The first quarter of 2008 is history and it's time to look back as see if we can spot any trends in real estate. Our company President, Dan Elsea, sends out a report every quarter to let us know how the company is doing in Michigan and what his take on the local market is for the quarter and the future. As many of you know, I track the statistics for my little corner of the market on a weekly basis – see www.themilfordteam.com and click on Market Statistics. What Dan “sees” are the statistics for the whole company over the entire market that we service.
I’ve posted the charts that Dan included in his report on my Web site, also under my Market Statistics page, so go there to see the data. Below is Dan’s report to the agents of real Estate One about the market.
There have been few years that have started out with as many mixed signals at this year. The MLS numbers published in the papers show some real growth in terms of homes sales yet our collective pocket books (Sellers and Realtors) don’t seem to be feeling the good news. I was skeptical about the MLS numbers and in fact held off on sending out any market data until we could detect some consistent pattern in the market. It appears the drop in March was somewhat weather related, with many “March” buyers finally coming out in April.
In short, the good news is the combination of bargain prices and great rates are beginning to both draw new buyers and cause old buyers to act. However, there has been a pretty strong pricing “bribe” to bring them out. Prices will continue to fall 8-12% this year from last year (it will feel like 15 to 20% when based off the asking price). These bargains are drawing down the listing inventory, so each month we are moving a step closer to a balanced market. There is still a wave of foreclosures yet to hit the market. The foreclosure and tax relief bills in process at both the state and federal level will help smooth out the remaining foreclosure lump. If they are delayed, the pricing pressure from short sales and foreclosures will continue into the third quarter of 2009.
Financially stressed sales (either foreclosure or short sales) still make up 50 to 70% of pending listing sold, indicating that buyers are drawn to the perceived potential bargains they represent. Sellers who are not in that category still need to adjust to compete or their piece of the buyer pie will shrink in half.
As we have said before, this does not mean a buyer should wait until next year to buy. It is unlikely that interest rates will remain this low. Further cuts by the Fed in short term rates will continue to cause long term rates to rise. Any delay in trying to buy at the bottom will be lost in higher interest rates.
The Rule of Thumb is a 1% increase in interest rates wipes out any gain from a 10% drop in home values. It is more likely rates will rise by more than 1% over the next 12 months than values will fall by more than 10% in most of our markets.
The rules have not changed for this year or next. Now is the time to buy, what you lose on the sale of one home you will gain on the purchase of another. Vacation homes are at all time bargain prices as well.
Many Sellers are not in a position to make a move, regardless of potential bargains. They should take a hard look at their housing needs over the next 24 months to determine if selling is in their best interest. As much as we love to help them sell their homes, our best advice for some is to wait, if they can afford to do so.
So, Dan’s view is consistent with what I’ve been reporting here and on my Web sites. His statistics also indicated a slight year-over-year drop in the 1st quarter sales in Oakland County (-1.4%)l as in Washtenaw County (-5.6%) and Wayne County (-0.3%); however the other counties in Southeastern Michigan had increases. See the charts on my Web site. I tend to agree that the March drop was weather related. As soon as the weather turned better in April there seemed to be a flood gate open up and buyers were everywhere.
As a company, Real Estate One sold or leased 3,220 homes in the 1st quarter and listed 3,241 more. We also had 6,345 potential buyers go through open houses during the quarter and 354,313 people visit out company web site – www.realestateone.com . Our National ranking among brokers went up from number 22 is 2007 to number 15 in 2008, so we’re obviously doing lots of the right things during this downturn in the real estate market.