NormsMilfordBlog

The Fall starts the seasonal slow down for home sales so we can expect fewer multiple offers. We will still see the vast majority of homes (over 85%) sell within 90 days or less. For Buyers in a bidding war, our rule of thumb has been, “as long as the offer is at or below the peak 2005 value, the overbid is a safe bet.”

I have included two charts, Comerica’s local economic trend and the latest Case-Shiller value trend. Both show good news for housing and our local economy.

The Comerica Michigan Economic Activity Index continues to show strong growth through this summer, surpassing the prior 2007/08 high points. This represents the fuel for sustaining our local housing growth trends.

Case-Shiller shows Detroit with one of the highest year-over-year value growth rates. Although we are the only major city still below our 2000 value baseline, that is heavily influenced by the decline in values for the city of Detroit (the good news is city values are rising quickly again). The typical Southeast Michigan market is at or above 2000 values.

The area around Milford that I tend to focus upon has done a bit better than the regional numbers would indicate, but the trends are similar. Our area is probably back to about 2004 levels for prices, still below the peak but better than the harder hit areas like Detroit, Ypsilanti and Pontiac. Home values are up in this area anywhere from 16 – 20% year-over-year, but remember that they are starting back up from a drop of anywhere from 30 to 40% in value, so it will take more time to recoup the paper losses that occurred. It is important that you get an updated market value for your home if you are thinking about selling. Things are changing too fast to rely on an old number, where the term “old” means 2-3 months ago or longer.

Several reports from various industry sources seem to reinforce the notion that the housing market is moving back towards equilibrium from it frantic pace of recovery early this year. The prime indicator is the lack of a big jump in prices between June and July of this year. Prices still went up, but not by double digits as was the case earlier in the year.

I suppose that a would-be home seller might like the rapid recovery to continue a while longer, but it is really a good thing for the market overall that it pause to cool off a bit. The rapid run-up of home prices, combined with an increase in mortgage rates served to lock out many first time buyers.  There was also a bit of” wait for it to go up more” greed going on that kept the inventory low and fueled the value increases. Many of those who waited may find that they will not be any better off and may have missed the very buyers they were hoping for.

One segment of the potential buyer pool  –  those who felt that they had to buy and get in before school starts in September – have already made their selections.  Closing by September 1^st pretty much meant that you needed to have a signed deal by August 1^st, in order to allow enough time for the mortgage company to get the deal underwritten.

The “prime” selling season is generally in the months of May, June, July, and August; however, the good selling season lasts until Halloween. After Halloween, things slow down quite a bit as people start focusing upon the Thanksgiving and Christmas holidays. After that it’s winter, which is always a slow home sales season.

So we still have some good selling months left in 2013, if you were thinking of selling and we have some more stable months ahead if you are looking to buy. Mortgage rates have stabilized a bit, although they are expected to continue a slow upward creep. More inventory of homes is coming on the market, which is good for buyers, too.  Home builders have also cranked up production, so more brand new homes are available, or will be shortly.

I was quoted this week in an article in the local Observer & Eccentric Newspaper about the current real estate market that we are in and how tough it is for buyers right now. Read the article here…

http://www.hometownlife.com/article/20130620/SPECIAL-SPECIAL%20SECTIONS/306200312

It’s tough on Realtors, too. I’ve sold all of my listings off and I’m trying to get more, but people still seem reluctant to list. Finding homes for the 4-5 sets of buyers that I’m working with is really tough in this market, so we need to be patient and persistent.

Dan Elsea is the Presidentof the Brokerage side of the business for Real Estate One and sends out market reports to all ofhte offices each month  that use the perspective that he has of the entire Michigan market to give us better insight into what’s happening in the Michigan market overall. Here is his report for May, 2013.

The real estate market continues its wild ride into summer. This is the most active market we have seen in Michigan. The Months Supply of Inventory has dropped to 37 days for the majority of the market, not yet to the two weeks of inventory that Las Vegas has, but still the lowest we have recorded. So are we headed for another bubble? The answer is both yes and no, but mainly no.

Cash sales are near 40%, lending standards are still very tough, housing affordability is at record highs and values remain 25% off their peak. All of which serve as insulation against another bubble. The added equity being created by the rise in values is strengthening a weak economy, as opposed to overheating a strong economy (which was the case in 2006). So, we have some room to play with before there is any significant bubble.

On the “yes” side, however, values are rising faster than the economy should dictate. Because home values are so affordable, many buyers can also afford to overbid. But there will be a natural cap on a “bubble” getting too high. Looking out to late 2014/2015, appreciation rates will move down to a more normal level from the 1-2% per month we are seeing now. This is due to interest rates inevitably rising and buyer demand slowing, as the pent up demand from the past six years levels off.

The annual appreciation rate should have a bubble look as appreciation rates peak over this year and the next and then settle back down to a more typical rate.

Following the rate at which different housing indicators are changing is a good way to see just how quickly a market is moving. The rate of change compares the percentage change from one month to the same month the prior year. For example, new listings in February of this year might be 20% lower than last February, but the March comparison was off only 10%, which means listing inventories are still falling, but at a slower rate. The charts below follow the rates changing over the past year for new listings, pending sales, days on market and price per square foot.

We are seeing the first signs that listing inventories are starting to stabilize. On the chart below, the green trend line follows the rate of change in new listings coming on the market compared to the prior year. From June 2012 to February 2013, fewer new listings were entering the market each month. In March and April of this year, the rate of new listings continued to fall, but at a much slower rate. This shows it is getting “less worse”, which is a positive trend! Buyer demand (the blue line) has also been accelerating in March and April, absorbing any and all new listings and not surprisingly the average days on market dropped dramatically, as well. If these trends continue, we can expect inventories to continue to tighten through the summer, even if more listings hit the market, since buyer demand continues to rise.

Using price per square foot as a value indicator, the rate of appreciation began accelerating dramatically last summer and has leveled off some in the past few months (it can’t go up forever).

April of this year was our strongest month since June of 2006 in terms of homes sold, a solid indicator of just how far the market has bounced back. We have moved from the pan, into the fire, from the dog days of 2007-2010 to today’s wild market, each with their own challenges and opportunities. This market is much more fun, but no less exhausting!