Heading into the last quarter of 2019, closed sales in the Southeast Michigan market have begun to fall off and October 1st inventory has just hit its highest point of the year. Through the year-end season and the first couple months of 2020, expect listing inventory, sales and prices to tail off. When buying or selling investments from stocks to houses, there can be advantages to zigging when the masses are zagging. With real estate, the life circumstances that often drive home sales (births, marriages, divorces, last kid off to college, new jobs or layoffs) don’t all happen in the spring and summer months. Understanding seasonal motivations and opportunities will help get buyers and sellers what they want, regardless of the time of year.
Strong Market Momentum: Despite the perception of slowing sales for the past couple of years, year-to-date sales are even with last year and set an all-time high inclosed volume—4% higher than last year. The market continues to carry momentum into the fourth quarter that may be slow to pick up in the 2020 election year.
Reduced Seller Competition: Because the best listings sell fastest, as the market moves beyond peak season, available inventory tends to be “picked-over” like store shelves toward the end of a clearance sale. Through yearend and the first couple of months of the new year, there will be a significant shortage of move-in-ready homes—especially in the more affordable price ranges.
Carryover Demand: A large number of buyers have yet to find what they are looking for, or were previously outbid by a competing offer. Although there may be fewer actively looking, year-end buyers are often highly motivated to move quickly with strong offers when a home they like hits the market.
Lower Prices and Interest Rates: Fourth quarter prices will temporarily drop as sellers attempt to sell before yearend. Although prices have generally been leveling off, the average sale price of a Southeast Michigan home was 4%higher this year than last. In all but a few markets and price ranges, prices will continue to be higher next year than this year. Interest rates remain near historic lows and will eventually go up.
Lower Property Taxes: Michigan property tax assessments lag roughly 18 months behind market values. In setting the new assessed value at the beginning of each year, assessors look at sales that took place from November of two years prior through the most recent October. When market prices are rising as they have been, new taxes and future capped values lock-in using the older and lesser values. Once set, that new assessed value will be the base from which future taxes are calculated.
Year-End Sellers More Likely to Negotiate: Many yearend sellers entered the market several months earlier. Many started with their prices too high, their property condition too low, or both. In the long run, sellers who initially ask too much eventually settle for less. Offers look more attractive after a few months on the market without serious suitors.
Less Buyer Competition: Great new listings come onto the market every month of the year. Buyers who remain focused on their search and ready to move in with a quick strong offer are often rewarded. Acting fast when the right home hits increases a buyer’s chances of landing that house of their dreams while other distracted buyers missout on the off-season opportunity.
Despite the seasonal slowing, year-to-date sales are even with last year and set an all-time high in closed volume—4% higher than last year. The market continues to carry momentum into the fourth quarter that may be slow to pick up in the 2020 election year.