No new news is good news! The market continues its march upward. The Months Supply of Inventory continues to decline as sales are outpacing new listings coming on the market. Certainly, shaky economic growth news here and in Europe has caused some concerns, but at the moment it appears that the combination of low interest rates and values, along with a large base of consumers able to consume, will cause the housing market to be a key factor in keeping our economy going through this current dip. A nice role reversal for us!
Based on current activity, we expect values to make a relatively quick jump over the next 12 months (10% plus) as a result of low salable inventories, low rates and buyers who for the most part have the financial strength to overbid. As interest rates and values rise and cash buyers become increasingly scarce, more inventory will hit the market and values will settle back to a more normal pace of appreciation.
Median prices have been increasing, but much of that to date is a result of buyers shifting to more expensive homes as well as fewer bank-owned properties. Most of the real appreciation has occurred in the last 90 days, so it will not show up in sold data for a few months. The majority of homes sales are occurring among listings on the market less than 90 days. In fact, in southeast Michigan, 42% of the under 90 day sales are at or above list price (we expect that number to rise as spring market closed data comes in).
As we said last month, 50-70% of all sellers will tell you the market is still slow, with not a lot of activity, while 85% of all buyers will tell you the market is moving at a crazy pace. This is not like 2008 when buyers were scarce. There is an abundance of buyers in the market and we distribute our properties to enough eyeballs that if a seller is not averaging three showings per week or at least one offer in 30 days, the home is overpriced for its market and condition. About 15% of those overpriced homes are eventually selling after several price reductions and, typically 6-8 months longer on the market.
Homes are selling on average at 97% of the listing price (93% in northwest Michigan), which means it takes only a small miss on the right price (5%-8%) to move a home from active to quiet. The good news is once a home’s value is reduced to the right price range, there is enough demand that it will sell quickly (96% of asking price) and not suffer as much of a “stale market” discount as we have seen in the past, but with an extra 6-8 month time cost.
Once again, if buyers are frustrated with a lack of inventory they should not forget to focus on the 50-70% of listings that are sitting on the market. These buyers might use an FHA 203K mortgage to make the updates/repairs that are typically keeping the home from being sold.