From our broker - Dan Elsea
The biggest influence on real estate so far this year has been the weather, not the economy (which has fortunately remained stable). The snow and cold have put a significant damper on customer and showing appointments. The good news is that values continued to rise, in many cases over 10%, and the number of homes under contract remained very close to January of last year. The most positive indicator is the number of visitors and information requests to our website, which remains at 2013 levels, even though showing appointments have been off 35% compared to January/February 2013. Buyer interest remains strong, but they simply cannot get to the properties to make an offer. There is about a 30-day lag before showing appointments turn into contracts written, so we expect February sales to be slow compared to last year. Weather related slowdowns rarely cause a permanent reduction in business, it simply pushes sales forward towards the better weather months.
For Sale inventories continued their downward trend, as did the Months Supply of Inventory (MSI), falling to its lowest point (three months) in Southeast Michigan. With 75% of all buyers chasing the newest listings on the market, the MSI for most buyers is under 60 days. There are fewer multiple offers than at the peak of the market frenzy last summer, but it looks like a similar active market may be waiting for us this spring. We can expect a big jump at the first thaw, and moving up from there. We are still expecting more listings to hit the market this year than last, just delayed by the weather. This will make the summer and fall markets fast-paced, but also a little closer to normal.
One way to judge the strength of the market is to compare the trend of sale prices to their original listing prices. In this chart we break out the properties that sold without price reductions versus those that required one or more price reductions to sell. The group without price reductions has held pretty steady in the upper 90’s, spiking to over 98% last summer when the feeding frenzy was the hottest. The group with one or more price reductions has hovered in the mid 80’s, spiking to over 90% during the summer. (Even the not so great listings were selling then!)
Looking at January 2014 sales we see that 65% of all sales were in the category without price reductions and selling on average in 31 days. As you would expect, the remaining listings sold slower and with a bigger discount to asking price. Of the 35% that required price reductions, on average they would need to reduce their asking price by 11% before they would be in the range for any strong offers to be made.
Our January sales were surprisingly strong considering the weather, a little behind last January but still a strong showing, with the average transaction value up to over $165,000. That’s a 24% increase compared to January of 2013.