Real Estate Market Report for May 2017

The real estate market in Southeast Michigan remains very "tight", with record low inventory driving market prices up. The graphic below provides a quick summary:

Please click here for a full version of the May 2017 Southeast Michigan Monthly Housing Report:

In this very "tight", low-inventory market is is more important than ever to seek the good real estate advice of a Realtor. It is definitely a "seller's market"; but, that does not mean that sellers can be successful with outrageous prices or that buyers must engage in bidding wars on every house. Both buyers and sellers risk making serious mistakes without the guidance and help of a good Realtor.

New-Home Sales Rise…existing home sales follow along for the ride

From a recent - National Homebuilders Association Press Release (May 26, 2015)

Sales of newly built, single-family homes rose 6.8 percent to a seasonally adjusted annual rate of 517,000 units in April, according to newly released data from HUD and the U.S. Census Bureau.

“Sales are moving forward and our builder members are telling us they are starting to see more activity as more buyers get off the fence and enter the marketplace,” said Tom Woods, chairman of the National Association of Home Builders (NAHB) and a home builder from Blue Springs, Mo.

“Following an unusually low sales report in March, today’s numbers are consistent with other data we’ve seen recently and indicate a continuing, gradual improvement in the housing market,” said NAHB Chief Economist David Crowe.

Regionally, home sales were mixed, rising 36.8 percent in the Midwest and 5.8 percent in the South. The Northeast posted a 5.6 percent decline and the West fell 2.3 percent.

The inventory of new homes for sale edged up to 205,000 units in April. This is a 4.8-month supply at the current sales pace.

In our area in southeastern-Michigan we can certainly see this trend. While sales of used homes are up too, new homes are selling as fast as they can be built. We still have a “tight market” in Michigan, with more buyers out looking than there are houses for them to look at. Multiple bids and bidding wars for good houses are not uncommon. Houses that are in move-in-ready condition are selling for at or above asking. All of that is good if you are a home seller, but quite frustrating if you are trying to buy.

The tight market has also impacted the rental and lease markets, with both experiencing rising asking prices and very low inventory. Many of the people who lost houses during the great recession are still living in leased homes while they rebuild their credit. It is very difficult to find lease properties, especially those that might accommodate a larger family.

So, what is a buyer to do? Well, for one, this is not a time to be “testing the market”. You are just wasting everyone’s time if you are out looking with no real plan to buy. You need to be pre-qualified and in a position to make an immediate offer. There are no “contingent upon sale of buyers home” offers being accepted these days and no sellers will even look at lowball offers. You should know exactly what your limits are, in case you get involved in a multiple offer situation and have to make your “best and final” offer. You should be prepared to walk away from homes that you really can’t afford, rather than getting swept up in the bidding wars.

You should understand that there will be cash bids that win houses (especially those under $200,000), even if they are a little lower than your bid with a mortgage, because the sellers don’t have to worry about you being successful in the mortgage process and many of those bids will be made without inspections and with a quick close. Most of all, you need to be patient. You will likely lose a d few bids before you have one accepted. Accept that and move on.

As for would-be sellers, now is the time to go for it. We are back to just about pre-recession values, so your house is worth more than ever. Waiting longer, so that you can wring just a little more out of the market also means that the next place that you are planning to buy is going up too, so it’s a wash. The key it to properly price you house; not to overprice it, in hopes of getting a little more. An overpriced house will just sit there; while a properly priced house may result in one of those bidding wars. The best place to be is to have a move-in ready house that has been well –maintained and has been updated. Hopefully you enjoyed those updates as you made them and now they add value in the market.

If you’re looking for a new-build home, don’t be surprised if you stop into a new construction site and discover that all of the sites and homes to be built on them are already sold. It’s that kind of market. If you do succeed in getting in on e one of these new developments, your next challenge is trying to coordinate the sale of your current home on a timetable that will mean only one move. That’s extremely difficult, so have a plan “B” in mind for temporary living somewhere, with your stuff in storage. It’s a pain in the short term, but hopefully worth it in the long run. After all, you’re getting into your new move-up house or maybe your retirement home, so you’ll probably be there for a while. 

Dan Elsea's Market Report

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 1^st, 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.