Like the weather, fall has slightly cooled housing market

By: Kristyne E. Demske | Metro | Published October 6, 2021

Shutterstock image

METRO DETROIT — Bidding wars, appraisal guarantees, cash-only offers.

Those were terms homebuyers had to learn in the hot housing market of the spring and summer of 2021. But as the season has put a slight chill in the weather, Realtors have also seen a slight cooling of the market.

Ben Rait, a Realtor with Century 21 Campbell Realty in Madison Heights, said it’s hard to know if there’s been a true change in market conditions or if sales have just slowed slightly due to the annual “back-to-school lull and going into colder weather.”

“It’s always a little less vibrant than it is in spring and summer, but I have not seen any change in the fact that there are not enough houses for the number of people trying to buy,” he said. “Even the not-so-nice houses are selling pretty quickly.”

Caron Koteles Riha, a Realtor with Real Estate One in Rochester, agreed that traditionally September is the slowest time of the year in real estate. Although September 2021 has been much busier than past years, “The market has definitely softened,” she said.

“It doesn’t mean that the prices have gone down; it just means that the overbidding has leveled out a little bit,” she said.

Riha said there have been fewer multiple-offer situations recently, and the average time on the market has increased.

“We are definitely seeing a longer average time on the market, and sellers are finding that they really have to be really accurate on their pricing; otherwise, they’re going to be on the market longer,” she said.

At the height of the boom earlier this year, she said, buyers were waiving home inspections and buying homes as is — a tactic she doesn’t ever recommend. That trend has cooled down as sales have slowed, she said.

“When people are doing their inspections, the buyers have more leverage, right now, to ask for repairs, where when we were selling homes with multiple offers and there were constant bidding wars, the buyers pretty much had to accept the property in the condition they saw it,” she said.

When the market was hot in the spring and summer, Rait said, it wasn’t unusual for buyers to give appraisal guarantees because, when prices were increasing so quickly, the appraisers didn’t always have past comparable sales that matched the prices being offered in the current market. With the guarantee, “If it appraises for less than the sales price, (the buyer was guaranteeing that) I will pay you $3,000-$5,000 over the appraised price.”

That made the market difficult for buyers who need Federal Housing Administration financing or other financing assistance “because they generally don’t have extra cash on hand to guarantee an appraisal,” he said.

Those high-priced sales of the summer have somewhat reset appraisals in the fall, Riha said.

“Our comps for the fall market are the summer sales, so they’re going to do just fine — just don’t get greedy about it,” she said. “Most of the homes are appraising just fine now.”

While it’s hard to forecast where the market is headed, Rait said he thinks there will be at least one more spring and summer season of booming sales.

“You never can tell. The stock market’s getting really goofy right now. It still seems like there’s no unemployment problem in this area,” he said. The last time the stock market and the global economy faltered, however, it didn’t have any impact on the housing market, which remained strong, so Rait said he doesn’t foresee the strong housing market going away anytime soon.

The problem isn’t having a job, he said, it’s having a job that pays a living wage.

“Anyone who wants to can find work, although wages still aren’t catching up to what it takes to have a house or an apartment. It’s still really tough for young people,” he said.

Realtors feel bad that they can’t get homebuyers good deals, Rait said. Even the past two or three years, he said, they could at least have a reasonable expectation that their buyers would be happy with the price they had to pay for their house, but “with the upcoming market, I’m not sure that’s going to be the case or not.”

He works with a lot of first-time homebuyers.

“It’s getting to the point where a young couple with blue collar incomes are getting priced out of the market,” he said. “I just don’t know what the relief for that is going to be.”

When he was young, Rait said, it was possible to have a minimum-wage job and afford a place to live, a car and food to eat, but he doesn’t see that as true anymore. Prices for just about everything, including transportation and homeownership, have tripled in the past 30 years, but “wages have not anywhere near tripled.”

Rait said it’s important for buyers to have an agent who can adequately prepare them for the “lopsided market.”

“Just keeping them apprised of any new developments, like these appraisal guarantees, making sure they understand what their financial situation is and what it’s going to take for them to be able to get something,” he said. “I wish there was something we could do to make it better for them.”

To stand out from the crowd, bring cash to the table, Rait said.     

“If you have a lot of equity and you have a really nice-size down payment to put down, that always makes sellers feel more comfortable,” he said. “If you try to buy something contingent on your house selling, you’re going to have a real problem. I haven’t seen a contingency offer get accepted in a couple years.”

And act fast.

“You can’t hesitate because it won’t be there long enough for you to sleep on it,” Rait said. “We tell all our sellers that if you don’t have somewhere to go before you go into this, you’re going to be facing the same issues that these buyers are facing.”

Sellers hoping to still take advantage of higher prices and sell their homes quickly can’t just expect the market to do the work for them.

Working with both buyers and sellers, Riha puts a lot of effort into managing expectations.

“I am really picky, and so when I counsel my sellers what to do, I tell them the same thing I always tell them, which is to make (the house) look as great as they can and go the extra mile because it’s worth it in the end,” she said. “Now, more than ever, people should make sure their home is ready to go on the market and not cut corners, because it will come back and bite them.”

She said she appreciates that the market has become slightly more normalized.

“It was fun for about a minute, and it’s exciting for sellers, (but) not exciting for Realtors on either side of the transaction because, when we had so many offers, juggling it, it was very stressful for some of them to try and handle multiple offers,” she said. “Even just the communication — trying to get back with all the agents who didn’t get it.”