Ed. Note: The following is Real Estate One's report on the real estate market in Michigan. Take note of the third paragraph that is underlined in the report. In the spring, sales prices peaked for the market. That means that when appraisals are done for homes selling in the fall and winter, there will be a large inventory of comparable homes that sold at a good price. This means appraisals are more likely to come in at sale price.
September’s written contracts were a positive surprise, breaking a two-month flat trend, indicating there is still some pent-up demand left. What we are hearing from our sales associates is the market is slowing compared to last year. The hard statistics bear this out with increasing property inventories and a slower rise in property values. Closed sales grew compared to last September from pent-up winter demand being released in June and July. The increase in written contracts should translate into a stronger than expected October or November, as those contracts close. Overall, home sales remain flat—even slightly behind—compared to last year. This is from a combination of: the end of the release of pent up demand from the recession, the increased cost of homeownership from rising prices, and the tougher mortgage standards, particularly for first time home buyers.
In some cases we are hearing of values rolling back a bit from this spring, not just in the upper end markets but across many price ranges. This is a result of this past spring’s extremely low inventories driving prices up from where they should have been based on current economic conditions. In reality, the movement of the housing market, the stock or other investments do not move in a straight line; instead, they move in fits and starts, constantly adjusting and correcting. On occasion, the corrections are as dramatic as in the past recession, but most of the time it is less dramatic, like the corrections we are seeing now. Overall, values will continue to rise with 2015 being higher than 2014, despite any corrections we are seeing.
Since no individual home is the "average," even if there is a settling or pull back in the market this fall, sellers will need to look at their own unique circumstances to determine the best market timing. The advantage of selling this fall and early winter is the ability to take advantage of the higher comparable sales from this spring and summer, which makes appraisals less cumbersome. By the same token, there is the potential of appraisal difficulties next spring if the market heats up.
The following charts track some key indicators segmented by price range.
For Sale inventories above $250,000 have been trending upward since March from a combination of sellers taking advantage of increasing values and a slowing of buyer demand in those price ranges. The under $250,000 segment rose during last fall and winter, but has declined since the spring. Buyer activity has also fallen, so although inventory scarcity remains an issue for buyers, it has stabilized to some degree. It is interesting to note that the number of homes selling at or above list price fell slightly in September from 38% last year to 32%. The under $250,000 segment had the biggest change from over 40% in 2013 to under 30%, this September, selling over list price, probably reflecting the reduction in bank owned sales as well as a slowing of buyer demand.
The Price per Square Foot trends across all price categories show a similar pattern peaking last fall, growing at a slowing rate until last summer and then moving up again in August and September. The late summer upswing coincides with the jump from delayed winter activity. The rate of actual appreciation was about a third less than what is reflected on the chart; the difference being the mix of homes sold, investor flipping, etc. These are closed figures so they lag the market by about 90 days; therefore, the latest increase reflects the spring jump. We can expect the rates of increase, particularly for over $500,000 segment, to flatten out over the next few months, reflecting the market adjustments discussed above.
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.
