The inventory of available homes for sale continues to fall, with the overall Months Supply of Inventory (MSI) for Southeast Michigan down to 2.5 months (from 5 months this time last year). With 82% of all sales occurring among properties on the market less then 90 days, the true MSI for the vast majority of buyers is about 48 days. The number of properties selling at or above asking price has remained stable at about 40%. We feel the number is actually higher, however with appraisal adjustments, many homes that bid over asking price are reduced downward as a result of a lower appraisal.
For Buyers, being ready to move quickly with cash or a pre-approved mortgage is the starting point, along with making an aggressive offer. Values are still 30% off of peak and are at a pace to return to peak levels in the next few years. Although today’s overbidding may feel strange to a Buyer, we are still in a very safe value range, even at, in some cases, as much as 20% over the asking price.
The velocity of the market has increased, particularly in the past 60 days. In February of 2011, 34% of homes sold in less than 60 days. It has now moved to 60%. As a result, the incidence of multiple bid offers is increasing every month. Most homes selling in less than 30 days are receiving multiple offers.
So what has this activity done for values so far? The Case-Shiller report gives the most accurate appreciation data, with the latest report showing a rate of 13.6% in late summer/early fall of last year (the data is from their December report, but is based on sales 4-6 months earlier). Our current data shows the pace has continued into January and February with median values of 35% and average value per square foot up over 20%, with half of that appreciation and the rest shifting to more expensive homes as the lower priced inventory dries up.
Even with the high level of buyer interest, Sellers should still remember that 47% of the homes currently on the market are overpriced by an average of 11% (that represents the discount between those homes that required price reductions versus those selling at or above asking price). Values are rising, so pricing more aggressively to meet a rising market will work, but be cautious on setting a value based on homes currently for sale. Also be cautious on using the web-based automated valuation programs like Zillow. They have a difficult time catching up with a changing market, giving mixed signals, but typically undervaluing. Talk to your fellow Realtors about which recent sales had multiple offers to get a feel for the value velocity in that market area.
Our pace of sales for February was very strong, but down slightly from January, possibly reflecting the fact that there are simply not enough homes available for sale. The past 90 days have been our best overall market share gains in the past four years, thanks to your hard work and patience in keeping buyers and sellers on target through all the market “noise”.
To read the full report click MarchMarketUpdate2013REO