Homeowners in SE Michigan have more jobs, money, and equity in their homes than they have had in 10 years, and many who had been financially locked into homes which no longer suited their needs, are now free to move.
Southeast Michigan is diversifying and stabilizing its economy with growth in construction, hospitality, financial and other professional business services. Fiat Chrysler Automobiles is working with Google to develop automated driving technologies and Warren Buffet and Dan Gilbert are together in a quest to obtain Yahoo. According to the U.S. Bureau of Labor Statistics, job growth in the Detroit area has been outpacing the national average at 2.2%, with Ann Arbor’s new job opportunities growing even faster at 4%.
Housing Supply: In all SE Michigan markets and throughout most of the country there is a shortage of available homes. The effects of the past recession continue to impact supply, in that many homes were physically damaged or lost through deferred maintenance and for years nobody was building new ones. Today, inventory levels which typically build during the spring remain tight and in almost every market inventories are lower than they were at this time last year. The number of New Pending homes has been keeping pace with or exceeding the number of New Listings coming onto the market.
Demand: The number of Homes Pending priced over $100,000 is up in every market as is the average closed price per square foot. In his May 12th presentation at the annual NAR conferences in Washington D.C., Chief Economist Lawrence Yun indicated that while the US population continues to rise, the average household size has dropped from 3.7 in 2007 to 1.5 in 2016. We need more single and multi-family homes for all the extra households. Yun also indicated that homeowners are gaining equity as values rise in relation to mortgage debt. Total mortgage debt throughout the US has dropped to less than 50% of total residential home value. The higher levels of equity provide new freedom to many homeowners, who previously were financially locked into homes that no longer matched their needs. Combine all that with the availability of below-4% mortgage rates (lower than any time since 1970)… we need more houses!
Today with more income, more savings, more equity in the homes they are selling, increasing populations and decreasing household sizes, buyers continue racing to get their offers in on the clean, new listings. Tired properties hang around a little longer. Today’s retail buyers are not looking to do the kind of work that they were willing to do ten years ago. Detailed homes are selling fast and to acquire them, some buyers are even willing and have the ability to waive “subject to appraisal”.
Overall, housing demand in Southeast Michigan remains strong and sales continue to exceed last year’s pace. The market under $250,000 is especially brisk with falling inventories, the $250-500,000 range is more stable as inventory growth is matching sales growth, and the over $500,000 market is slower, relatively speaking, with inventories rising faster than sales.