The combination of the lowest interest rates in 50 years and the lowest number of available homes in five years would normally indicate a strong Seller's Market. In our case, the third leg of the real estate stool, employment growth, is still wobbly enough to offset some of the value of the first two. However, in spite of the economy, Michigan looks to be one of the strongest real estate markets in the country.
Low home inventories, incredible pricing and a general feeling that we are moving off our low point are combining to keep the market moving. Our post tax credit sales have not fallen to the same degree as most of the country and surprisingly, thanks to record low interest rates, August sales rebounded ahead of last August (we were expecting a 10-15% decline). Northwest Michigan did show a decline, but less than expected (and our own numbers were up!). In some price segments (mainly under $100,000) there are enough cases of multiple offers to say for the first time in five years, we are setting a foundation for value appreciation.
Current tough lending and appraisals standards continue to be one of our biggest stumbling blocks towards a stronger appreciation foothold. Appraisers are being held back, still focused on a declining market as opposed to an appreciating or even neutral market view. However, like any cycle, those standards will eventually move back towards a reasonable range (we hope sooner than later). In many instances, buyers have had to make a larger down payment to bridge the gap between the sale price and appraised value. This is not necessarily a bad strategy for the buyer if there are multiple offers, since those offers indicate the true market demand fits the price.
As we said last month, this is the best time in the past three years for a Seller to put their home on the market (particularly under $200,000). The price you will receive may not be what you had hoped, but values have stabilized from their 1-2% per month decline. This perfect combination of low rates and low inventory may be temporary as both rates and inventories (pent up bank owned) will certainly rise. For Buyers, it is likely that both values and interest rates have bottomed out, meaning that waiting to buy will cost as oppose to save you money.
Certainly, we have a record number of Sellers who are not able to move because of value declines and/or mortgage balances and we are still working through a large backlog of financially distressed home sales. However, there are strong underlying factors that will push the real estate market upward, albeit slowly, regardless of the current economic issues. The first time buyer segment (Gen X and Y) is building up at a record pace, move up/out Sellers are also at record pent up demand levels (Baby Boomers looking to make their final moves). Most homeowners who have had to sell or lease as a result of financial stress can't wait to purchase a home the first chance they get. Sellers who are short on equity to move, are not short on their desire to move. All told, there is near record interest and demand for housing which will fuel steady housing growth as we move out of our recession.
Economic declines always hit harder than predicted and rebounds always happen faster. This rebound should be no different. It will not come roaring back, but for all the reasons stated above, the real estate market will rise faster than most have predicted. Below are a few economic indicators from the monthly Comerica Economic Brief. You can see in many areas, Michigan is clearly bouncing off the bottom.
Homes Under $100,000 in Value | Number of Homes Pending | Available Homes for Sale | ||||
Area | Aug. 09 | Aug. 10 | % Change | Aug. 09 | Aug. 10 | % Change |
Oakland County | 740 | 878 | 18.6% | 3,588 | 2,650 | -26.1% |
Macomb County | 719 | 912 | 26.8% | 4,020 | 2,602 | -35.3% |
Livingston County | 65 | 80 | 23.1% | 290 | 222 | -23.4% |
Washtenaw County | 79 | 75 | -5.1% | 383 | 392 | 2.3% |
Wayne County ( - Detroit & G.P.) | 636 | 760 | 19.5% | 2,714 | 2,116 | -22.0% |
Detroit | 795 | 789 | -0.8% | 4,606 | 3,357 | -27.1% |
Grosse Pointe(s)* | 129 | 162 | 25.6% | 915 | 514 | -43.8% |
Northwest Michigan** | 72 | 68 | -5.6% | 4,378 | 4,199 | -4.1% |
Total | 3,235 | 3,724 | 15.1% | 20,894 | 16,052 | -23.2% |
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| Median Sale Price | | Ave Chance of Selling (in 30 days) | |||
Area | Aug. 09 | Aug. 10 | % Change | Aug. 09 | Aug. 10 | % Change |
Oakland County | $46,000 | $48,750 | 6.0% | 21% | 33% | 61% |
Macomb County | $35,000 | $34,900 | -0.3% | 18% | 35% | 96% |
Livingston County | $60,500 | $72,000 | 19.0% | 22% | 36% | 61% |
Washtenaw County | $50,000 | $46,450 | -7.1% | 21% | 19% | -7% |
Wayne County ( - Detroit & G.P.) | $43,000 | $46,100 | 7.2% | 23% | 36% | 53% |
Detroit | $7,500 | $10,000 | 33.3% | 17% | 24% | 36% |
Grosse Pointe(s)* | $25,000 | $27,500 | 10.0% | 14% | 32% | 124% |
Northwest Michigan** | $46,800 | $50,750 | 8.4% | 1.64% | 1.62% | -2% |
Total | 33,145 | 36,165 | 9.1% | 15% | 23% | 36% |
Over $100,000 in Home Values | Number of Homes Pending | Available Homes for Sale | ||||
Area | August 09 | August 10 | % Change | August 09 | August 10 | % Change |
Oakland County | 878 | 1,017 | 15.8% | 9,050 | 5,980 | -33.9% |
Macomb County | 406 | 411 | 1.2% | 4,132 | 2,262 | -45.3% |
Livingston County | 144 | 173 | 20.1% | 1,637 | 1,193 | -27.1% |
Washtenaw County | 178 | 197 | 10.7% | 1,804 | 1,391 | -22.9% |
Wayne County ( - Detroit & G.P.) | 353 | 379 | 7.4% | 2,913 | 1,806 | -38.0% |
Detroit | 8 | 16 | 100.0% | 428 | 273 | -36.2% |
Grosse Pointe(s)* | 54 | 65 | 20.4% | 783 | 467 | -40.4% |
Northwest Michigan** | 147 | 141 | -4.1% | 5,036 | 4,822 | -4.2% |
Total | 2,168 | 2,399 | 10.7% | 25,783 | 18,194 | -29.4% |
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