By the end of 2012, prospects appeared mixed for the 2013 Michigan housing market: on one hand, real estate experts remained well aware of the fact that the recession greatly affected the state. On the other hand, the Detroit housing market was poised to make one of the biggest comebacks in U.S. history. So, did any of these predictions come true, or has the 2014 Michigan housing market continued to slump under numerous negative influences from the past? According to more than one report, the 2014 Michigan housing market fared rather well. In our following, we examine some of the biggest political and economic factors affecting the residential segment of the state’s property market. These factors include the following:
- An Oscillating Job Market and Uneven State Economy
Up until the first quarter of 2014, the economy in Michigan appeared to be on an incline at a relatively steady pace. The Michigan economy added over 293,000 new jobs since late 2009. Yet, early on in the fiscal year, the state lost 10,000 jobs. However, the state added majority of these jobs back during the second quarter of 2014. The forecast for the remainder of the year and for 2015 does not appear very optimistic. Experts predict that the rate of job growth will remain at 2.5 percent until the end of 2014. They then predict this rate to likely drop to the 1.3/1.4 percent mark next year. Luckily, the area holds an incredibly low rate of inflation (which amounts to a 1.6 percent increase in 2013). Since the rise in federal taxes was not very significant in 2014, personal incomes registered a sharp 4.3 percent increase.
- The Great Flood of 2014
In 2014, flooding affected numerous Michigan homes. This flooding caused their sewage system to back up and further damage their property. As far as housing values go, experts feel the impact of this calamity will likely be minimal since home insurance policies cover sewer backups. However, experts warn homeowners that they must update their new policies with such a rider (in case they haven’t done so already) so they are covered for future disaster. Meanwhile, buyers would be wise to inquire as to whether a potential home was affected by the floods and what actions were taken to repair the damage.
- New Construction Activity in Southeast Michigan
Several areas of the 2014 Michigan housing market are rebounding from the recession at an incredible pace. Home values already increased between 40 to 50 percent. South Lyon and Lyon Township in Oakland County make up one such area to experience growth. Construction activities intensified recently in this area. Prices reached $258,000 in September 2014. Experts expect several new homes priced around the $300,000 mark to hit the 2014 Michigan housing market soon. Chelsea, in Washtenaw County, serves as an example of another hotspot where resale activities drove up the median prices.
Michigan isn’t the strongest housing market in the country, However, at the moment, the Michigan housing market isn’t doing too badly. RealEstate.com calls the market “robust.” They specifically note the plentiful opportunities for investors, individual buyers, and renters. Apparently, many types of opportunities exist at the moment in terms of prices as well as types of property. Michigan boasts a wide range of both rural and urban properties. This eclectic nature caters to an incredibly diverse range of lifestyles. We feel that Macomb, East Grand Rapids, Forest Hills, Benton Harbor, and Harmtramck represent the top five Michigan cities for families. Families with children make up 42% to 47% of the population in these metropolitan areas. These areas also hold incredible low crime rates. Michigan has a lot to offer to singles as well: upwards of 87 percent of the population in places like Big Rapids, Highland Park, and East Lansing still hasn’t married.
As of the writing of this report, we still feel that Michigan is a seller’s market due to the high median sales prices and transaction turnaround times that afford current owners a distinct advantage. Recent data from RealEstate.com shows that selling the average condo in Michigan take roughly 188 days. Meanwhile, single family homes spend 154 days on the market on average. Though the market remains fairly balanced, several cities experienced major swings, either upward or downward, in terms real estate prices during the past three months. The prices in Rochester Hills and South Haven witnessed the most dramatic increase in listing prices. Prices dropped most dramatically in Port Huron (by 24.5 percent) and Benton Harbor (19.32 percent).
The overall median value of Michigan homes stands at $117,000 according to Zillow.com. RealEstate.com adds that the most expensive homes in the state reside in Bloomfield Hills and Bloomfield Township. In these locations, the median sale prices exceed $1,000,000. The most affordable 2014 Michigan housing markets by median selling price currently reside in Detroit ($25,696) and Flint ($28,181). Inkste follows closely behind at $29,448. Zillow’s forecast for the state’s housing market remains mostly positive. Based on the current year-to-year home value increase of 2.5 percent, we predict a massive 7.2 percent upswing over the coming twelve months. Since the selling and listing prices fluctuated so dramatically in the Michigan market through recent years, the market appears less healthy than average and more unstable.
Local real estate agency Real Estate One says that the market sent mixed signals during the year’s third quarter due to drops in both the number of new listings and the number of sales. This represents a significant change in pace from the upswing which the market recorded only two months earlier at the end of June. However, prices continued to increase with the average price per square foot increasing by 10 percent per month.
The expected replenishment of state inventory represents one indicator that the 2014 Michigan housing market might be regain its former strength. The number of distressed properties on the market currently stands at just 3.9 percent. That figure sits safely below the national average of 6.9 percent. Since the number of new listings is stagnating and we expect home sales to decrease through the winter (as is usually the case over the cold season), the slowdown in buyer demand should help drive up the stock of homes currently on the market. Since prices should continue growing as they have over the past two years, the end of 2014 will probably bring even bigger inventory increases in the upper end of the market (or homes priced at $500,000 and up).
As far as price variations are concerned, we expect the end of the 2014 Michigan housing market will strengthen sellers’ positions in the market. However, this probably won’t occur at the same extent that it did during the first quarter of the year. Over the summer, demand for houses increased. We witnessed more expensive homes on the market take several price cuts before eventually selling far below the initial offer. Similar trends should occur by the end of the year and throughout early 2015. Sellers might need to adjust to current market realities by shaving a few pricing points off of their listing price and by lowering their expectations on buyer activity.
So, the future is wide open for Michigan. Many things are still ‘up in the air’ and the overall market could end up going either way. Reporting market conditions in 2015 should prove interesting. We’ll see you back on here in the new year!