Dan Elsea is our broker and one of the company owners. each month he reports on how the market has been doing through the end of the prior month. This is his May report.
In April, the market heated up even more than we had expected. With For Sale inventories rising through the winter and into the beginning of 2015, it looked like the market was becoming more balanced. To some degree it has settled compared to last spring, but the buyers are coming out full force as well. The result is a healthy gain in sales (6% in April, a nearly 10% year to date increase over 2014) and in price per square foot (6.5% in April, about an 8% year to date increase over 2014). New listings entering the market grew faster than sales causing inventories to rise by about 6% in April. The Months Supply of Inventory (MSI) is holding steady at 2.2 months with the vast majority of buyers (88%) buying homes that have been on the market less than 90 days. This makes the feeding frenzy for new listings even more active than the 2.2 months supply indicates.
There are a couple of industry issues that everyone should be aware of regarding any real estate transactions in the upcoming months. The first is a warning regarding a wire fraud scam moving across the country. The second issue reflects changes to the mortgage approval and closing process that could cause extended and delayed closings beginning with new sales this summer.
1) The Wire Fraud scam is based on giving false wire instructions to a buyer, tricking the buyer into wiring their down payment money to the crooks. The criminals, using various methods, gain access to someone's email (Buyer, Seller, Realtor, Title Company, etc.) to monitor the activity during a transaction. When they see a closing coming, they impersonate the Realtor or Title Company, sending bogus money wiring instructions to the Buyer, thereby grabbing the Buyer’s money for the sale.
The solution to prevent the scam is relatively simple for buyers. Always call someone you know in the transaction (the Realtor or Title Representative) to verify any wire instructions you receive (in addition to using email, the crooks will sometimes call and impersonate the Title Company).
The more we communicate exclusively via email the easier it is to get lulled into a scam. When it comes to wiring money, always add the additional step of personal verification with your Realtor or Title Representative.
2) The new regulatory changes will affect mortgage applications received after August 1st, 2015. These changes are part of the final implementation of the Dodd-Frank legislation. We will go into more detail next month, but the core changes will be a new closing statement replacing the HUD 1 and new time frames for lenders to provide information to buyers during the application and approval process. The result will be a lengthening of the mortgage approval process. Most industry experts suggest that we plan on up to 10-15 additional days, as well as the need for a flexible closing date. Transactions during which sellers are closing on their home in the morning to buy their new home in the afternoon ("back to back closings") will be trickier, as will closing where the buyers are scheduled to move in the day of closing. It will be more important than ever to plan some flexibility into the choreography of the closing and moving process, allowing for an extra 10 days or so for the mortgage approval process and an additional 5-7 days for the time between loan approval and the actual closing.The additional disclosures and new forms are benefits to the consumer. The trade-off is a slower mortgage approval and closing process.
April activity for the company followed the strong market activity. Combined we had a truly remarkable record month with over $500 million in new contracts written, a company record and certainly the most ever for a broker in Michigan. Only a handful of real estate companies sell over $500 million in a full year, let alone in one month.