Home prices, sales remain steady

Local Realtors hopeful market has bottomed out

The federal tax credits for first-time and move-up buyers created somewhat of a buying frenzy leading up to the April 30 deadline for signing a purchasing agreement on a home.

Many worried that home sales would stagnate when the credits expired; however, while sales did drop off a bit in May, local Realtors say that summer sales have remained steady.

“We did see a lull right after the tax credit went away — the same thing happened when the last homebuyer credit expired (in September 2009). The lucky thing this time is that it expired in the spring, which is traditionally a busy season,” said Realtor Joanna Darmanin of Century 21 Town & Country in Royal Oak. “Most people I’ve worked with that didn’t make the deadline were disappointed, but they are still looking to buy a house; they’re just taking more time searching now.”

Realtor Brian Powers of Keller Williams Macomb-St. Clair Market Center in Chesterfield agreed: “If the sole reason someone bought a house was the tax credit, that would be crazy. If they were in the market in April and didn’t find a house before the deadline, they’re still looking — there’s still a decent amount of buying activity going on.”

According to Realtor David Reese of Real Estate One in Troy, available home listing inventories continue to decline, with the amount of inventory on the market at a two-year low as of the end of July.

“If the trend of declining inventory continues and banks continue to slowly release listings of distressed homes, rather than flood the market with excess inventory, home prices will continue to stabilize,” said Kelly Sweeney, CEO of Coldwell Banker Weir Manuel Realtors in Birmingham, noting that inventory is now at about half of what it was three-four years ago — around 30,000 — and is getting closer to a healthy market of 20,000.

The Realtors agree: Homes priced under $150,000 are starting to see slight increases in value compared to last year, depending on the neighborhood; most moderately priced homes’ values — $150,000-300,000 — are starting to stabilize, as are homes priced under $500,000 in more affluent communities; prices of luxury homes, however, are still seeing declines, Sweeney noted, as it’s a limited market and many appraisals are subject to bank regulations and often done by appraisers who are not from the area and don’t understand the nuances of the local market.

“The market here in Southeast Michigan has bottomed out and stabilized, for now, but the looming shadow inventory of bank-owned properties that are not listed for sale right now has the potential to threaten the supply and demand equilibrium and can drive home prices right back down,” said Powers.

The economy coming out of recession, and more specifically, the creation of jobs will also influence whether the market continues to stabilize or begins to decline again.

The good news, both Reese and Sweeney noted, is that home sales in Michigan, which has one of the most severely impacted housing markets in the nation, actually experienced a much less severe decline than other states after the tax credits expired.

“We’ve been feeling the market stabilize for over a year now as inventory continues to decline, but you’ve got to be careful in Michigan — you hear about all the foreclosures that haven’t hit the market yet, and everyone’s waiting for a second wave,” Sweeney said.

However, he noted, that because the market in Michigan crashed a couple of years before the rest of the nation and subprime mortgages are not the main reason for foreclosures here — job loss is — Michigan likely will not feel the impact as much as other states.

Another market trend that shows signs of the local market stabilizing is sales of traditional homes, not just foreclosures and short sales, are increasing.

“Sellers who gave up on trying to sell their home six-12 months ago might be surprised at the changes that have taken place in the market since they last tried to sell. It is definitely worth another look to contact a Realtor and get a market analysis of their home to see if it makes sense to try and sell,” said Powers.

“The traditional seller is still in the mix, but they have to be realistic in their pricing,” Darmanin said. “With buyers, the first thing out of their mouth is, ‘I want a great deal,’ and the first thing sellers say is, ‘I’m not giving it away.”

To compete, however, traditional sellers have to be savvy in pricing their home, mirroring what the banks are doing and pricing their homes competitively so that they get interest — and hopefully, multiple offers — from several buyers.

“Less than half the inventory on the market is from traditional sellers, so it’s a very limited market. There are also fewer buyers, making the market more balanced for traditional sellers. … That’s not to say prices are going up, but clearly, those houses in good condition that are priced right are selling quickly,” said Sweeney, noting that many buyers are finding that they aren’t necessarily the best deal.

“The perception among many buyers is that the best deals are with the foreclosed properties. Sometime it is, sometimes it isn’t,” Powers said.

There are myriad reasons why buyers are avoiding distressed properties: In short, many are in poor condition; due to third party approval, it takes much longer for a sale to go through; purchase agreements can be accepted then declined basically upon the bank’s whim; and offers above the listing price require the buyer to make up the difference in cash.

To that end, it’s important for buyers to work with an agent who understands the dynamics of the distressed market and who will relay that information so that buyers can make an informed decision they will not regret later.