The Michigan Housing Market is SINKING. Over the last couple months, headline after headline shows frustration, discouragement and most importantly raises the question, what is going to happen? Well, stick around because I’m going to touch on just that.+
This blog is a direct transcript from the video below. This comes in 3 versions: You are able to watch the video, read the blog for your convenience or listen to the audio experience (which is linked under the video below).
As a Michigan Realtor, I have been seeing this first hand, and not just in a tiny little service area in southeast Michigan. We are talking anywhere from East Lansing over to St. Clair Shores, up to Flint and below Ann Arbor. It’s happening everywhere. I have been showing clients more homes than ever and bidding anywhere from $1,000 over asking price to over $60,000 over asking price, and even with bids that high, they still aren’t winning the home. In most southeast Michigan cities, homes are selling in hours and as much as a few days if it’s priced accordingly, and even then most buyers assume it’s going over asking price even if it is just a few thousand.. Real Estate Agents In Michigan (and in most states I could assume) have a strategy of putting the home “coming soon” on a Wednesday, making it go live Friday and calling for highest and best by Sunday. That just goes to show how quick homes are going on and off the market. I’ve used this strategy countless times on my listings, and have received anywhere from 3 offers to well over 20.
This market craziness has been going on since 2020, most buyers are burnt out, looking at dozens of homes over the course of each week, losing out on dozens of offers as well. I have had clients give up, I've had clients move in with their parents, I’ve had clients adjust their search radius beyond what they could’ve imagined. Well, I have some good news for all those people who have been battling in the trenches, the market is shifting a little bit in your favor. Don’t get me wrong, the real estate market in Michigan is still very much insane, but let me fill you in on what “shift” is happening and why.
Friends, family, and acquaintances all ask me the same questions, is the housing bubble going to pop? Is the market slowing down anytime soon? Are housing prices going down?
This is the answer right from the horse's mouth. The housing market is slowly finding balance again. I wouldn’t say we are in a housing bubble, because I don’t believe it’s going to have the “POP” effect that the market did back in 2008, where everything just fell off a cliff.
There’s a turning point. According to Google analytics, Fewer people are searching terms like “homes for sale”, which is down 10% from a year ago. The analytics collected for home showings has also shown home tours are down, and mortgage applications are down 14% from a year ago, and on top of all that, home sellers are having to drop their list prices. You probably just had to do a double take just then, but yes, they are dropping their list prices. Here’s a quick 25 second clip of me throwing some crazy statistics your way about why that is.
Meanwhile, housing inventory is starting to slightly improve. Housing inventory actually rose 8% annually, which is the first time that benchmark has been reached in 3 or so years. Sellers are becoming more and more confident about the profit they can get from selling their home. While some choose that avenue, others are utilizing cash out refinances to add much more value to their homes, then plan to sell in the near future to capitalize on this hot market.
Don’t get me wrong, competition is still tight in this market. Redfin reported that over 54% of homes that went under contract had an accepted offer within the first two weeks of being listed. While 39% of homes went under contract within one week of hitting the market. It doesn’t seem like a high percentage, does it? Well, with homeowners seeing how much their neighbors house went for after a bidding war, they are using those figures as a starting point when they list their home, and most times, that will result in a seller having to do a price cut. It’s sellers greed. You can’t blame people for trying to make as much as they can on the sale of their home, but aiming that high does more harm than good, along with just throwing the home on the market and hoping for the best. If the home is cosmetically not looking so hot, buyers sometimes have a hard time overlooking that and come to the conclusion that if you can’t take care of something as simple as cosmetics, then what about the attic? Or the Crawlspace? Or the roof? It pays to get a pre-inspection before listing your home to have a home inspector show you ahead of time what could be flagged so you can determine if it’s worth putting time and money into.
