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.
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