After a frigid and molasses-like start to the year, the metro Detroit housing market has blossomed this spring into a seller’s market.
On the flip side, would-be buyers should brace for some frustration — unless they’re paying in cash — because the competition for a limited number of move-in ready homes is even fiercer than it was last year.
Realtors report that houses in the suburbs are regularly fetching at or near their asking price, and in many instances above it.
As buyers become frustrated by the slim pickings on the resale market, home builders are seeing a surge of interest and sales. Building activity in the metro area is projected to soon return to 2007 levels.
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Yet in the near term, the region’s housing inventory is expected to stay tight and continue to lift prices up from their post-crash lows.
There are fewer borrowers underwater on their home mortgages, but many of them are waiting to see how high prices will rise before they decide to sell — a strategy that keeps home inventories low.
“If you’re buying and selling, you’re going to be so happy when it comes to your sale,” said Realtor Andy Hargreaves of Coldwell Banker Preferred in Plymouth, “but you’re going to be very frustrated when you try to buy (because of)
the lack of selection and the amount of competition.”
Extreme weather delayed the traditional start of this year’s house-hunting season as the number of listings and sales this winter were down from a year ago. But prices were up.
The median sale price within the four-county region of Wayne, Oakland, Macomb and Livingston was just over $115,000 in March, up from $85,000 a year earlier, according to data from the Realcomp multiple-listing service, which doesn’t count private sales or for-sale-by-owner transactions.
Overall, prices early this winter were back to spring 2008 levels and about 25% off their local peak in late 2005 and early 2006. That is according to the latest Standard & Poor’s/Case-Shiller Home Price Index.
Realtors say that the most desirable homes are now receiving multiple offers within hours of hitting the market.
“If you’re on the market and you’re actively trying to sell and you’re priced correctly, you’re likely going to sell in less than 90 days and you’re likely going to sell somewhere between 95% and 100% of what you’re asking,” said Lora Kazanjian of Max Broock Realtors in Birmingham.
Not all would-be buyers are prepared for the intensifying competition. Realtor Lynn Caldwell described how one of her clients has had to keep raising the maximum she is willing to pay in her search for a three-bedroom ranch in St. Clair Shores. Her initial budget of $180,000 is up to $250,000.
“It’s a very frustrating time to be a buyer,” said Caldwell of Sine & Monaghan Realtors.
Agents are seeing more cash offers among interested buyers as a strategy to beat out the competition. Those with large enough bank accounts to make an all-cash offer often triumph in bidding wars, and may get modest price discounts.
For Hargreaves, just under half of his nearly 275 sales in 2013 were cash deals. Some of those sales were to foreign investors in Asia or Europe who planned to rent the properties, he said, while others were to families who intend to occupy the houses right away.
Agents note that in some transactions which close as cash sales, a buyer may still obtain a loan behind the scenes for a portion of the sale amount.
“That way you were able to put yourself at the top of the list in a bidding war, but after the fact you pulled your cash back out and took advantage of the interest rates,” Kazanjian said.
Good for builders
The slim pickings in the resale market is good news for home builders, who are anticipating a fairly strong year in suburban Detroit despite the slow start this winter.
The number of new house permits is forecast to top 5,000 this year in the four-country metro Detroit region for the first 12-month stretch since 2007, said Michael Stoskopf, CEO of the Home Builders Association of Southeastern Michigan.
One of the fastest-selling new developments is Valencia Estates in Novi by Pinnacle Homes. Construction is under way on more than a dozen of the 38 available house sites that have sold since Jan. 1, with prices averaging just below $600,000.
“For the majority of our buyers, they’re building new because there’s not much on the (resale) market,” said Tracy Shinneman, the development’s sales manager. “I think people are just tired of the frenzy of getting into these bidding wars.”
Out in Orion Township, Scott Herkes and his wife, Cody Tucker, are building a two-story, four-bedroom house in the new Stonegate West development by Pulte Homes. About 40 of the Stonegate’s 140 house sites have been sold at prices ranging from $310,000 to $425,000.
The couple decided to go for new construction after trying to look around the Lake Orion area for a bigger house than their current one in Birmingham to accommodate their growing family. They offered just above listing price on a $280,000 foreclosure sale in Lake Orion, but were outbid.
Herkes said their new house is expected to be ready by late June or early July. But they won’t be selling their Birmingham house quite yet.
As they bought their existing house near the top of the local price market a decade ago, and have since made home improvements, Herkes said they are planing to rent the property as the market continues to rise.
“At least in the short term, to see where the values go,” he said.