BANGOR, Maine (AP) — Rising mortgage rates that are anticipated when the Federal Reserve tightens credit in the new year is expected to slow but not stall Maine’s red hot real estate market.
Home prices will keep rising but not as fast as this year despite inflation and higher lending rates, experts say.
With inflation accelerating to a nearly four-decade high, home prices are up 18% nationwide, and price relief will take at least a couple of years, Mike Fratantoni, chief economist at the Mortgage Bankers Association, said at a recent Bangor Daily News real estate webinar.
“This, unfortunately, is our new normal,” said Kortnie Mullins, vice president of the Bangor Region Realtors Association.
New construction slowed during the Great Recession, and Maine and other states failed to meet housing demand since then, said Tim Wells, director of the Greater Portland Community Land Trust.
Maine currently has about 25,000 fewer housing units than it needs, said Aaron Bolster, president of the Maine Association of Realtors. That may not seem like much in larger state, he said, but “that’s a lot in a place of 1.3 million people.”
As for interest rates, the interest rate for a 30-year fixed mortgage is expected to rise from its record low of 2.65% in December 2020 to 4% by the end of 2022, Fratantoni said.
“A 4 percent mortgage rate is historically very, very attractive, but just that increase should be enough to put the brakes on a little,” Fratantoni said.