Real Estate Information Archive

March finished with a nice flourish of activity with pending sales (new contracts written in March) up across all price points compared to last March. The pace of new listings entering the market was still slower than last year for properties under $250,000, putting continued pressure on already scarce For Sale inventories. Clean, well-priced homes are going fast, with 25% of homes selling in 10 days or less and 55% in 30 days or less.

The $250,000-$500,000 markets saw a slight 4.5% rise in inventory but a huge 31% rise in activity. Although sales activity in the over $500,000 luxury Home market increased by 4% over the first quarter of last year, the 11% rise in listing inventory made the market feel slower to many high-end sellers.  

Local supply and demand drives value changes as the statistics in the above chart reflect. Supply and demand can vary dramatically within the different price ranges and markets, affecting appreciation accordingly. First Quarter 2016 value per square foot jumped the most (9% over 1st Quarter 2015) in the Under $150,000 price range, where the inventories are the tightest (15% lower than 2015). For $150,000-$250,000, again with low inventories, values jumped almost 3%.  In the $250,000-$500,000 markets, with inventories rising, values rose just under 2%, and for the over $500,000 markets, with inventories rising over 11%, values were flat.

Buyers

In all price segments, there is a shortage of nicely detailed and updated homes. Again, the great ones go fast and often with multiple offers. Buyers need to be diligent in monitoring new homes as they hit the market, patient in waiting until the right home appears, and ready to jump when it does. The best homes often sell in hours instead of days. To win the race to the deal, buyers need to monitor new listings constantly, and be prepared to write with earnest money deposits and approval letters.

We are often asked how far values have come back from the peak point of 2005/6 in Southeast Michigan.  Using Case-Shiller data we can estimate about how far we have moved over the past 10 years.  Case-Shiller shows we are back to early 2001 values, but since they tend to run 6-8 months behind in their date, we are really closer to late 2001-early 2002, which puts us back to about 85% of peak values.  There are many markets that are back to peak and some lagging behind, but on average, 85% is a good number to use.  It is also interesting to note that we are now back in line with the long-term value trends (the orange dotted line) if values had followed their long-term trend, instead of the roller-coaster ride we all took.

Demand for Detailed Homes

Prior to the recession, buyers freely used home equity loans to update kitchens, baths and do other home improvement projects. The recession pulled the plug on the availability of home equity loans for most homeowners. Buyers have fewer freshly updated and decorated homes to choose from. Since most buyers aren’t in a position to qualify for an equity loan when they first buy, the easiest way to finance updated kitchens and baths is to buy a home that already has them. Buyers want it easy and are willing to pay a premium to get that detailed home.

Last year Southeast Michigan broke records for both sold units and sold dollar volume. We are off to an even better start in 2016 with both units and volume. That kind of activity combined with low inventory is a perfect recipe for value growth.

Please contact me with any of your real estate needs. I am happy to assist you.

Tom Stachler is a local Ann Arbor area real estate agent, realtor and Broker providing home or house pricing for the markets located in Saline, Dexter, Chelsea, Milan, Ypsilanti MIchigan. Contact him to get price, realty information and new listing updates.   

It looks like it might be shaping up to be an interesting spring market. Although the trend of rising inventories is still taking hold, a combination of good weather and continued buyer interest at all price ranges, has kept For Sale inventories lower than we had expected which is good news for sellers. What won't be clear until April or May is whether the increased sales activity for the last 4 months is borrowed business from the spring or a true increase in buyer demand.

Under $250,000 inventories are falling and buyer activity is rising, causing a continued scramble to find a Home to purchase.  Although inventories are rising in the over $250,000 price categories, new contracts are rising faster than new listings, which is keeping the expected inventory jump this winter much less than anticipated.

For the economy in general, economists seem to be pessimistically optimistic. Economic activity is moving forward but at a slow enough pace that it is vulnerable to sudden change in any world activity. With stock prices lower, upper-end markets should slow as well and with stronger home equities, many more sellers will be able to sell, creating more inventory, and potentially slowing appreciation rates, if supply exceeds demand.  All that said, it is also as likely that buyer demand still has some kick left in it, as first time home buyers and as many “boomerang” buyers jump back into the market (see chart below).  So we will simply have to wait and see how the spring market unfolds. It does appear the real estate bulls vastly outnumber the bears in relation to the spring market and 2016 in general. So, with inventories low and demand still strong, those Sellers who may be waiting until spring to put their homes on the market should consider entering the market now.  

To get a feel for how far values have recovered relative to peak values back in 2005/6, here is a chart showing Michigan in comparison to the rest of the country. It shows Michigan back to 92% of peak values, which when adding in the pay-down of mortgages during the past 10 years, puts most Michigan homeowners with more equity than that at the peak.

So far it looks like an early spring for both the weather and for real estate activity, so for both buyers and sellers, don't be afraid to jump in now, the water might be still a bit chilly but it is heating up fast!

Current Mortgage Interest Rates

Conforming

Non-Conforming

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It was a bit surprising to see 2015 end with a flourish of new sales contracts. We think the jump in sales activity was as much a result of mild weather as increasing buyer activity.  It would not be surprising to see that November and December sales were "borrowed" from the first quarter of 2016. Web site activity and property showings remain at similar levels as last year, which indicate we still have strong buyer interest, equal to the beginning of 2015, but not a wild market that the last 60 days might suggest. Looking back, 2015 was the year we began to move towards a more balanced market, with inventories finally rising across all market segments, faster in the upper-end but still rising in the lower price ranges as well. This past year saw value increases across all price categories, with the strongest gains in the under $250,000 segments. As shown by the Case Shiller Composite Report, the pace of increasing Home values slowed as available homes for sale increased. These national numbers mirror what we have seen throughout Michigan as well. So even with demand remaining strong, the increasing inventories will cause a cooling off of home value increases.  

