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Grosse Pointe Housing Market Update
The Grosse Pointe Housing Market has been as hot as the weather lately. This is traditionally one of the busier times of the year in real estate, and this year is no exception. Low prices combined with historically low interest rates have created a perfect buying storm, and people in the Grosse Pointe area are taking advantage of it.
Grosse Pointe housing inventory has continued to slightly decline. This is good for almost everyone. Basic economics would indicate that less inventory combined with high demand would equal rising prices. While that is true, prices have only risen slightly and the reason for this is simple.
Appraisals. Basically when a buyer wants to purchase an item, that buyer agrees to spend their money on whatever they are buying at a price the buyer and seller agree upon. The same goes with real estate, only the buyer often isn't using his or her own money. So in the middle of everything is an independent appraisal. The mortgage world came under heavy scrutiny several years back as basically anyone with a pulse and a signature could get any mortgage he or she desired. Since then government regulations have changed the way a mortgage is done, and especially how an appraisal is assigned (meaning who does it) and how it is to completed.
To make a long story short, even though a buyer and seller agree on a price (thus the true market price of the home) an appraiser has the final say. In some worst case scenarios, appraisers can come from as far away as Port Huron or Flint and maybe do not have access to our local MLS (There are two major MLS systems in our area, and for an appraiser to do a thorough job, they need access to both). So in the end the market does not set the price, the appraiser does, which can be frustrating.
Even with that in mind, our local market is still hot. Currently there are 210 single family homes available on the market in the five Grosse Pointes. This does not include any homes under contract, or awaiting short sale approval. There are 140 homes under contract right now, and another 38 awaiting short sale approval for a total of 178 homes or 46% of our market. That is a huge percentage which indicates a robust real estate market. 259 homes have sold thus far this year compared with 208 sales during this time period last year.
Though prices are not shooting up through the roof, this market recovery is good for anyone who owns a home. Like I tell all my friends, we have hit "a bottom." The real question is have we hit "the bottom?" I am confident we have, but no one really knows the answer to this. Time will tell. Either way, its a great time to buy real estate. In the meantime, if you have questions about your specific situation, contact your local Grosse Pointe Board of Realtors Member. Real estate is hyper local, and local agents understand our market better than anyone.
GP For Life
7:42 pm on Monday, June 11, 2012
Chace, while a thrid party having a final say in a price may be a little taxing remember that the market set the bubble pricing too. Certainly part of the overvalued pricing pre-bubble-burst was attributable to, shall we say, moronic lending standards. Another contributing factor was people assuming a liquidity premium, either through long sales or debt, which caused buyers to pay premiums for something that didn't exist.
Either way, I think you hit the nail on the head. We've hit a bottom and its probably the bottom.
Salvador
9:55 am on Tuesday, June 12, 2012
Chace good article. How is our average days on market and months of inventory? Are they coming down too and how do we compare to areas like birmingham, novi, etc. That will tell us how desirable it is still. Keeping my fingers crossed. Thanks
Connie Sfire
11:52 am on Tuesday, June 12, 2012
Chace..I enjoyed your article. I was a neighbor of yours when you lived on GPBlvd
with your mom. I am so proud of you as you are a responsible knowledgeable young
man. I am a retired residential appraiser, who was angered by clients choosing out
of state appraisers when they could have hired a local who understands the area.
The realtors should demand only local appraisers to do the job. Good Luck,
Connie Sfire
Vicky Colwell
12:25 pm on Tuesday, June 12, 2012
Great explanation, Chace. We are honored that you serve as our GP Board of Realtors president. You've shared some very pertinent information!
Mike Ramsey
4:38 pm on Tuesday, June 12, 2012
As a person who just purchased a house in Grosse Pointe, and whose first appraisal came in a shocking $35,000 below my offering price, I think the appraiser "problem" is the single biggest issue facing real estate today. I ended up getting a second appraisal with a different loan package that came in at the selling price. The sheer fact that I could get two appraisals with such different values is scary enough. What has happened is a classic overreaction in the opposite direction. What stuns me the most about the appraisal is that it seems to give absolutely no value to the quality of the home and its features. The gross liveable square footage is the only thing that matters. It doesn't matter if it has Viking appliances and a new roof and driveway, sprinkler system and alarm system and perfect landscaping. All these things have ZERO value! Remind me to build a 20,000-square-foot cinder-block building with nothing in it. I know that the appraisers are professionals who are trying to do a good job, but this random pool system that they use also makes them free from responsibility. Also, shouldn't appraisers use the data that you have shown - that so many houses are under contract and that listing prices are up -- to show that houses sold now might be worth more than ones sold three months ago?
Mark Small
10:35 am on Wednesday, June 13, 2012
Chase, I'm a professional real estate investor (for 30 years). I am currently investing in your community. The only thing I would add to your commentary is that every market over compensates (in both directions). When everyone was in what I refer to as the "greed phase" of the market, no one thinks the market will ever go down and everyone things they can defy fundamental economics. Now we're in the "fear phase" of the market and everyone thinks the opposite - it can only get worse.
What ultimately makes sense are simple fundamental economics. What percentage of someone's income is being allocated to housing. When that number is more than 25% it begins to move into the red zone.
What we are seeing now is the opportunity of a lifetime for those who can get over their own irrational fear and buy "right".
Thanks fot the article.
Mark A. Small
www.silentpartnergroup.com