With far fewer houses, Michigan’s real estate market is ‘absolutely crazy’

Adelicia Caree

The price data represents sales though the Realtor boards, not all home sales. There also can be some overlap in the sales calculations, in which more than one regional listing board reports prices in some communities. However, the figures are an indication of what’s happening in the state, real estate […]

The price data represents sales though the Realtor boards, not all home sales. There also can be some overlap in the sales calculations, in which more than one regional listing board reports prices in some communities. However, the figures are an indication of what’s happening in the state, real estate industry experts said. 

The rising prices reflect “a strong housing market,” said Robert Dye, chief economist at Comerica Bank, with home sales reaching levels not seen since 2006.

Michigan’s tax collections reflect the price increases: So far this fiscal year, real estate tax collections are 27 percent higher than a year earlier, joining motor vehicle taxes and lottery ticket sales as growing revenue sources for the state, according to the Senate Fiscal Agency. 

Homeowners, meanwhile, who choose to sell are learning from real-estate agents how to maximize prices. Al Block said he recommends setting a showing period of just a few days along with an offer deadline. 

The best offer, he said, is not just about price. 

Sellers are asking for – and getting – potential buyers to waive inspections, provide a guarantee to pay full price if an appraisal comes up short, or allow a seller to live in a home for a time after closing. Some potential buyers skip lending outright and offer cash.

The situation has many asking experts whether the state is within a new pricing “bubble” that could collapse. Kage, of the real estate data service, said enough factors are different from 2007 and the Great Recession to suggest that a bubble shouldn’t happen this time. 

“I don’t know that we’re looking at that many (buyers) who could fall into foreclosure,” Kage said, due in part to tougher lending restrictions over the past decade. “We should be OK, as long as interest rates stay low and the economy stays OK.”

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Mortgage rates are inching up over 3 percent in early March, and economists forecast they’ll rise to about 3.4 percent by year-end, a rate still considered low.  Foreclosures, in the meantime, aren’t accelerating rapidly. National data from the Mortgage Bankers Association shows that 5.1 percent of Michigan homeowners are behind in their mortgage payments, a lower rate than 42 other states. 

Haden Block, the agent in Royal Oak, said the mild rise in interest rates may help to alleviate some of the housing pressures by reducing demand. However, he notes, that won’t help affordability. Another solution, Al Block said, is for more lenders to offer “bridge” loans so that sellers can feel confident about listing their home while searching for a new one. 

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The coronavirus changed the housing market, industry experts say. It closed homes to showings last spring, then sellers and the public had to regain confidence with in-person visits. Yet, with travel restricted and people staying home more, people wanted to focus on their living space. 

“As we went through COVID-19, many folks found themselves in a situation where they were spending more time at home and working from home,” said John North, CEO of Coldwell Banker Weir Manuel, which is based in the Detroit suburb of Bingham Farms and operates 18 real estate offices in the state. 

Some chose to renovate existing homes. Others saw “opportunities to take advantage of (remote work) and move to different locations,” North said.

Realtor Pete Platte of Gaslight Group Properties in Petoskey saw that play out last year, and it’s continuing in that community on Little Traverse Bay. 

Platte said about half of the houses have been second homes, but the community is changing as buyers look for primary residences. “If you’re shut up in a pandemic, you might as well be in a beautiful area,” he said. 

Normally by early March, Platte would be working with 10-15 active listings coming onto the market in February for buyers to consider.

“At this moment, there is zero,” Platte said last week.

One home listed in the $500,000 range in late February had three offers by the following day. Everyone watching it wondered if it could reach a $600,000 offer — or more — if it stayed on the market all weekend. The final price won’t be disclosed until after the sale is finalized.

Realtors agree that the lower end of the market tends to generate the most offers right now. Platte said the most he’s heard of in Petoskey is 10, while a move-in ready bungalow in the Creston neighborhood of Grand Rapids recently received 24 offers.

The Youngs got used to following other customers into Rochester Hills-area home showings and seeing another family ready to enter as they left, Stephanie said. That inspired quick decisions.

After one, as they discussed it in the car, they decided to make an offer for $15,000 over list price. “We weren’t going to wait.”

The house was very close to what they wanted. What they gave up in size they made up with a better floor plan for their lifestyle, which includes their 6-month-old daughter, Alita. They expect to close on March 20.

“We’re so happy,” Stephanie said. “I can’t believe we got it.”

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