Are we finally seeing the market turn? Is the bubble bursting or is this the new norm? Let's take a look at some facts and stats in your April Real Estate Market Report and see what's been happening and likely to happen moving forward.
We had an outstanding April with the first two weeks taking off like a rocket and seeing a jump of 20-25% increase of new properties hitting the market. In the second half we did slow down just a touch. In March we saw roughly 12,500 new homes come to market. In April we were looking to exceed 15,000 new homes but ended up at 13,517. So a slight increase of 1,098 new homes in comparison to last month, with the largest increase being in the $250-$300K and $500-$600K brackets.
For homes sold, we had 9,438 homes in April compared to 9,884 in March. Roughly a 500 home decrease, but we believe a number of homes scheduled to close at the end of April were pushed into the first couple of days in May due to mortgage companies running a bit behind. However, we still have a pretty balanced number all considering.
Some exciting news for homeowners is that the median sales price rose $9,100, (about 3%) based on the average sales price in Metro Detroit. The question is, are we in a bubble? We are confident in saying we will not see the multiple offer situation we have been experiencing continue indefinitely. There are a number of buyers still wanting to take advantage of the low-interest rates, with the other side being there are a lot of sellers who have been hesitant about listing their home in fear of not being able to find their next home. We have also seen the number of offers before getting accepted has dropped by 50% since early 2021 which is expected to continue. This means buyers will have less competition when submitting an offer, with sellers still being able to max out the equity on their home while taking advantage of the still low-interest rates.
The big question is, are we in a bubble or are the new home values here to stay? We think they are here to stay for a couple of reasons.
One large factor is that new construction has taken a drastic decline over the past decade. Since the 1970s, we have consistently seen over 25 Million new homes built every decade, but between 2010-2019 that number fell to just below 6 Million new homes, resulting in over 20 Million homes missing from the US market. In fact, the home building had just caught up from the previous recession of 2008-2010 in the last quarter of this past year so we likely have at least another decade until these numbers catch back up. The current building of new homes has also slowed due to the price of lumber skyrocketing to 4 times the cost we were seeing at the beginning of 2021. Many builders are now having to increase their prices just to break even and those who are already committed to homes being built are seeing a loss of $40-$50K per home, with some contractors already being committed to 40+ homes. We will likely see numerous smaller building companies pull contracts or go out of business that are no longer able to afford these losses.
Second, millennials have fully entered the housing market. In the past 24 months, we have seen millennials entering the market unlike any period before. With the low-interest rates this has become the perfect time for them to take advantage of becoming homeowners vs renting. Millennials had typically stayed at home longer than previous generations, but have reached the age where they are now entering the market at a higher rate as they are starting families of their own.
This all puts homeownership at a major advantage over renting. It's more affordable - a mortgage payment is on average $200 less per month than a rental payment or an average savings of $2400 per year. Also, the tax write-off received is on average (for our homeowners) is $2500 that they paid in. Additionally, in owning a home you are building equity. In the first year, the average mortgage in SE Michigan is being paid down $300 per month, or $3600 per year. Combined in the first year alone this means a savings on average of $8,500!
If you have been considering buying and/or selling a home, contact us today. We have been having great success not only in helping our buyers win their new homes but in finding homes not yet listed on the market. We would love to help you and your family get to your next destination!
For help with your real estate needs, or to ask any questions, please call: 248-886-4450
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