Sorry went off on a little seller tangent for a second. Let’s replay this scenario and you can let me know your thoughts. I’m a Realtor, I price a home for $240,000 (which is at market value with an expectation of over asking price offers). I get 10 offers, and the highest gets me to $300,000. We accept it, it’s sold and the rest is history. Neighbor John sees the sold price on Zillow, calls his Realtor buddy up and says he wants to list it for $300,000, the Realtor lists it and they end up getting 3 showings in a week's time. What went wrong? Yes, the home was technically listed at market value, but at the same time that home sold based on one (or 10) buyers willingness to pay that much. Listing at $300,000 will limit the buyer pool tremendously and will most likely force you to make price cuts until you get it sold. You and I both know that price cuts don’t look good either. This is the reality of today’s housing market, I can assure you I'm not making this up. Home prices are still high and the median national home price actually climbed to an all-time high in May reaching a few thousand dollars short of $450,000.
Buyers are concerned. Interest rates are rising and are expected to hang out around 7% by the end of 2023. Fannie Mae put out a home purchase sentiment index a little bit ago that showed 79% of respondents said now is a bad time to purchase a home, and that was an all time high response rate on their survey, with affordability being the main concern. There was a sudden surge in mortgage rates that got rid of quite a few buyers in the market, but as of late, rates are stabilizing while homes remain in short supply. So it is expected that home price growth rates will decline, but at a national level it isn’t expected to make a huge difference.
For all of those buyers out there that are determining what they should do, and if they should wait. The main benefit of waiting is there could be less competition as the housing inventory starts to increase.
With buyer demand pulling back, housing inventory growing ever so slightly, and mortgage rates trickling up, it has shifted this “sellers market” perspective into a “buyers market” perspective.
Let’s break this down for a minute. Let’s say you purchased a home right now for $300,000, and put down an average down payment of 7% with an interest rate of 5.97% over the course of a 30 year mortgage. Your monthly payment would be approximately $1,667 excluding: taxes, insurance, and potential HOA fees. On the other hand, let’s say you waited until the end of 2023 or early 2024 when the interest rate is projected to be over 7.25%, and let’s assume with the earlier example you offered $25,000 over asking price which totaled $300,000. Let’s pretend bidding wars vanished by this time and you were able to get that $275,000 home at asking price, putting 7% down over the course of 30 years with an interest rate of 7.25%. Your monthly mortgage payment would be $1,744 excluding taxes, insurance, and potential HOA fees. You’d be saving approximately $77 if you purchased a home right now compared to if you waited. Of course, $77 isn’t the end of the world, but it puts into perspective the price changes that happen when the interest rate and home price are adjusted.
Based on what I've told you and seen from personal experiences, the housing market is shifting ever so slightly, but that definitely doesn’t mean that there aren’t bidding wars happening everyday with a home you love, so with that being said, here is your surprise/gift I promised at the beginning when I said to stay until the end. In the description I have a guide to help you navigate the housing market right now, examples of how to win in a bidding war and get your offer accepted on the home of your dreams. It doesn’t cost anything of course, just hit the link in the description for a free copy to download, it doesn’t matter what part of Michigan you're in, or if you have a Realtor for that matter. I just hope this guide helps you win the home you love, because I see it every single day, its discouraging and I don’t blame anyone for wanting to give up, but if this guide keeps you on track, and helps you, you better reach out to me and let me know how it goes! Again, the link is in the description to a guide to help you through it all.
MENTIONED LINK(S) 🔗 →Bidding War Video: https://youtu.be/ZsvM23F8tWM
Cheers,
Andrew
Andrew McManamon is a Michigan REALTOR® with Signature Sotheby’s International Realty and provides real estate services to Buyers, Sellers and Investors throughout SE Michigan including Livingston County, Oakland County, Washtenaw County, Genesee County & beyond. Andrew has become one of the rising stars of Michigan real estate agents. Prior to his real estate career Andrew was responsible for managing a senior living facility in Brighton, Michigan as a dining supervisor and an activities assistant. Andrew’s passion to help people is unlike any other, and he continues to strive to be best resource he can be. Andrew graduated from Cleary University in Howell, Michigan with a double major and currently resides in White Lake, Michigan.