty in South Portland, ran newspaper ads last month promising a new car to people who closed on a select home. To separate his properties from the pack, Cloutier reasoned, he needed to do more than just lower the asking price.

Cloutier worked a deal with the Jolly John car dealership for a 24-month lease on new vehicles, such as the Jeep Liberty. The house sellers had to agree to give the buyers $11,000 at closing, to cover the lease.

"It was just a creative way of saying why this $400,000, three-bedroom house is better than the one up the street," Cloutier said.

The technique brought in plenty of inquiries, but no firm offers on the five homes that were part of the experiment. Cloutier said he might try again next month.

"It did generate activity," he said. "There are just too many houses for people to pick from."

Other homeowners are dangling similar incentives. The seller of a Portland condominium has been running newspaper ads offering a new Honda Civic. Ads for a new, energy-efficient home in the Sebago Lake region feature this headline: "Free heat for 1 yr.!"

"You don't need all those bells and whistles to sell it," she said, "if it's priced, shown and marketed right."

Manchester expects inventory to build only to a certain point. After that, falling prices and stable mortgage interest rates will convince more buyers to jump in.

But it's harder to predict how far prices may fall. In York County, for instance, both the number of homes sold and the median sales price are down modestly for the first half of 2006. Those figures are more or less flat in Cumberland County.

Manchester doubts that statewide median sales prices will actually decline in 2006. She expects this year's modest growth to continue, in the 3 percent range.

Sheryl Gregory, a past president of the Maine Real Estate Information System, said she detects that leveling, but not a decline. A broker at Homestead Realty in Winthrop, she's operating in an area that continues to see active sales and moderate growth in housing prices. The buyer's market that has washed over southern Maine has yet to reach Kennebec County, she said.

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