Inventory levels continued to decline through January in most Southeast Michigan markets. Sales activity (showings and new pendings) generally fell off in February compared to the prior month, yet closed sales were up 10%.
Heading into March, closed sales were remarkably even with last year (5,651 vs. 5,654). Values continue to rise, but at a slower rate than we’ve experienced over the past several years. Closed volume has been up in all local markets except the Macomb County and Detroit Condo markets.
Entry level markets continue to shrink (declining inventories and sales) while upper-end markets expand. Developers have generally been focused on the luxury markets. As a result, upper-end markets are getting saturated with inventory. Although luxury sales were up last year, values showed signs of plateauing and even dropping in many areas.
While market conditions are generally shifting in a direction less favorable to sellers, the movement isn’t necessarily favoring buyers either. As prices, interest rates and property taxes continue to rise, many potential buyers are getting completely priced out while other buyers won’t be able to afford the same home they could have purchased a year or two ago.
Although prices are increasing at a slower rate than they were, they continue to rise in most markets. Interest rates, which had a slight downward adjustment, are expected to continue to rise over the long term. Additionally property tax assessments (which generally lag a year or two behind values) will be on the rise for a couple years, even after prices level. For anyone thinking of buying or selling in the next few years, moving sooner rather than waiting would be wise.
Sellers: At any give price, more buyers can afford to purchase a home today than later this year or next year. There is a shortage of affordable move-in-ready homes. Buyers will still pay a premium to be able to move into nicely finished homes. As most sellers need to purchase a replacement property, the “buyer advantages” are also relevant to most sellers.
Buyers: Prices, interest rates and property tax assessments will all continue to rise this year. If you are planning to move in the next couple of years, you may want to think about doing so sooner rather than waiting. Many younger buyers are delaying their move while saving to build up a larger down payment. For most buyers their target home is moving out of reach faster than they can save. Talk to your lender. Many younger buyers strapped with school debt are also getting help from family members. Without being reckless, it may be a wise financial move to lock into a new home before it moves further out of reach.