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Friday, February 15, 2013
Michigan Real Estate Market Update February 2013
Michigan Real Estate Market Update February 2013 January started at full speed. The activity level matched the spring markets of 2010 and 2011. The result, of course, is an even tighter listing market, since homes are selling faster than new ones are coming on the market. Good things happen with values when demand exceeds supply. Throw in a record low supply, add a touch of Buyers with record buying power and we can expect to see big value jumps. Certainly any one who has purchased a home in the last four years, particularly investors, should consider testing the market. Multiple offers are not guaranteed for every Seller and values have not yet returned to 2005 peak levels, but there is enough demand in all price ranges that Sellers can be confident there is little likelihood a property can be underpriced. If it is, it will quickly be bid up to market value. There is, however, still the danger of overpricing. If you look where the activity is concentrated, 40% of properties have been on the market over 90 days. Most all of these properties are overpriced and attracting only 15% of interested buyers. This chart shows how the key supply and demand factors are influencing values. The purple line is value per square foot, which shows an accelerating growth rate. This is a direct result of both the accelerating decline in inventory (blue line) and accelerating increase in home sales (red line). Also adding fuel to the fire is a deceleration in new homes coming on the market (green line). It is interesting to see how far we have moved in the market. The following charts trace the 4th quarter activity at key dates in our market transition. 2004 was that last strong real estate year and one of the peak value years. 2008 was the peak in terms of homes for sale, causing values to start to decline. 2011 was the bottom in terms of home values. Last year showed the value rise off the bottom When comparing December 2004 with December 2012, you can see we are at an inventory low point. The number of sales is exceeding what was a strong year in 2004 when comparing 4th quarter activity in each year shown. In 2004, both our economy and real estate were peaking. In 2013, we are moving up off a strong growth year, so we can expect good things for real estate. It is not surprising our January numbers were very strong as well, even compared to a strong January last year. When a market changes direction, the statistics can occasionally give off confusing signals. The decline in buyer activity and showing appointments is a result of the large reduction in available homes for sale, rather than a decline in buyer demand. If there are not many houses to view, we have fewer showings, open house and web property visitors. Based on the buyer activity when a new home is listed, there is no doubt buyer interest is growing.
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