Michigan monthly market report - July 2013

Michigan Monthly Market Report - July 2013   

Buyer demand in June continued at a strong pace in terms of new purchase contracts written (pending sales). June also continued the trend of more sellers putting their homes on the market, which should “in theory” relieve some of the significant inventory shortages. We say “in theory” because although new listings did rise, so did buyer demand, quickly absorbing the additional homes. In spite of more homes coming on the market, the available inventory continues to fall, reaching a new low for Southeast Michigan of 2.1 months (1.5 months for homes on the market less than 90 days). As we have shown over the last few months, the rate of growth for both new sales and listings continue their upward movement resulting in fewer days on market.

Enlarged View: Annual Appreciation Graph 

It is not surprising that the home value trend continues to accelerate, as well.

Enlarged View: Price per Square Foot Graph 

Interest rates were the biggest news in the past 30 days, rising in anticipation of the federal government rolling back their support of low mortgage rates. Showing appointments slowed a bit in June, which might indicate a reaction to the rising rates. So how high will rates move? Since jumbo mortgage loans (loans over $417,000) do not have a federal subsidy, they are the best gage of where interest rates should move. Right now both conventional and jumbo rates are nearly identical, meaning they have moved to their true market level and we can expect them to remain stable in the short run. However, as the economy continues to improve, rates will rise.

What is the “cost” of waiting in the current market?  For buyers the math is pretty easy. If values go up 10% and interest rates rise 1%, their buying power is reduced by 20% (i.e mortgage payments increase 20%), which is of course why so many buyers are attempting to buy now.  For Sellers, that 1% rise in rates will negate a 10% increase in value. Therefore, over the next few years rising rates will offset some of the rising appreciation, reducing buyer demand and limiting the amount of wild cash offers given to sellers.

Buyers should be aware that in more and more cases, sellers are requiring the buyer to commit to covering some or all of the short fall if the appraisal comes in lower than the agreed purchase price. Prices have not yet reached their 2005 peak levels so overbidding is still a safe bet to get the home you really want, even if the appraisal comes in lower. Appraisers have a very difficult time catching up with a rising market, since they rely on historical sales data to determine the value of a property.  

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.

Foreclosures plummet in Michigan

Yesterday, as part of the report on the real estate market in Berkley, I noted that foreclosures had dropped year over year.  Today, RealtyTrac announced in their Mid Year 2013 U.S. Foreclosure Market Report that foreclosures have “plummeted” (their word) in Michigan.  

The report released numbers that show the foreclosure rate is the lowest in years for the first half of 2013.  The numbers are even lower in some areas than they were in pre-recession days.

In Oakland County, there were 2,572 filings in the first half of 2013.  That represents a decrease of 44 percent over the second half of last year and a 54% drop over a year ago.  

Buyers use all homes sold in an area that compare to a home they are considering as one factor in determining the value.  Homes that are third party owned or in foreclosure generally represent a greater risk than homes that are privately owned so they are priced lower than comparable homes.  This brings down the total market value of all homes in the market.  With foreclosures and third party homes decreasing, the total market value of homes will rise.

The market is impossible to predict with any certainty.  Market conditions can change in a short period of time and reverse themselves.  But, there is every indication that the real estate market is improving as supported by this recent report on the drop in foreclosed homes on the market.

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.

Real Estate Market Report for 2nd Quarter 2013

The residential, single family dwelling market in Berkley is on the rise.  This follows the rest of the Oakland County market.  The average sale price in Berkley for 2013 second quarter rose over last year by $40,516 to $156,340.  It rose over $12,000 from the first quarter of the year.    

Some of that increase is affected by the top end of the market.  But, the average square footage of each home sold over last year actually fell from 1,174 to 1,190.  During the same time period the average dollars per square foot jumped from $ 98 to $ 131.  This indicates that everyone selling a home in Berkley is benefiting from the improved market.

One of the reasons for the increase in average sale price is a belief that the market has bottomed out and homes prices will begin to increase.  This, with an almost all time low in mortgage rates and an improved economy, has brought buyers into the market.  

Another reason for the increase in the sale price and the per square foot numbers is due to a steady decrease in the number of bank owned and other third party ownership properties and the number of short sales.  There are risks in purchasing third party owned and
short sales that makes them different than private owner sales.  But, buyers tend to consider them when making offers for private owned properties.  This is mostly due to the function of including them when comparing similar homes in an area to the one that the buyer is making an offer on.

All of this has pushed inventory of homes on the market in Berkley down.  At one time during second quarter, there was less than a month’s supply of homes on the market.  Many homes were selling so fast, that signs hadn’t been placed on the front lawns yet.  A statistical indicator of this was the increase in the difference between list price and sale price.  Last year in second quarter, homes on average were selling for about $2,700 less than the average list price.  But, in 2013’s second quarter, homes were selling for $329 over list on average.  Part of this is due to agents and appraisers being more conservative when estimating the market.  But, another reason for this is the intense competitiveness in the market.  Often, there are multiple bidders on a single piece of property.  When a buyer loses out a couple of times on the home they want by bidding under or at list, they will eventually bid higher than list to insure they get the property.

No one can predict with any confidence what the market will do in the coming days as we enter the third quarter of the year.  But, many believe that the market will begin to level off at a much healthier rate than last year.  The numbers from last year and the first quarter of the year indicate that may be the direction the market is heading.

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All numbers from Realcomp.