X marks the spot. What am I referring to? Read on and find out. I am often asked; âSteve, when are the prices going to go down? Steve, when will there be more homes for sale? The answer to both questions is not soon. So in other words, don’t hold your breath (unless you want to look like a Smurf). Some people think that overnight prices will suddenly drop and the inventory of homes for sale will increase dramatically. Again, that won’t happen anytime soon. Prices have been rising for over 10 years while stocks have been falling for over 10 years.
Supply and demand drive prices up or down. With stocks so low, there is no reason for prices to drop. The Great Recession and the housing bubble that were caused by bad mortgage lending practices are not a factor today. Back then, it was easy to get a mortgage without a down payment. Have you tried getting a mortgage in the past 10 years? It is a much stricter process and bad language is known to come out of the mouths of borrowers.
Here are some facts that explain why there is a housing inventory shortage. In 2018, Freddie Mac estimated there was a housing shortage of 2.5 million units. Towards the end of 2020 it rose to 3.8 million and by the start of 2021 it was already estimated at 4.0 million. New home construction has been declining since the end of the Great Recession for the following reasons; builders have gone bankrupt, the lack of available skilled workers and government regulations. By the end of the 1970s, 418,000 entry-level homes were built each year. Over the past 20 years, it has declined. In 2004 there were 186,000 and in the 2010s it was on average around 55,000. In 2020 it was 65,000. Add to that tens of millions of Millennials entering the housing market and buying. their first home. Overall, the construction of new single-family homes has declined over the past 10 years.
Some people think that due to the pandemic there will be a bunch of foreclosures coming onto the market. Again, this will not happen. This time around, the government and lenders got smart and offered forbearance deals to homeowners who were struggling financially during the crisis. Now, with the economy taking off and the country reopening, very few foreclosures are expected. Even if there was a slight increase, the inventory would be absorbed quickly. More than likely, those facing foreclosure would market their property and sell it quickly, preventing a foreclosure from occurring.
Unfortunately, I don’t have room in this column for graphics; but if I did and you could look at two charts showing 10 years of housing data for Michigan, you would see the following. One would be the number of homes for sale and the other is the average sale price. If you stack them you will notice that it forms an X. Prices have been rising for over 10 years while stocks have been falling for over 10 years. Hopefully we will see more inventory on the market soon. What is the best advice I have if you are looking for a home? Stay in the game and have patience! If you are selling a house; congratulations! If you would like me to send you a copy of the graphics, let me know.
Market Update: The April market update for the Macomb County and Oakland County housing market is as follows. In Macomb County, prices are up nearly 13% and Oakland County prices are up more than 17% for the month. The inventory of residential homes / condos on the market was still declining. Inventories in the Macomb County market are down more than 55% and those in Oakland County are down more than 42%. The average number of days in the Macomb County market was 21 days and the average number of days in the Oakland County market was 25 days. Closed sales in Macomb County increased nearly 64% and closed sales in Oakland County fell 57%. Closed sales have increased by a significant percentage from last year due to the COVID-19 shutdown last year. (All comparisons are month-to-month, year-to-year.)
Steve Meyers is a real estate agent at RE / MAX Metropolitan in Shelby Twp. and is a member of the RE / MAX Hall of Fame. Contact him with any questions at 586-997-5480 or [email protected] You can also visit his website: AnswersToRealEstateQuestions.com.