Massachusetts resident Lee Burgess had his heart set on moving to Portland this summer after he was offered several jobs in city restaurants and bars.
But with July nearly over, he is still living in Somerville because he could not find an apartment to rent.
Burgess said he began looking for a room to sublet for the season about a month before he would need to move in, which he assumed would be enough time based on his experiences in Boston. But he never heard back from several people advertising rentals online.
In Boston, he said, it’s typically possible to find a sublet in one day.
“I realized later it’s because there’s not that many universities in Portland,” he said. “In Boston all the kids are here and then the summer hits and they go back home.”
From renters to first-time homebuyers, property owners looking to downsize and contractors working on renovations, people in all walks of life are experiencing the ripple effect of Maine’s recent rise in popularity. And the changes in where people live could be permanent.
As Forbes reported in March, the pandemic has created “one of the most frenzied and unpredictable real estate markets in a generation” nationwide in the past year. COVID-19 inspired millions of Americans to move from their cramped apartments in dense, urban areas like Manhattan and San Francisco to larger homes in suburban towns that gave them more space to work remotely.
As of last October, nearly 9 million Americans had relocated since the beginning of the pandemic, according to an analysis published last December by the National Association of Realtors. Other data shows that Maine was a popular new home destination for many.
A report by Atlas Van Lines, for instance, said Maine ranked third among states that had more people move in than out in 2020. More than 62 percent of moves that occurred in Maine last year were people moving inbound.
When buying isn’t an option
Burgess isn’t the only renter who has been burned by the current market in Portland.
The need for more affordable rental housing in the city has been discussed for years, but some renters are now dealing with new problems, such as landlords putting their buildings up for sale out of the blue.
One of them is Betsy Thompson, who last week said her apartment building went on the market recently and as a result, she was automatically switched to a month-to-month rental agreement.
Thompson called the situation stressful since the new owners could raise rents when the building is purchased. She was laid off last summer after being furloughed because of the pandemic, which she said has complicated the problem.
“I don’t want to pay more or move after my employment situation this past year,” she said. “I’m still recovering from that.”
Some landlords are raising rents as a result of the city’s property revaluation, forcing some renters to scramble to find new rental housing on short notice in an already tight market.
Online forums dedicated to finding rental housing, like the private Facebook group “For Rent Southern Maine,” which has more than 7,000 members, suggest a dire need for more rental housing at all price points.
People post daily in the group, many of whom are young professionals newly hired in Portland, with budgets of more than $1,000 a month, seeking roommates and still struggling to find rental housing. Nearly all of the inquiries have attracted comments with links to scam sites, too.
Crystal Auger, director of the rental program at Dirigo Management Co., said via email last week that demand for apartments in Portland has been consistently high.
People hoping to rent, she advised, should start hunting for a place two months before they plan to move. She typically begins marketing apartments 45 days prior to the move-in date.
“Oftentimes due to the overwhelming response I get for some units I may not even remarket another because I have enough people I know looking for housing (that) I simply reach back out to them,” Auger said.
Will the bubble burst?
Realtor Lindsay Book has had a front-row seat for how the pandemic heated up the state’s real estate market. Book runs her own real estate team, Mainly 207 Homes, through Realty ONE Group, and said there has been a constant appreciation in value of Maine homes that she expects to continue for a long time.
Some recent appreciation has been extreme, with certain properties’ values increasing by as much as $170,000 more than what the owners paid in only a couple of months, Book said. Book said she warns clients about the possibility of the “bubble bursting.”
The bubble will eventually burst for homes selling for hundreds of thousands of dollars over what they were purchased for, she said. But she still expects them to appreciate by as much as $30,000-$50,000 as time goes on.
Even four years ago, Book said, people were offering $20,000 or $30,000 over asking price for some properties, because Maine simply does not have enough housing inventory.
She said other patterns have emerged this year too, such as clients waiving inspections on new homes – which she called “insane.”
Book started her own real estate team, she added, to help “bring humanity back into real estate,” but the current market is making it difficult.
“How can you comfortably tell a client ‘Well, there’s going to be 30 offers on this property, I want you to waive the inspection and go $60,000-$70,000 over,’” she said. “Why is the asking price even there? What’s the point of it?”
New neighbors from away
The current market has also forced many Mainers who are financially ready to buy or sell their home to change their plans, Book said.
She has noticed more buyers from out of state with remote jobs are gravitating towards purchasing homes in Portland-area in towns like Scarborough and Cape Elizabeth.
“They’re going in at astronomically high cash offers because they’ve been saving to buy a home (in areas like) Boston,” Book said. “So then we see our Mainers are having to shift their perspective and move out to areas they didn’t see themselves going.”
Those include places like Auburn, Winthrop, Pittston, and Gardiner, she said.
Some Mainers, she added, are ready to list their homes on the market but have nowhere else to go due to the low inventory, which is also adding to the stall. Homes that used to be thought of as first-time buyer properties are now also more expensive.
Another element that Book said has thrown a wrench in the real estate market is the high cost of lumber.
As Forbes reported in May, lumber and plywood prices surged this year due to demand for home renovations, and then homebuilders increased construction last fall. According to Forbes, the materials’ prices are not expected to return to pre-pandemic levels until 2023.
High lumber prices, Book said, have affected the home-flipping industry, which she estimated typically accounts for about 20 percent of Maine’s real estate inventory. Now, with lumber prices high and even homes that would typically be flipped costing so much, many investors are deciding not to do it anymore.
Cape Elizabeth native and local contractor A.J. Frustaci said last week he has only been working on one house flip this year, his childhood home, which he is about a month away from selling.
The shortage of contractors has led to an abundance of jobs, Frustaci said, to the point that he has to turn down offers weekly, but also driven up other material prices in addition to lumber and wood.
“It’s not just lumber; paint, joint, compound, windows, doors, concrete, granite, kitchens, it’s all connected,” he said. “A sheet of plywood that used to cost us $35 (a year ago) is now up to around $78. Multiply that by 90 sheets to lay a subfloor.”
He and his colleagues have built a particular design of a home several times with the materials costing around $24,000; it is now up to nearly $44,000, he said.
Shortages driven by shutdowns at the beginning of the pandemic have also had delayed effects. In one case, Frustaci said he lost a job due to a flooring material being delayed by four months. A lot of the country’s paint, he added, is stored in Texas and was frozen and destroyed last winter during the state’s freezing weather.
“A lot of people don’t realize how phenomena like that screw the home building process,” Frustaci said. “It jacks up prices, delays the projects, and gets everybody mad at one another. It’s not a pleasant time for builders.”