Real Estate Information Archive

August 2015

The biggest overall trend for 2015 has been the awakening of the listing inventory. Even in Washtenaw, where inventories have been tighter than anywhere else in the state, there has been some relief for buyers, but mainly in the upper price ranges. So far this year has had more Home sales than 2014 and we expect that trend to continue this fall as well. The slow-down in under $250,000 segment this past month is a result of too few homes to buy, not a reduction in buyer demand. You can see that values jumped and “Days on Market” fell as a result of the inventory drop. The rest of the market followed a pattern seen across the rest of Southeast Michigan, with both rising sales and inventories. The bigger than anticipated jump in sales in June and July seems to be a result of buyers jumping in, anticipating a future interest rate increase, as well as reacting to a larger For Sale inventory. August activity, although still strong, has slowed a bit, possibly as a result of what would have been August business being pulled into June and July.

We track the number of visitors to our web sites as a way of anticipating future buyer demand. As the chart below shows, activity is equal to last year with a continuing upward trend, confirming that there is still strong buyer interest.

Home values continue to rise, but slowing from the crazy levels of 2013/14. Although not as geographically targeted, Case-Shiller tends to have the best data on true appreciation rates. The chart below shows the year over year value changes for SE Michigan, demonstrating that appreciation still healthy in the 5% range and also reflecting what we are seeing in Washtenaw as well.

Going into the fall, sellers will need to be aware that with inventories rising, home values will not move as much, and in those markets where inventories jumped quite a bit (mainly in the higher priced segments) values may decline for a short period of time until supply and demand balance again. A recent survey of home sellers showed that they have become more optimistic about the value of their home.  The graphic below compares the seller’s opinion of value to their actual appraisal. Up until March of this year, the seller’s guess was less than their appraised value, but since March they have become more optimistic, with that optimism increasing each month. That combination of increasing value optimism by the sellers and an increasing For-Sale inventory is likely to cause many properties to be overpriced this fall and winter.

 Please contact me regarding any of your real estate needs. I am happy to assist you.

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FHA Making Homeownership More Accessible and Sustainable?

FHA is reducing annual FHA mortgage insurance premiums by 0.5 percentage points from 1.35 percent to 0.85 percent. This reduction in premiums will produce an average savings of $900 annually for all new FHA borrowers.

More than 800,000 FHA borrowers are projected to take advantage of these lower rates in the first year, saving millions of dollars in total.

Lowered premiums will create opportunities for 250,000 new homeowners to purchase a Home over the next three years. In recent years, many aspiring homeowners have been waiting on the sidelines before Buying a new home. By making mortgages more affordable and helping create further confidence among those wanting to buy a home, the FHA premium reduction will help hundreds of thousands of additional families own a home for the first time.

The new home buying activity and benefits of the cost savings to borrowers will help further strengthen the housing market. An increase in first-time homebuyers and more affordable mortgages will help spur more residential construction and help create new jobs in the housing sector.  FHA will also be starting a automated program for lender underwriters to check appraisers pricing with assigned comps or recent home sale prices to loans.  Appraisers feel this is ridiculous and may create another 7-10 days to the appraisal process.  Look for more on this as the program rolls out.  

Each Year the Market moves Closer to a Sellers Market as Inventory Challenges Arise

There were no dramatic changes for the housing market in November and the first part of December. The median sale price increases in the last 90 days have been modest at under 2%, however the real value increase has been closer to 4%. The difference being that with a slowing upper price market, median values will tend to be lower than the true appreciation rate. The Month's Supply of Inventory (MSI) has been declining, with a small jump in November, a sign that although inventories are rising, demand is still strong. Sold properties have been rising through the fall season, but slowing in November compared to last year. Some of that decline might be weather-related and the fact there was one less business day in November this year. The slower sold pace does reinforce our feeling that the market is settling down to a more normal pace, especially in the over $500,000 segments. With buyers spread out among more listings, many sellers will feel that the market is slower than it really is. 

These charts from the National Association of Realtors focus on some of the underlying economic trends that should translate into a multi-year real estate recovery.

Household Net Worth at All-Time High 

Most people do not realize how far household net worth has risen from the bottom of the recession, and that it has exceeded the prior 2007 peak. The stock market jump has certainly helped move the numbers up, but the majority of the yellow bars are made up of home equities. Higher household net worth translates into higher consumer confidence and increased consumer spending.

GDP Growth = Job Creations (8 million lost, 10 million gained)

Going hand-in-hand with increased household net worth is the increase in total jobs, again exceeding the peak year of 2007. The jobs added during this recovery are more service-based and do not have the same buying power as those in the past, but with so many dual income families, the combined incomes create buying power for housing. Michigan as a whole may lag compared to the national averages in these two areas, but Washtenaw should actually exceed the national averages.

