This was actually a frequently asked question of me in December of 2016 and so far in 2017. While I wish I had a crystal ball, I do not, but after 32 years of selling real estate in this area, I am very adept at looking at the trends in real estate and predicting what will happen.
For Sellers: We saw a significant drop in listings on the market at the end of 2016 as compared to the end of 2015. On December 31, 2015, there were 19,634 homes and condominiums on the market in the Metro Detroit area. This compares 11,255 homes and condominiums on the market in the Metro Detroit area on December 31, 2016. This means that there were 43% less properties on the market at the end of 2016 as compared to end of 2015.
This is huge. The number of people that are putting their homes on the market so far this year is down tremendously. I believe that we will see roughly the same number of sales in 2017 that we saw in 2016, but since there are so few homes on the market at this time, we are finding that even plain homes are getting lots of attention and are selling.
This is very good for sellers because normally we only see multiple offers being made on a home if it is very sharp with lots of updates and very fairly priced. We are sometimes seeing multiple offers on homes at this time that would not normally get a second look if there was more competition.
The mid-priced segment of the market (and this varies from city to city) is the segment of the market that has the least amount of inventory and seems to have the biggest demand from buyers.
My advice for Sellers: If you are planning on selling your home in 2017, beat the competition and get your home on the market early in the year.
For Buyers: We saw a healthy increase in the median sale price of homes in the Detroit Metro area in 2016. From December 2016 over December 2015, we saw the following increases in the median sale price for the counties in the Metro Detroit Area:
Wayne County: The Median Sale price rose 8% to $108,000. Oakland County: The Median Sale price rose 4.5% to $207,000. Macomb County: The Median Sale price rose 9.7% to $147,000 Livingston County: The Median Sale price rose 14% to $245,000
These are healthy increases. Some of these areas are still rebounding from the severe drop in prices that we saw during the Great Recession. There are no apparent signs that show us that our housing prices are in a bubble and will come back down. I believe that we will continue to see moderate increases in our housing prices throughout 2017.
However, we may see a significant increase in the monthly payment of owning these homes. During the last 8-10 years, we have seen artificially low mortgage rates that were held down by the U.S. monetary policies. In December 2015, the Federal Reserve increased key interest rates for the first time in nearly a decade. They increased again in December 2016. We still have historically low mortgage rates which makes the purchase of a home more affordable for everyone. The question for 2017 is whether we will continue to see the increasing of mortgage interest rates.
To show you just how this can affect the cost of purchasing a home, I will show you what the monthly principal and interest payment is on a 30 year mortgage at various interest rates for a $200,000 mortgage.
4.2% (December, 2016) P & I payment of $978.03
5.75% (December, 2004) P & I payment of $1,167.15
7.38% (December, 2000) P & I payment of $1,382.03
8.21% (December, 1992) P & I payment of $1,496.91
11.26% (December, 1985) P & I payment of $1,944.04
16.95% (December, 1981) P & I payment of $2,843.23
My advice for Buyers: It does not appear that mortgage interest rates will go down from this point and they may very well go up. This is the best buying opportunity that you may have for many years. Don't put off buying a home if this is something that you want to do.
In 2016, we saw an increase in sales in almost every segment real estate market. There was a year over year increase of 9.7% in the number of homes that sold in the $150,001 to $300,000 price range.
There was a year over year increase of 17.9% in the number of homes that sold in the $300,001 to $450,000 price range, and there was a year over year increase of 11.7% in the number of homes that sold in the $450,001 and above price range. The only decrease was the year over year decrease of 3.6% in the number of homes that sold for $150,000 and below.
In a nutshell, I feel good about the real estate market for 2017. 2016 was a frustrating year for buyers in that there were often multiple offers for the same home. It was and will continue to be very important for buyers to be well represented and well positioned before making that initial offer. Even though 2016 would be considered a seller's market, sellers learned the importance of making their home look good at the onset and making sure that they priced the home well from the beginning.