March finished with a nice flourish of activity with pending sales (new contracts written in March) up across all price points compared to last March. The pace of new listings entering the market was still slower than last year for properties under $250,000, putting continued pressure on already scarce For Sale inventories. Thus, buyers will need to be diligent and patient, while being ready to move quickly when the right home pops up. The over $250,000 markets saw a rise in inventories, reflecting that the higher the price point, the higher the jump in inventory. In most cases, although sales activity increased over the first quarter of 2015, listing inventories rose even faster, making the market feel slower to the average seller in the upper price ranges, even with more sales occurring.
The supply of For Sale inventories also affected first quarter appreciation rates. In the under $250,000 price range, where the inventories are the tightest, values per square foot have moved up as inventories have fallen since the beginning of the year. For $250,000-$500,000 markets, inventories have begun to rise, but so have values, showing a more balanced (supply and demand) market. In the over $500,000 markets, with inventories rising, values have slowed and have even shown a negative trend for the first quarter compared to 2015. We don’t think this shows a collapse in upper price range homes, since there are actually more buyers than this time last year. So demand is good but the jump in inventories has created more competition for those buyers, pushing down prices until that new inventory is absorbed.
It is also interesting to note how Michigan fares compared to the rest of the nation in terms of home value appreciation. Although not at the top of the list, Michigan is certainly among the strongest in terms of expected home value increases over the next 12 months.
The first quarter trends still show strong buyer demand across all price points, some of that weather related, but still a good start to the year. Inventories are tight, with a strong seller’s market under $250,000, a sellers-neutral market in the $250,000-$500,000 price point and moving towards a buyer’s market for the over $500,000 price range. But as importantly, any home, regardless of price, that remains on the market over 6 months is sitting in a buyer’s market until the sellers change their price or condition to gain a more competitive position in the market.
We are often asked how far values have come back from the peak point of 2005/6 in Southeast Michigan. Using Case-Shiller data we can estimate about how far we have moved over the past 10 years. Case-Shiller shows we are back to early 2001 values, but since they tend to run 6-8 months behind in their date, we are really closer to late 2001-early 2002, which puts us back to about 85% of peak values. There are many markets that are back to peak and some lagging behind, but on average, 85% is a good number to use. It is also interesting to note that we are now back in line with the long-term value trends (the orange dotted line) if values had followed their long-term trend, instead of the roller-coaster ride we all took.