Happy New Year! It’s hard to believe how fast 2017 has come and gone, but it’s safe to say it was an excellent year for Michigan’s housing market, which was able to surpass the record-setting year established in 2016.
Throughout 2017 Michigan home sales increased 5.2% and average home values increased 6.6%. Detroit was recognized as one of the hottest real estate markets in the country due to high consumer confidence, buyer demand, and a strong economy with a robust job market. However, according to a report by the nonprofit Urban Institute (UI), it suggests that more and more expensive homes are flooding into the luxury market causing homebuyers to struggle as they look for starter and trade-up homes. This means that home affordability will in turn go down as fewer people will be able to afford homes like they were able to in prior years. Right now the median home price in Michigan is around $135,000 and is predicated to rise another 3.5%. This primarily affects the Millennial generation just entering the market because inventory is limited causing an increase to the price of homes available to first home buyers. Consequently, buyers discouraged by a lack of inventory in popular metro Detroit communities are expected to expand into New Hudson and Macomb County due to a more extensive selection.
There has also been a shift in home preference from colonial-style homes to ranch-style homes as Baby Boomers downsize and look to keep everything on one level. This trend is expected to impact buying and pricing patterns, with ranch homes expected to increase in value as demand rises.
Metro Detroit’s housing market kept its shape last month as low inventory and rising demand continue to push sales higher. As of December 2017, average rent for an apartment in Detroit was $1,171 which is a 2.48% increase from 2016 when the average rent was $1,142. The amount of homes sold in Detroit during 2017 was 4,888, resulting in a 3.5% increase, but the number of homes listed was down nearly 30%. Homes are selling about a week faster with metro Detroit’s housing inventory currently at a 2.4 month supply. Similarly in Ann Arbor, there is a limited supply with a greater demand. As a result, we saw average sale prices for single-family homes in Ann Arbor increase from $285,718 in 2016 to $303,384 in 2017, which accounted for a 6.2% increase. In 2017, 50% of single-family houses sold in Washtenaw County have gone for list price or higher, compared to 44% at this time in 2016. These trends hold true throughout Southeast Michigan as well.
Conversely homes in the luxury market, priced over $500,000, are staying on the market much longer than average priced homes. In the month of December there were 2,087 luxury listings in Southeast Michigan, which resulted in a 6% decrease from the month before. Luxury listings also had a 10 month supply in December, which was also about the same for October and November.
Looking back at 2017 one thing became very clear; more inventory is currently needed to meet buyer demand, especially properties priced below $500,000. All signs point to a very strong 2018 market. We have excellent economic momentum, low unemployment, weak inflation, and low mortgage rates. Here’s to a strong start in 2018!
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