Demand for new construction, higher interest rates could make housing market tougher for sellers

By: Joshua Gordon | C&G Newspapers | Published June 24, 2015


METRO DETROIT — The housing market in metro Detroit is still flooded with buyers and sellers, but things may get a little more difficult for sellers as interest rates have started trending upward and more buyers are looking to get into new builds.

Keller Williams real estate agent John Kurczak, based in Sterling Heights, said that just as things have changed in the types of homes that buyers are looking at, so too has the way that homes are sold.

“I started 20 years ago, and we were busier than anything on the weekends, but now we are busier during the week than on weekends,” he said. “Buyers want to spend time with friends and family on the weekend and not working on a house. They would rather spend an extra $10,000 on an updated new home and not have to do it themselves.”

Agent Deby Gannes, with Hall & Hunter Realtors in Birmingham, said not only is the allure of a new build enticing, especially for younger buyers, but it also seems to promise fewer hidden problems than an older home.

“With an old house, when you start renovating, you don’t know what is underneath and you don’t know what surprises you will have,” she said. “I think a lot of younger buyers, those in their 30s, want a new construction because they want instant gratification. They want the tall ceilings and the updated everything. What you see is what you get in those, and they don’t want to have to do updates.”

Even in the resale game, Kurczak said, updating your home is crucial in getting the home sold quickly and for the right price. During the spring, Kurczak said, homes are still selling quickly, but the home’s condition does matter to the buyer.

“It has been a very busy spring, and homes are selling like hot cakes, but only the homes that are staged and prepared to sell,” he said. “If a home is in perfect condition with new paint and flooring and updated, they are easy to sell, but ones that need work or are in a challenging location, they take longer.

“There is an old saying that buyers see what they see, not what is to be.”

As the summer approaches, Kurczak said, sellers have to be wary of when they put their home on the market if they are looking to sell quickly. The weeks before and after a holiday are usually slow times, he said, as many people are on vacation and not shopping for new homes.

Taking into consideration the Fourth of July and Labor Day in early September, Kurczak said late July and most of August would be the best times to list a home.

Gannes said the spring has been a strange period for her, as homes aren’t getting multiple offers like they were at the same time last year. A big factor is that people don’t want to be on the hook with a new home and their old home at the same time.

“I think people know they need to find a house before they put theirs on the market, so it is like a Catch-22 because once they find a house, they can’t act on it because they don’t want two houses at the same time,” she said. “It is expensive to move to a temporary location just to move again to a new home. So we are carrying a lot of listings as people want to sell.”

Recent talks from the Federal Open Market Committee hint that interest rates could go up in the near future once unemployment numbers get to an acceptable level and the inflation rate gets closer to 2 percent.

Even so, recent reports from mortgage-finance company Freddie Mac said the average national rate of a 30-year, fixed-rate mortgage rose above 4 percent for the first time this year in June. The mortgage rate last reached 5 percent in 2011 and has been below 4 percent for much of the last few years, on average, according to Freddie Mac.

Because the rates have been higher, refinancing trends have gone down, said Tim Pascarella, vice president of the Ross Mortgage Corp. branch in Royal Oak.

“Refinancing is a relative word, as for certain people it is always a good time to refinance,” Pascarella said. “You refinance to lower your payment, but the problem there is if you had a 30-year mortgage, you are going back to a 30-year mortgage, or you can switch to a 15-year mortgage and your payment won’t go up that much. But most people who wanted to refinance have done so already.”

Historically, Pascarella said, if interest rates go up, the refinance rate goes down. But with rates still relatively good, he said people may still look to refinance and even buy a new home.

“I encourage people I work with to purchase, because history speaks for itself, and I think the rates are going up, so you should take advantage of them while they are still low,” he said. “When our market rates go up, less people refinance, as it makes a lot less sense for most of the population to do it.”