Young Adult Homeownership Rate (under 35 years old)

The young adult homeownership rate is one of the biggest challenges for housing growth. With tough lending standards, slow job growth and high student loan debt, young adults have a hard time getting financed. As lending standards move back to more reasonable levels, some of that first time home buyer pent-up demand will be released, moving that ownership percentage closer to 40%.

Homeowner households have not grown since 2006, but are primed to grow.

This chart clearly illustrates the effect of the housing bubble. After 20 years of growth in the number of homeowners in the U.S., we have been at a standstill for the last six years. Most economists expect the homeownership numbers to resume their growth, but probably at a slower pace than in the past. Much of that future growth is in former homeowners, who were forced to Rent, and hope to buy again the first chance they get.

National Housing Forecast

Overall, we are carrying an improved listing inventory, good economic momentum and some evidence that there is still some pent-up demand out there along with the prospects of continued affordable interest rates. The skies look good going into 2015 for stable and steady growth in the Washtenaw real estate market.

Please keep me in mind for any of your real estate needs. I am happy to assist you.

tom stachler is a real estate broker working and living in the ann arbor and saline michigan markets.  check with him when looking for ann arbor homes for sale or saline michigan homes for sale as well.  

ann arbor and saline real estate market update for january 2015

There were no dramatic changes for the housing market in November and the first part of December. The median sale price increases in the last 90 days have been modest at under 2%, however the real value increase has been closer to 4%. The difference being that with a slowing upper price market, median values will tend to be lower than the true appreciation rate. The Month's Supply of Inventory (MSI) has been declining, with a small jump in November, a sign that although inventories are rising, demand is still strong. Sold properties have been rising through the fall season, but slowing in November compared to last year. Some of that decline might be weather-related and the fact there was one less business day in November this year. The slower sold pace does reinforce our feeling that the market is settling down to a more normal pace, especially in the over $500,000 segments. With buyers spread out among more listings, many sellers will feel that the market is slower than it really is. 

These charts from the National Association of Realtors focus on some of the underlying economic trends that should translate into a multi-year real estate recovery.

Household Net Worth at All-Time High 

Most people do not realize how far household net worth has risen from the bottom of the recession, and that it has exceeded the prior 2007 peak. The stock market jump has certainly helped move the numbers up, but the majority of the yellow bars are made up of Home equities. Higher household net worth translates into higher consumer confidence and increased consumer spending.

GDP Growth = Job Creations (8 million lost, 10 million gained)

Going hand-in-hand with increased household net worth is the increase in total jobs, again exceeding the peak year of 2007. The jobs added during this recovery are more service-based and do not have the same Buying power as those in the past, but with so many dual income families, the combined incomes create buying power for housing. Michigan as a whole may lag compared to the national averages in these two areas, but Washtenaw should actually exceed the national averages.

Young Adult Homeownership Rate (under 35 years old)

The young adult homeownership rate is one of the biggest challenges for housing growth. With tough lending standards, slow job growth and high student loan debt, young adults have a hard time getting financed. As lending standards move back to more reasonable levels, some of that first time home buyer pent-up demand will be released, moving that ownership percentage closer to 40%.

Homeowner households have not grown since 2006, but are primed to grow.

This chart clearly illustrates the effect of the housing bubble. After 20 years of growth in the number of homeowners in the U.S., we have been at a standstill for the last six years. Most economists expect the homeownership numbers to resume their growth, but probably at a slower pace than in the past. Much of that future growth is in former homeowners, who were forced to Rent, and hope to buy again the first chance they get.

National Housing Forecast

Overall, we are carrying an improved listing inventory, good economic momentum and some evidence that there is still some pent-up demand out there along with the prospects of continued affordable interest rates. The skies look good going into 2015 for stable and steady growth in the Washtenaw real estate market.

Please keep me in mind for any of your real estate needs. I am happy to assist you.

tom, stachler, thomas, real estate, market, updates, ann arbor, saline, dexter, ypsilanti, michigan, homes, houses, trend, equity, charts, bar, graph, reports, housing, prices, plot, stahold, corp, one, improving, decline, increase, decrease.

April sales took a nice jump, gaining back some of the delayed sales from January through March. Although spring sales are moving up, the combination of fewer homes to purchase and reduced Buying power will keep sales from making up all of the decline we saw in the first quarter (compared to last year). We still see 2014 as a strong real estate year across all markets and price ranges, however about 5-7% down from last year in terms of total homes sold.

