Southeast Michigan Market Update December 2014

by admin on December 5, 2014

There were no dramatic changes for the housing market in November and the first part of December. Home values continue to rise in excess of 6%, slowing a bit from a pace that was higher than 10% earlier this year. The number of homes for sale continues to rise giving buyers some relief from inventory shortages. The Month’s Supply of Inventory (MSI) remained about the same as last November. New contracts written have been up the last 90 days while closed sales have actually fallen. Though new contract data is less reliable than sold data, we remain optimistic that there is a backlog of sales waiting to close in the next 60 days. The slower sale pace does reinforce our feeling that the market is settling down to a more normal pace, especially in the over $500,000 segments. With buyers spread out among more listings, many sellers will feel that the market is slower than it really is.

These charts from the National Association of Realtors focus on some of the good things going on in the economy that should translate into a multi-year real estate recovery.

picture

 

 

 

 

 

Most people do not realize how far household net worth has risen from the bottom of the recession, and that it has exceeded the prior 2007 peak. The stock market jump has certainly helped move the numbers up, but the majority of the yellow bars are made up of home equities. Higher household net worth translates into higher consumer confidence and increased consumer spending.

picture

 

 

 

 

Going hand-in-hand with increased household net worth is the increase in total jobs, again exceeding the peak year of 2007. The jobs added during this recovery are more service-based and do not have the same buying power as those in the past, but with so many dual income families, the combined incomes create buying power for housing.

picture

 

 

 

 

The young adult homeownership rate is one of the biggest challenges for housing growth. With tough lending standards, slow job growth and high student loan debt young adults have a hard time getting financed. As lending standards move back to more reasonable levels, some of that first time home buyer pent-up demand will be released, moving that ownership percentage closer to 40%.

 Homeowner households have not grown since 2006, but are primed to grow.

picture

 

 

 

 

This chart clearly illustrates the effect of the housing bubble. After 20 years of growth in the number of homeowners in the U.S., we have been at a standstill for the last six years. Most economists expect the homeownership numbers to resume their growth over the next 10 years, but probably at a slower pace than the past 20 years. Much of that future growth is in former homeowners, who were forced to rent and hope to buy again the first chance they get.

National Housing Forecast

picture

 

 

 

 

 

Overall, we are carrying an improved listing inventory, good economic momentum and some evidence that there is still some pent-up demand out there along with the prospects of continued affordable interest rates. The skies look good going into 2015 for stable and steady growth in the real estate market.

This past November we did very well as a company, gaining a bit more market share like we have all year. With an extra weekend day (and one fewer business day) in November, we had a few extra moments to relax and enjoy all we have accomplished this year. As a reminder, our “Second Look” program through John Adams Mortgage has proven to be very beneficial to our clients with over half of those clients switching to John Adams (and they receive a $50 gift certificate)! We appreciate your support of this program and all of the services we have to offer throughout our family of companies.

 

 

 

Leave a Comment

Previous post:

Next post: