From the May monthly report on the market that our broker, Dan Elsea, does comes this brief overview:
“Overall, housing demand in Southeast Michigan remains strong and sales continue to exceed last year’s pace. The market under $250,000 is especially brisk with falling inventories, the $250-500,000 range is more stable as inventory growth is matching sales growth, and the over $500,000 market is slower, relatively speaking, with inventories rising faster than sales.”
There are many reasons for the market slowdown at the upper end of the market, not the least of which is the general re-set of the economy to a lower overall average. The loss of higher paying middle class jobs has shifted the median and average home sales prices downward, as few and fewer people can afford the upper end move-up homes.
Homes price above $500,000 are sitting on the market longer and/or selling for less than many owners expected. The recent “Great Recession” had a dramatic impact on many two earner families, with many families experiencing the layoff of one or both earners. Even if both wage earners are once again working, the result of the disruption is usually a much smaller combined income. The recession also had a chilling effect on middle management positions and pay as various take-overs and mergers resulted in fewer positions and generally lower pay or reduced bonuses.
Add to all of that the beginning of the expected retirement downsizing of the Baby Boomer generation and the addition of many of the “McMansions” of that generation and you have the makings of a glut in the $500K and above home market. That excess inventory has worked to hold down prices for those larger homes.
So, if you have a home that will price out at or below $250,000 you are in great shape to sell. Homes in that price range that are in good condition and which have been well updated sell in days or weeks at most. Even homes in that price range that need lots of work or updating will sell, but they may languish on the market, until the seller drops the price to reflect the condition.
If your home is in the $250-500K price range it may take 2-3 months to sell (maybe longer), again depending upon the current condition and whether it has been updated. Sellers in this price band would do well to pay attention to things like de-cluttering, making any needed repairs and keeping the place clean. Buyers may be willing to take on a few projects in this price range, but there is enough inventories on the market that they don’t have to compromise too much just to get a house.
Sellers of homes above $500,000 should plan on 6 months or longer to find the right buyer. There just aren’t that many buyers in that price range out looking and they are very demanding when you do find them. Most buyers in that range don’t want to have anything that needs to be done or updated when they have paid that much to begin with. Patience and persistence is required of these sellers.
If you are a buyer, especially in the lower price bands, you need to be ready to act quickly if you find the perfect house for you. You must have your mortgage pre-approval ready to present, along with your offer. You should also be in a position to make an offer with the fewest number of contingencies or concession requests as is possible for you.
Buyers' offers are judged on their “strength”, which is a combination of offer price, proof of ability to pay and number of concessions or contingencies that accompany the offer. Asking for Seller Concessions to cover your closing costs makes your offer weaker than someone else offering the same (or even slightly lower) price, but without the concession demand. Offers that are contingent on things like the sale of an existing house are just not flying these days, at least not in the lower end of the market. At the lower end you will also be competing with all-cash offers from investors, so adding any conditions, concessions or contingencies to your offer makes it much weaker.
If you are ready to become either a buyer or a seller, call me for a free consultation on what you should do to be ready for that role in the current market.