One of the biggest logs in the dam holding back a flood of new listings is the seller’s “Move Up Spiral.” With many homes selling quickly, sellers are afraid to put their Home on the market until they find a home to buy to avoid an intermediate move. Imagine if all sellers held back for that reason, there would be very few, if any, homes to purchase. On the other hand, if all of those sellers let us know of their intent to sell (even if they did not specifically put their home on the market), our matchmaking skills would take over, creating additional sales and breaking up the log jam. We do see this now, with about 10% or more of our sales “creative,” meaning transactions where the properties were not specifically on the market.

We have successfully used sales contracts with extended closing and occupancy dates to give sellers more time to look for a home and many sellers are arranging for an interim move. Although not convenient, it does give sellers certainty. Our most successful strategy has been simply reaching out to homeowners in targeted areas via mail, social media or even door to door with messages about the new home needs of our sellers (aka hesitant buyers) to find that other reluctant seller whose home fits our clients’ needs. 

One area to watch is some creeping overconfidence on the part of some sellers as a result of media and our own discussion of double-digit appreciation and bidding over asking price. Values are rising quickly and 68% of all home listings are selling in 90 days or less. However, homes are still selling on average at 96% of list price, so buyers are aggressive, but within a relatively narrow value range. Buyer activity is always the best gauge of whether a home is at the right price point. Under the current market conditions if the property is priced correctly, showing activity should be immediate and there should be at least one offer in the first 30 days (markets over $500,000 will have a slower activity pace).

Our monthly charts break down the markets by under and over $100,000 segments. If we move upstream a bit in price the differences in markets become even stronger. Here is a snapshot of the market change from April of 2013 using a $200,000 price point. Both are moving in the same general direction but at different paces: the inventory levels under $200,000 show dramatic declines, while the over $200,000 is more modest. A buyer looking in either segment will experience some inventory frustration.

I am happy to announce that my brokerage ranked #8 in the nation in number of transactions for 2013 as well as #1 in Michigan. 

Thank you very much for your business and support!

The rate of sales slowed in November as it has for the prior three months. It is still strong, but not as strong as this time last year. Inventories continue to fall as a result of an increasing number of listings that are expiring. New listings entering the market have been up for the past six months. Many of those are expired listings reentering the market, which are not enough to raise inventories. For buyers, there is still a significant shortage of available homes for sale with inventories remaining at 10-year lows. At the end of November, Southeast Michigan inventories dropped below 10,000 properties (this is compared to the peak of over 65,000 properties for sale in 2008). Values are up about 8% and new listings entering the market continue to rise. This shows that sellers are seeing some light at the end of the value tunnel and are putting their homes on the market at an increasing rate.

There are more than a few people predicting a flat to declining real estate year for 2014. Certainly with the possibility of tougher mortgage standards, rising interest rates, pent up demand having been released and a relatively flat economic growth, it is reasonable to predict a slow down. After all, we can’t expect to have record years every year (in terms of unit sales) and three years in a row is a pretty good run. We do think 2014 will not be as strong as 2013, but I am more optimistic than most, mainly because there is still quite a bit of Buying power left in the market. 

The housing affordability index is a good measure of that buying power. Historically, an index in the 120 range (the median family income can buy 120% of the median priced Home) is the good spot for a balanced and healthy housing market. In Michigan, we might move that range up to 140 since our values tend to be lower. We are still over 200 in Michigan, so there is still some buyer “slack” that will be capable of pushing up prices and creating multiple offers into 2014/15 (but not at the same pace as 2012/13). The chart below gives an example of what the index would look like given reasonable assumptions for the next few years.

If these assumptions hold, the market will settle to a balance around 2016. There is a positive wild card and that is household income. Income growth has been flat, which does not help home values. But as jobs grow and second income opportunities increase, this supercharges a household’s buying power. Although the median income may not be rising quickly, every job that creates a strong second income, also creates powerful homebuyers who can buy/outbid a significantly higher priced home.

A Short Spotlight on the City of Detroit: The city certainly suffered more than most in the downturn, but its rise has also led the way up. Since 2011, the median price has risen 89% and the average price 69%. Sales are still dominated by investors at the lower end of the market causing the median price to hover around $13,000. Looking behind those numbers we see some strong trends comparing 2013 to 2011. Sales of homes in excess of $40,000 have risen 20% and homes in excess of $100,000 have risen 61%. This shows that with more higher value sales, owners are moving in to replace investors. Midtown and Downtown have a housing shortage as well as key neighborhoods such as Rosedale, University, East English and many more.

