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Sunday, January 15, 2012

Local Real Estate Market Update

Local Real Estate Market Update

The market continues its march towards recovery, but at an inconsistent pace. For example, November started out at a slower rate, but picked up speed toward the end of the month, catching up with last year, not surprisingly following the consumer confidence trend as well as car sales. Comerica's Michigan Economic Activity Index confirms our jumpy recovery, showing the economy moving in a consistent range, bumping up and down within that range.

The number of new listings coming on the market continues to decline, with sales rising (compared to 2010), causing the Months Supply of Inventory (MSI) to fall to a seasonally adjusted low point for the year. There is no doubt a constantly declining MSI will push home value up, and we have seen evidence of that over the past six months with over bids on many homes. The overall MSI is still above 5 months, which is considered a neutral market (for appreciation). In reality, the market is moving in two speeds, about 1/3 at under 2 months and 2/3's at over 7 months with the average being 5 months. For the most part homes are either selling quickly, at or above list price (those in the best condition and priced competitively) or they are still selling at a large discount to asking price (poor condition/location/pricing). With that said, the steady downward MSI trend shows that buyers are beginning to compromise more on what they will accept in terms of condition and features, dipping into the less than salable inventory (but at a discounted price, which temporarily exacerbates the low appraisal issues).

CHART: Solds - Pending Index - Price per Sq. Ft.

The chart above compares this year to the same month last year at three levels, which gives a seasonally adjusted view of each indicator. Home values per square foot have shown a steady rise, particularly over the past five months. Homes sales, both closed (Solds) and pendings (Pending Index) have shown mixed results compared to 2010, mainly as a result of being compared to the tax credit months in 2010. Overall, sales have matched last year, which means natural housing demand has replaced the artificial demand created by the tax credits. The Pending Index on the chart is a projection of closed sales based on the 60 day average lag time from written to closed sales. The index shows that although the growth rate of sales slowed August to November, we can expect a quickening of activity carrying into the new year.

Lastly, Buyer Interest is holding steady in terms of showing appointments and open house visits and we expect this activity to continue going into the new year.

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