5-County Market Trend Summary

Dan Elsea, our Brokerage President released this report last week that shows an encouraging trend in home sales - we may be bottoming out.

By focusing on sales above $40,000 we have filtered out a significant share of the investor and rental transactions, leaving the vast majority of owner occupied sales to set a trend. The Western Wayne county numbers do not include the City of Detroit. Because most of the current sales in the city are under $40,000, we were not able to create an accurate investor filter for that market.

The trend line for each county shows where the sales are headed. In all counties, except Western Wayne, you can see the current trend shows a pretty clear bottoming out of the market, and in the case of Oakland County, a possible upward trend in the sales pace. Although these numbers are not as optimistic as the total sales numbers, they do confirm what we have been seeing in the last 90 days, that we are in a bottoming out phase in terms of sales units for owner occupied homes/condo’s.

The second graph, outlining median home values is more of a mixed bag, with Washtenaw, Oakland and Western Wayne showing a downward trend at the same pace and Livingston and Macomb showing a slowing in their price decline pace. In all cases values continue to decline but the rate is not increasing. Combine that with a reduction in housing inventory and you have lined up all the core real estate conditions for a neutral to improving market over the next 24 months. There is quite a bit of excess housing inventory yet to absorb in all price ranges before we will see these numbers translate into price appreciation.


Does this mean we are at the true bottom or are we in for another level of correction based on the current economic conditions? We are too early in the Wall Street reactions to make a prediction of any merit. We do know however that the result will certainly not increase our growth rate; it will either be neutral or a further downward trend.

With that in mind our advice for Sellers remains the same, price aggressively; do not expect the market to rise to your price. Our current price decline pace of about 1% per month will either remain constant for the next 12 months or accelerate, either way; a 10% price reduction today is the smartest hedge you can have against the uncertainty of the future markets. It is important to remember that the 10% number is based on a reduction from current market values. Many homes are currently listed anywhere from 5% to 25% above the current values, so for many the price decline needed is quite steep.

For Buyer’s there may be a tendency to hold back to see if prices fall even more, but again, the news is will either be neutral or possibly worse for buyers. Right now for the majority of Buyers mortgage money is surprisingly plentiful with the availability of FHA programs. If the financial crisis does worsen it will likely mean less mortgage money available, not more and higher rates, not lower. There is always the personal financial uncertainly that effects a home buyer’s decision regardless of the great deals in the market, however those who are comfortable with their financially position (understanding that your stocks will return their value over time) this is that once in a life time opportunity to buy.

This report confirms what I've been seeing and tracking in my much smaller patch of the market in Milford, Highland, Commerce White Lake and West Bloomfield. I've also noticed that foreclosed homes, as a percentage of the weekly sales, have been dropping slowly back down and the number of "regular" home sales has been creeping up, even those over $300K.. In some areas that I track, the sale price to SEV price has also been stabilizing and starting back up a bit. That's all good news. We have a long ways to go to get back anywhere near where we were on price/values a couple of years ago; but maybe that's a good thing, since where we were then was into highly inflated prices. We seem to be landing about where we should have been, so far as price/value goes, had there not been the big run-up in prices from 1999 to 2004/5.

Now if we can just get the stock market and the financial markets to stabilize...