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Metro Detroit housing market lacked inventory in 2017 as prices went up

By: Joshua Gordon | C&G Newspapers | Published February 14, 2018

METRO DETROIT — The number of homes on the market keeps dropping and new homes aren’t getting listed as fast, but buyers are coming in large numbers, leading to high sales numbers and rising prices.

Realcomp, based in Farmington Hills, released its 2017 year-end market report, which shows that a low inventory of houses around southeast Michigan in 2017 didn’t dissuade buyers from finding their perfect homes.

The report looks at approximately 20 counties in southeast Michigan — including all of the thumb and as far west as Jackson County — and shows there were 17,491 homes for sale at the end of 2017. That represents a roughly 25 percent drop from 2016, and a 48 percent drop from the nearly 34,000 homes for sale at the end of 2013.

Thomas Roncelli, with Real Estate One in Shelby Township, said that up until three years ago there was an oversupply of houses on the market, which followed several years of a crisis in the housing market.

Roncelli said lost jobs, foreclosures and people wanting to make money on their homes led to people not putting their houses up for sale in the late 2000s. Around 2013 and 2014, people were in a better position to list their homes, but the buyers weren’t there.

Now there are more buyers looking than there are homes for sale, leading to prices going up and homes being on the market for a shorter period of time. While the report shows that the average time on the market for metro Detroit homes is 34 days, Roncelli said he often sees homes going from listing to signed contract in 10 days.

“Interest rates are really crazy low, so if a house is priced at market price, there will be a fight over the inventory,” Roncelli said. “As the economy improves and jobs are coming back and the automobile industry has straightened itself out, more people are wanting to buy; there just is not enough inventory.”

Because the market has been all about the buyers recently, that means fewer homes are being put up as people are settling in. Nearly 128,000 homes were listed for sale in 2017 in the region, down 6 percent from 2016 and 13 percent compared to 2013, according to the Realcomp report.

In metro Detroit, there were nearly 60,000 closed sales in 2017, according to the report. That is down less than 1 percent compared to 2016, but sellers are still getting top dollar for their homes.

About 98 percent of homes in metro Detroit that sold in 2017 got at least list price, the report states. The average sale price in 2017 was $171,000, up about 7 percent from 2016 and nearly 49 percent from 2013, according to the report.

Macomb County’s average sale price was $155,000, with similar changes compared to 2016 and 2013; the report also states that Oakland County’s average sale price last year was $232,000.

In 2013, nearly 65 percent of homes listed for sale at the end of the year were listed for $150,000 or below. Last year, that number was down to about 43 percent, the report states.

“If you have five people who want to buy a house, and all five have been looking for a month and have missed out on other houses because they didn’t bid high enough, now prices are going to rise,” Roncelli said. “The demand is greater than the supply.”

Nancy Robinson, with Century 21 Town & Country in Royal Oak, said another reason for a lack of new listings and inventory is that people are staying in the homes and neighborhoods for longer, and growing their homes to accommodate them.

“People look at the cost of a new construction and start thinking about staying where they are and adding on,” she said. “You can build on to your own home for significantly less than a new construction. People are opting to keep the same neighbors, same school and same area by putting a second floor on.”

The 2018 housing market has stayed the course thus far, but Roncelli said he thinks that the market will even out between inventory and the number of buyers by the end of the year. That means houses may be listed for longer and prices may not quite be as high.

Interest rates could be a factor in that, Roncelli said, as there is talk of them going up this year. However, he said lessons were learned from the market crash, and he doesn’t expect interest rates to ever get up to around 15 percent, like they did before.

“If we can get the market down to the middle, it will be a whole lot better situation for everybody,” Roncelli said. “Now if a seller sells their house, then they are a buyer and have to fight for a house. Everybody is mad. We all will like it better when there is a little bit of a balance.”