As prices and interest rates rise, watch for some of the lower priced areas to heat up even more (Livonia, Redford, East Ferndale, Warren, Detroit, Taylor, Westland, etc.) as buyers move down in value, rather than leave the market altogether.

Thank you for your support in 2013. I look forward to working with you in 2014.

tom stachler, market, update, ann arbor, 2014, real estate, for sale, condos, homes, commercial, properties, listings, agent, broker, new, property, saline, michigan

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ann arbor area real estate and market updates for south east michigan including new construction and expectation on Home values and appreciation

Home prices are back to 2003 levels in the latest sign of an improved housing market.

 In another sign of a turnaround in the long-battered real estate market, average home prices rebounded in July to the same level as they were nine years ago.  Ann Arbor and Saline are now in their fourth year showing modest annual appreciation gains.  

According to the closely watched S&P/Case-Shiller national Home Price index, which covers more than 80% of the housing market in the United States, the typical property price in July rose 1.6% compared to the previous month.

It marked the third straight month that prices in all 20 major markets followed by this index improved, and it would have been the fourth straight month of improvement across the full spectrum if not for the slight decline in Detroit in April.

The index was up 1.2% compared to a year earlier, an improvement from the year-over-year change reported for June. While home prices have been showing a sequential change in recent months, it wasn't until June that prices were higher than a year earlier.

The July reading matched levels last seen in summer 2003, when the market was marching toward its peak in 2006. The collapse of the market after that led to the financial crisis of 2008.

"The news on home prices in this report confirm recent good news about housing," said David Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. "Single-family housing starts are well ahead of last year's pace, existing home sales are up, and the inventory of homes for sale is down and foreclosure activity is slowing."

Record low mortgage rates and a tighter supply of homes available for sale have helped to lift home prices which starts in the stronger markets and then will follow to their surrounding communities as time progresses. Lower unemployment also has helped with home prices, although job growth in recent months has been slower than hoped.

Earlier this month, the Federal Reserve announced it would buy $40 billion in mortgage bonds a month for the foreseeable future. This third round of asset purchases by the central bank, popularly known as QE3, is its effort to jump start the economy through even lower home loan rates.

Related: Best home deals in Best Places

Mike Larson, real estate analyst with Weiss Research, has stated that part of the improvement in the housing market is due to investors using the low mortgage rates to buy up homes that are in foreclosure and renting them in a strong rental market.

But he said that he doesn't think there's much chance of housing prices forming any kind of new bubble in the foreseeable future.

"Clearly the worst is behind us for this market., but this is not a market that is going to take off again," he said. "While you have a firming up, you still have tight lending standards and people who have been burned are reluctant or unable to get back in the market." He predicts it will take several more years before housing prices can gain more than 1% to 2% a year.

Related: Buy or rent? 10 major cities

But that is good news for a housing market that was plagued by plunging home values and high foreclosure rates for much of the last six years. And the good news has the potential to build on itself, said Joseph LaVorgna, chief U.S. economist for Deutsche Bank.

"Housing remains a rare bright spot in an economy that is otherwise muddling through," he wrote in a note to clients Tuesday. "The price trend for housing is significant, because it provides economic stimulus via stronger household balance sheets."

High inventories of homes for sale have plagued many markets, but in a recent analysis of metro areas, inventories were found to be shrinking sharply during the second quarter, The Wall Street Journal reports.

About 2.34 million homes were listed for sale on the multiple-listing service by the end of June, the lowest level for that time of year since at least 2007, according to Realtor.com. What’s more, some inventory levels even reached their lowest levels since the housing crisis began five years ago, which has prompted some markets to even say their facing a shortage of homes on the market.

While a drop in inventories can often signal more demand — and ultimately a boost to Home prices — some analysts aren’t so sure this signals a complete turnaround for the real estate market quite yet.

“While sales are picking up in some cities, analysts say the sharp decline in inventory also reflects the slow pace at which banks are processing foreclosures,” The Wall Street Journal reports. (The number of homes in foreclosure — a backlog of 2.1 million — is near a high.) Also, some sellers are taking their homes off the market due to low offers and waiting until they put it back on the market.

In its analysis, The Wall Street Journal found that of the 28 major metro areas evaluated inventory levels had dropped in all 28 — except for three. What’s more, they found that inventories had dropped by double digits in 16 of those markets during the second quarter when compared to a year ago. For example, inventories dropped in Miami by 43 percent from a year ago; 30 percent in Washington, D.C.; and more than 20 percent in cities like Charlotte, N.C., Seattle, and San Francisco.

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