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Maine is becoming a prime destination for luxury real estate. For the third consecutive quarter in a row, Portland, Maine, remains at the No. 1 spot on The Wall Street Journal/Realtor.com Emerging Housing Markets Index putting it at the top of the luxury real estate market. The average home price in Portland is $522,530.
With Maine being the No.1 state in the country for second homes, other suburbs of Maine, particularly in the southern part of the state, are also seeing real estate growth in this category including Freeport, Cumberland, Cape Elizabeth, and Kennebunkport. These areas have seen a median home value increase of $100,000 or more since the pandemic began. What is driving this luxury hotspot growth? It comes down to three main factors:
- Demand drivers: The city’s appeal is fueled by its proximity to Boston, attracting buyers and ongoing demand for vacation homes that began during the pandemic.
- Market trends: The luxury market in Portland benefits from its picturesque landscapes, vibrant local culture, and recreational offerings like skiing and fresh seafood.
- Investment appeal: The city’s growth in luxury real estate is also driven by its attractive features for high-net-worth individuals looking for second homes or investment properties.
One group contributing to this luxury real estate boom in Maine is HENRYs (High Earners, Not Rich Yet.) According to a new survey, HENRYs in Maine are quite active with real estate. The survey was launched in July 2024 in partnership with Pollfish of 1,000 people aged 18-54 who make at least $100,000 and have either bought a luxury property in the last 18 months or plan to buy one within the next two years. It was found that, for HENRYs who reside in Maine, a whopping 65% plan to purchase high-end properties valued at $1 million or more within the next two years. Compared to states with the most expensive housing markets in the U.S., including New York (43%), California (58%), Texas (63%), Washington (48%), and Massachusetts (56%), Maine HENRYs are standing out.
The survey explores HENRYs’ engagement with luxury real estate by asking if they have purchased or plan to purchase a property valued at $1 million or more within specific timeframes, examining their motivations, investment priorities, financial strategies, and concerns related to the luxury real estate market. It also investigates the types of luxury properties they are interested in and the factors influencing their perceptions of the market. Since HENRYs are usually millennials, the survey focused on respondents aged 25 to 44 years old. Here’s what you need to know.
Understanding HENRYs and the luxury real estate boom
HENRYs represent an influential demographic when it comes to the future of wealth. Particularly, it seems they’ll have a huge impact on the luxury real estate market. HENRYs earn between $100,000 and $250,000 annually. But they aren’t considered “wealthy” due to expenses like student loans, rent costs, a lack of traditional investments, or lifestyle choices, like pricey vacations over a padded savings account.
Given that HENRYs may hold an increasing amount of wealth in America, their investment behaviors are something to take note of. The survey found more than 35% of HENRYs who reside in Maine have bought a luxury property in the last 18 months. They are also allocating 35% of their total investment portfolio to real estate, according to the survey data.
How HENRYs pay for their real estate
Though HENRYs are not quite rich yet, they follow the trend of other wealthy people’s real estate buying habits by paying in all cash. The survey found that 71% of Maine HENRYs plan to pay for their luxury real estate purchases in cash. By paying in cash, HENRYs can avoid mortgage approval delays, close deals faster, and strengthen their negotiating positions. This approach mirrors the tactics of the ultra-wealthy and positions HENRYs more favorably in the competitive luxury housing market. But an additional third of respondents aren’t opting for all cash, a traditional mortgage or home loan – they’re taking out jumbo loans.
A jumbo loan, or jumbo mortgage, is a type of home financing that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Because these jumbo loans are not eligible for purchase from Fannie Mae or Freddie Mac, they typically come with higher interest rates and stricter underwriting standards compared to conforming loans. Jumbo loans come at a high cost, but they also come at a high reward for HENRYs who are looking towards a more financially lucrative future. While the maximum loan limits for conforming loans can vary by location, for most areas, the 2024 conforming loan limit is approximately $766,200. Additionally, while conforming loans may require as little as 3-5% down, jumbo loans often require 20% or more.
Lenders typically require good creditworthiness and lower debt-to income ratios to qualify. Jumbo loans in the Maine market are useful for buyers potentially because of rising interest rates, limited homes for sale, and high prices for available inventory. Portland itself is a town of only 68,000 residents, and according to data from Redfin, prices for the finite properties available have increased by 6% over the past year.
Maine: The future of luxury real estate
Despite not having accumulated significant wealth yet, HENRYs represent a unique segment of the market, prioritizing real estate as a key investment. This shift in the patterns of Maine HENRY buyers is driving a transformation in the state’s real estate landscape, turning previously overlooked areas into thriving hubs. However, Maine HENRYs need a little help to fulfill their newfound dream of investment portfolios, and the data indicates that the strategic use of jumbo loans allows these high earners to enter the luxury market.
Within the next two years, those who observe market trends and luxury real estate fans alike should keep an eye on Maine, which is poised to cement its status as a leading luxury real estate market.
Methodology: This survey, conducted with Pollfish on July 3, 2024, targeted 1,000 U.S. respondents aged 18-54 who had either purchased a luxury home ($1 million+) within the last 18 months or planned to purchase within the next 2 years. Respondents had to earn at least $100,000 annually. The focus was on the 25-44 age range, aligning with the typical millennial HENRYs demographic (ages 27-42). The survey results, weighted by age and gender according to census data, offer valuable insights into luxury real estate trends and preferences among high earners.
Disclaimer: Article content is intended for information only. It may not reflect the publisher nor employees’ views. Consult a mortgage professional before making financial decisions. Publishers or platforms may be compensated for access to third party websites.
