A very thorough and sensible analysis, Ben. Thanks for taking us back to GFC for important context. One additional piece of this narrative that has played out to a greater degree outside of Maine is the role of "professional" RE investors. When the GFC flushed out banks and builders as you described, unregulated funds seized an opportunity to buy developments in FL, AZ, NV and other hard hit areas. After flipping these properties for huge gains a few years later, these financial firms re-deployed their investors' funds across the country and became key determiners of rental rates. Their investment goals, horizons and practices differ greatly from traditional landlords - in many cases to the detriment to tenants, IMO. This is a big (and powerful) business now and may have changed the game for good in many places.
Thanks for this article Ben. I’m not so sure interest rates are going to decrease appreciably anytime in the near future. One thing that doesn’t get talked about enough is the fact that the pandemic accelerated the Baby Boomer retirement cycle which continues today. This will continue to drive demand for younger workers keeping the unemployment rate low. While large tech companies may be seeing reduced payrolls due to high interest rates and lower valuations and prospects for fundraising, Main Street businesses are still struggling with a huge shortage of workers. This will in effect keep unemployment low and wages growing, further hampering the Fed’s ability to lower rates. Many of the Main Street jobs cannot be replaced by AI either.
But in all things, particularly real estate, everything is local. I think you did a good job summarizing macro trends and I’m sure your goal is to appeal to a larger audience beyond Maine. But here is Maine we have unique challenges driving the housing affordability crisis. As the previous commenter mentioned, Maine is experiencing an influx in new people moving to the state. This is a good thing for a variety of reasons, not least of backfilling our aging population and adding much needed labor capacity to the state. But this has also increased the price of housing. This trend will only get worse as more people discover Maine. Climate refugees within our borders is a real thing and will only accelerate.
In addition to increased demand for housing, we have other structural problems. Maine has not traditionally built homes at scale. We do not have favorable land use laws, sanitary sewer capacity or enough building trades to appreciably increase housing stock quickly. Even with the passage of LD 2003 increasing the ability to add supply we still have an old story in place. A story that says Maine should remain the way it always has been. There is a lot of pushback around adding new development. And even when that can be overcome, we have a labor issue. We cannot currently build market rate housing for a price that is attainable for the median homebuyer or renter. Maine will need to work harder to attract and retain young folks and grow a robust building sector.
Thank you for your insights. I look forward to reading more from you.
Thank you, Ben. I wonder how much the movement of people during the pandemic from more densely populated areas to Maine impacted the rapid price increases in this state. I also noticed the sale of rental properties from local mom and pops to larger companies, often out-of-state.
Look forward to your weekly articles! What percentage of real estate loans are non recourse?
A very thorough and sensible analysis, Ben. Thanks for taking us back to GFC for important context. One additional piece of this narrative that has played out to a greater degree outside of Maine is the role of "professional" RE investors. When the GFC flushed out banks and builders as you described, unregulated funds seized an opportunity to buy developments in FL, AZ, NV and other hard hit areas. After flipping these properties for huge gains a few years later, these financial firms re-deployed their investors' funds across the country and became key determiners of rental rates. Their investment goals, horizons and practices differ greatly from traditional landlords - in many cases to the detriment to tenants, IMO. This is a big (and powerful) business now and may have changed the game for good in many places.
Thanks for this article Ben. I’m not so sure interest rates are going to decrease appreciably anytime in the near future. One thing that doesn’t get talked about enough is the fact that the pandemic accelerated the Baby Boomer retirement cycle which continues today. This will continue to drive demand for younger workers keeping the unemployment rate low. While large tech companies may be seeing reduced payrolls due to high interest rates and lower valuations and prospects for fundraising, Main Street businesses are still struggling with a huge shortage of workers. This will in effect keep unemployment low and wages growing, further hampering the Fed’s ability to lower rates. Many of the Main Street jobs cannot be replaced by AI either.
But in all things, particularly real estate, everything is local. I think you did a good job summarizing macro trends and I’m sure your goal is to appeal to a larger audience beyond Maine. But here is Maine we have unique challenges driving the housing affordability crisis. As the previous commenter mentioned, Maine is experiencing an influx in new people moving to the state. This is a good thing for a variety of reasons, not least of backfilling our aging population and adding much needed labor capacity to the state. But this has also increased the price of housing. This trend will only get worse as more people discover Maine. Climate refugees within our borders is a real thing and will only accelerate.
In addition to increased demand for housing, we have other structural problems. Maine has not traditionally built homes at scale. We do not have favorable land use laws, sanitary sewer capacity or enough building trades to appreciably increase housing stock quickly. Even with the passage of LD 2003 increasing the ability to add supply we still have an old story in place. A story that says Maine should remain the way it always has been. There is a lot of pushback around adding new development. And even when that can be overcome, we have a labor issue. We cannot currently build market rate housing for a price that is attainable for the median homebuyer or renter. Maine will need to work harder to attract and retain young folks and grow a robust building sector.
Thank you for your insights. I look forward to reading more from you.
Thank you, Ben. I wonder how much the movement of people during the pandemic from more densely populated areas to Maine impacted the rapid price increases in this state. I also noticed the sale of rental properties from local mom and pops to larger companies, often out-of-state.