Hi Friends! Below is our monthly market update from President of Brokerage Services here at Real Estate One, Dan Elsea.
Like September, October was a pleasant surprise outperforming our expectations in terms of homes sold. We continue to see the same trends: For Sale inventories are increasing and the rate of appreciation is still strong, but at lower rates. Most of the strength in the market is in the under $500,000 segments. We have seen a rather significant drop in showing activity in the upper end markets (over $500,000) with showings per listing dropping over 30% compared to October of last year. In part, this is influenced by more listings to choose from which spreads buyers across a larger inventory. For upper end sellers, it means fewer showings per week (under one per week versus near two last year on average) and a slower pace for offers. The rate of showings per listing has fallen across the other price ranges as well (about 20%), but not as dramatic as the upper end markets. The actual number of showings in the $300,000 to $500,000 price range has actually risen over the past 90 days, showing that there are still pent-up buyers entering the market, but since there are more listings on the market in the $300-500k market it will still seem slow to a seller even with those additional buyers.
For the next few months the market will feel quite a bit slower due to a combination of more listings on the market and the normal seasonal showing activity slowdown. There will still be a brisk rate of sales compared to historical winter months. Depending on our winter weather, we may actually see a nice jump in winter sales in early 2015 compared to this past winter (no winter could be tougher than the last one, so winter activity will be no worse, only equal or better).
Looking at things from a historical perspective shows how far we have come from the 2008 market bottom. Reflecting back on the 90’s, we can see what to expect once the market settles back to normal. Case-Shiller appreciation rates are typically the most accurate, although we feel its numbers for Southeast Michigan are low compared to what we see happening. With that being said, the data does represent a good trend line since the early 90’s.
There is a concern in the market that the pent-up demand created by the housing recession has been released, with the expectation of falling sales and values as we move back to a less frenzied “catch up” market. The chart below takes a stab at showing where that pent-up demand went. The chart uses national data, but we applied our local flavor, adjusting for foreclosure rates (we were higher than most) and rate of recovery (we were faster than most). It shows that the market got ahead of itself compared to the historical normal sales rates in 2004-2006 and then fell significantly below the norm in 2007-2012. The combined “downs” (in red) exceed the “ups” (in green) showing that it is logical there is still some of that demand projected to be released over the next 3-4 years. Assuming our economy continues in a positive direction, housing demand should be either equal to or above the historical trend over the next few years.