“Lack of inventory is really what’s hurting us,” said Kim Thompson, CEO of ECAR (East Central Association of Realtors.)
What has been true for the last few years is still true today — interest rates are still low, and demand for homes is still strong, leading to a limited inventory of available homes and bidding wars on many properties. Sellers can easily sell a home if priced right, but will struggle to find something in the $150,000 to $175,000 range in some areas.
“There’s no sign of decline,” said Patrik Welty, owner/broker of Legacy Realty Professionals in Fenton.
He added that while the market is not declining, it’s not as dramatic as last year. “It’s not like a feeding frenzy 24/7,” he said.
This has been the situation for a couple years, with no clear answer as to when prices will plateau.
Homes in the $175,000 range remain “hot commodities,” and can sell before they hit the market with multiple offers. Welty said the only balanced market is the non-lake homes listed for around $500,000. These can actually sit on the market for a few weeks with a regular pattern of offers.
Sales are still climbing. Thompson said 480 residential homes were sold in May of 2018 in Genesee County. There were 540 sold in May of 2019. Every month so far has beaten sales for 2018.
She added that average home prices in Genesee County have also increased from $151,000 to $163,000.
“I can’t believe we haven’t reached that plateau yet. It feels like it’s time,” she said. She added that this won’t happen until this problem of inventory is solved. There aren’t enough single family homes under $200,000 for sale.
New homes needed
To ease the lack of inventory, more new homes need to be built — especially those under $200,000.
Lisa Sears is executive officer of the Home Builders Association of Mid-Michigan with 30 years in the industry. When asked if new builds have increased, she said that it’s “complicated.”
“It’s pocketed,” she said. “Fenton’s really hot right now.” Southern Genesee County is seeing more construction than northern Genesee County.
She said there are a few challenges to building new homes. One major issue is affordable land. A smaller builder won’t be able to buy up an entire subdivision-worth of land and develop it. “It’s a real quandary for the smaller builders,” Sears said.
Another issue is that in previous years, someone building a new home would have instant equity, and it would be worth more than a similar existing home.
Today, an existing home may be a better investment. The price to build a home can only go up with the cost of materials and the impact of federal tariffs on steel and aluminum.
Still, she said in many ways the industry is doing better than during the crash of 2006 to 2009.
Welty is confident that there is no real estate “bubble” that can be burst leading to another crash. “Dynamics from 2008 don’t exist today,” he said. Risky, no documentation, no proof-of-income loans created back then, don’t exist today.
Because he doesn’t predict a crash, he can’t predict when this sellers’ market might change.
What are sellers and buyers being advised, according to Welty?
Buyers: make sure financing is in order, and be informed about what your price range can buy. Be prepared to move quickly if you like the home. Homes can sell in hours.
Sellers: homes need to be priced appropriately for the market and be in good condition. They shouldn’t have major issues that could impede financing.
Sellers and buyers need to be informed about what homes will sell for, and what the personal financial impacts and process will be.