This year should show similar value gains but on the lower end of the ranges we saw in 2015. The overall trends for 2016 should follow what we saw in 2015, with rising inventories, continued strong buyer demand, but probably not keeping pace with the current increase in inventories.

There is still some pent up housing demand yet to be released, probably over multiple years as opposed to all at once. Values are getting close to peak 2005 levels with 90% of Michigan home owners now with equity in their homes, a big jump over the bottom of the recession.

The recession delayed many moves, as shown by the chart below, leading up to the recession the average time between moves was 6 years and it moved to 9 during the recession. Time between moves will over time move back closer to the 7 year range, with the difference being pent-up seller demand to be released over the next few years.

The recent regulatory changes known as TRID have not had a big impact so far on getting homes sold and closed. It looks like the new regulations have extended closing dates by about a week or less.  Nonetheless, we still recommend at least 45 days from mortgage application to closing day.

All the current indicators show that housing should remain strong throughout 2016. Interest rates, although expected to rise, will remain low, mortgage lending is easing, employment and wages continue to show positive (although slow) upward trends and there is still pent-up demand from the recession left to be released. All good news. Will the current stock market correction change that? So far it appears the stock market is making the same adjustment we saw in housing in 2015, a correction to an overheated market. The old joke about the stock market is that its declines have predicted 9 of the last 5 recessions.  Certainly a fall in household net worth, whether it is from a drop in stock values or home equites, will have an impact on housing but so far it appears, with possibly the exception of the upper-end markets, the impact will not be major on housing. The momentum of the overall economy, growth of millennial home ownership and remaining pent up housing demand should carry housing through any stock market related slump.

Overall we are going into 2016 will a steady tailwind (or maybe a tail-breeze) which should keep housing moving forward at a steady pace.

Please contact me with any of your real estate needs. I am happy to assist you.

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Good Morning.

With the first half of 2015 in the books, we have been pleasantly surprised with the results. After three years of a recovering housing market, we had expected the market to slow to a more historically normal pace, instead it has accelerated into the summer.  There are some signs that the market is returning to a more moderate and sustainable pace with For Sale inventories beginning to rise and the pace of new sales, although strong, rising at a slower rate. The charts below show the movement of the market over the past three years, giving a feel for how the current market has developed.

Home Sales: Home sales in the lower price ranges have fallen as a result of both fewer bank-owned sales and a continued shrinking of available homes for sale. Year-to-date-sales under $150,000 have fallen 5% compared to 2014.  Demand remains strong, but with low inventories, there simply are not enough homes to satisfy buyer interest. In the higher price ranges (over $150,000), fueled by growing For Sale inventories and consumer confidence, the pace of home sales has risen, with sales so far this year growing by 20% over 2014.  

For Sale Inventories: The majority of bank-owned properties has been in the lower priced markets, so it is not surprising to see those inventories shrink as foreclosures decline.  As home values have risen, sellers have been able to get back into the market, releasing listing inventory, with the pace accelerating in the last 90 days. For properties over $150,000, and particularly over $500,000, inventory growth has outpaced the increase in sales, causing many sellers to feel like the market has put on its breaks. That is true to some degree, there are actually more buyers in the market than this time last year, but there are even more listings, so it will feel slower in the upper price ranges, with fewer showings per listing and a slower pace of appreciation.  This is of course all relative, since it is still a strong market across all price ranges and areas; the difference being the slower pace of appreciation in the over $150,000 markets compared to the pace in this segment in 2014.

Home Prices: Home prices continue to rise across all price categories, but at a slower pace, which is healthy, keeping below the unsustainable rates (over 10%) we saw in 2013 and 2014. The chart below follows the percentage value change over the prior year by quarter. Value jumps in excess of 20% in 2013 were again influenced by bank owned sales. Across all price ranges, as inventories began to rise in early 2014, the rate of appreciation began to slow, with the over $150,000 segments now below 5%; and, in fact, the over $500,000 segment has fallen to a negative rate in the last 90 days. We don't think this a permanent trend for the upper-end, just a market correction influenced by the jump in inventories. Values in all price ranges will continue to rise over the next 12 months, just at a slower pace. It is likely that as we move into late summer and fall, listing inventories will tend to be overpriced, particularly in the higher priced markets as inventories rise. We are seeing that now in over $1,000,000+ properties throughout most of the metro area.   

Overall, the number of homes selling at or above their list price remains at about 30%, about the same as last year, as are the number of homes selling in under 30 days (55%). This suggests that even with an increased inventory, a property with the right balance of location, condition and price will sell in weeks vs. months. Interest rates should rise in the second half of this year, which may cause a mini rush of buyers moving to get under the rate increase wire.

Company wide, Real Estate One continues their bragging rights run of three months in a row, in excess of 1/2 billion dollars in homes sold. In any one three month period,  we have exceeded what any other broker has sold in Michigan for all of 2014!  So, don't be shy and call me today to get your property on the market. 

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