This spring is shaping up to be another sellers' market in metro Detroit housing as would-be buyers continue to scramble over the slim number of for-sale houses, especially those with entry-level prices below $325,000.
On-market home listings in the area were down 10% this February from a year ago, according to the latest data from the Realcomp multiple-listing service, although the number of sales rose 5%.
The inventory decline appears to be putting more upward pressure on home sale prices, which have returned to or surpassed their precrash levels in nearly all areas of the region outside the city of Detroit.
The median sale price of a house or condo in metro Detroit was $170,000 in February, or 4% higher than last year, according to Realcomp, which defines metro Detroit as Wayne, Oakland, Macomb and Livingston counties and doesn't count private sales or for-sale-by-owner transactions.
"This (increase) just gives some more enthusiasm to people who were thinking about selling. And that's really what we need right now — more inventory," said Realcomp CEO Karen Kage.
Mortgage rates in the region are still only about 3.75% to 4.25%, according to real estate agents, which could add momentum to spring buying season because lower rates help affordability.
"We're looking forward to a hot spring," said Hassan Ahmad, an associate broker with Remaxding Edge in Dearborn Heights. "I think it's too early to say how the entire year will play out, but all the fundamentals remain positive."
The market for entry-level homes, generally priced up to $325,000, right now is as tight or even tighter than it was last year, according to Realtor Jason Matt of Keller Williams in Plymouth.
"We're still seeing over-asking and multiple offers and all that. Buyers are still really frustrated," Matt said.
Sellers in cities such as Livonia, which has a good supply of entry-level housing stock, are seeing a large number of offers, he said.
Other hot spots for entry-level prices include Warren, Madison Heights and Westland, agents said.
For move-up homes priced about $350,000 and above, there has been a small yet noticeable change in the market this spring, Matt said. While those sellers are still getting offers, they are not coming as fast and furious as last year.
"I think (buyers) have gotten a little bit more picky" in the move-up market, Matt said. "They are still willing to pay top dollar, but they are not going to pay $10,000, $20,000 over for a home that isn't in the condition they expect it to be in."
"That has been the biggest shift in the market," he added, "but it's really been a small shift."
Agents are seeing more move-up homes hit the market as baby boomers decide it is time to swap their large houses for smaller houses or condos. Some of those higher-end listings are just now reaching the market and were not counted in this winter's housing data.
"We are seeing a lot of downsizers, and that is why we are seeing more of the higher-end homes" for sale, said Susan Vogel, who leads The Susan Vogel Team at Remax First. "The inventory is ramping up very well."
Yet those downsizing boomers can then be in competition for smaller homes with young, first-time homebuyers. That can create a challenge for the first-time buyers, because sellers often choose the older buyers' all-cash bids over competing loan-backed offers.
"Many sellers will take a little haircut on the price if (the offer) is cash," said Al Block, president of the Greater Metropolitan Association of Realtors. "So the younger buyers do have a harder time."
Overall, the widely followed S&P CoreLogic Case-Shiller index showed that home prices across the metro Detroit region this winter were about 90% above their post-crash lows here in early 2011.
Despite the tight inventory for existing houses, the amount of new homebuilding activity in the region is still below its historical average.
In 2018, there were 5,703 single-family house permits issued in Wayne, Oakland, Macomb and St. Clair counties, down from the 42-year average of 9,735 permits, according to the Home Builders Association of Southeastern Michigan.
The average value of a single-family house permit was $304,068 last month, nearly 13% higher than a year earlier, the association reported.
Some reasons for this relative decline in new home construction are the rising costs for lots and building materials, the trend of young people waiting longer than past generations to build houses, and less commercial lending support for midsize builders to put up spec houses, said Michael Stoskopf, CEO of the Home Builders Association of Southeastern Michigan.
"Instead of having that (financial) pot where you can build four, five or six homes, you are building one home at a time," Stoskopf said of the commercial lending situation. "So that limits the production as well."
The communities seeing the most single-family house permitting activity are, in order, Macomb Township, Shelby Township, Canton, Orion Township and Lyon Township, he said.
