The Current Real Estate Market Explained: Why Michigan Housing Prices are Soaring

Michigan Housing Prices are Skyrocketing!

Housing prices are soaring in the U.S. and especially in Michigan, where houses are in low supply. Michigan currently ranks 14th among states with the fewest homes for sale.¹ As a result of this shortage, supply and demand are at play as prices are shooting up. In Metro Detroit, real estate agents claim offers come “flooding in” within hours of a new listing.²

And in Macomb County homes are selling the quickest - most selling in less than a month on average. In total, Metro Detroit home prices are up 65.8% compared to this time last year.³

What Forces Are Driving the Real Estate Prices Up?

Several forces are affecting the current economics of real estate:

Lack of Inventory
What we are seeing now is not a bubble reminiscent of 2007 - it's simply a lack of inventory.  Currently a record-low number of homes are available for sale—roughly 1.03 million Nationwide. That is drastically lower than the average number of homes for sale during the past 10 years! It's no surprise that many hopeful homebuyers are having issues securing a home.⁴

It’s a Seller’s Market
Now is a great time to be a seller! You will get top dollar for your home and you could get great terms, too. In many ways, this may be the friendliest sellers’ market we have seen in quite a while. Nearly half of homes are selling within roughly a week or less. Median prices are rising at a phenomenal rate. And National prices, in general, have increased 17.2 percent over last year.⁵

Mortgage Rates
Interest rates fell at the start of the pandemic in March 2020, shot up briefly a month later when the first economic stimulus was announced and then dropped precipitously throughout the rest of the year while setting more than a dozen record lows. Rates are just now moving up again.⁶

Why now?

Listings are skyrocketing for several reasons. Many experts believe the continued low mortgage rates, a pandemic-era construction slowdown, and an increase in money available for a down payment are all factors.⁷

auburn hills s

What should you do?

If you are waiting for home prices to drop to buy a home, this might not be the right move. Interest rates are near historical lows and if you hold off on buying you might not be saving money in the long run. While waiting for home prices to drop, interest rates may rise. For example, if mortgage interest rates return to previous rates of 5% on a 30-year mortgage (as they were ten years ago), a house priced at $400,000 today would have to drop 20% to $320,000 before saving any money on your monthly payment. 

In this hypothetical example, the difference between the monthly payments is only $5.

Waiting for lower prices while interest rates are rising may be a fool's errand. 

In this hyper-competitive market, many people are thinking of taking advantage of the situation by selling or buying a home. If this sounds like you, give our office a call. We work with many housing-related professionals who may be able to offer some guidance and support.

120

Auburn Hills MI, Michigan, Detroit Metro Detroit. Metro Detroit Housing Market. Real Estate. Housing. Financial advisor

New to WealthMap Advisors?

Schedule a free 15 Minute Q&A about how we can help you

^{1. Inspection Report Network, Cities with the Most and Fewest Homes for Sale}

^{2. Click on Detroit, a Look at Metro Detroit's Hot Real Estate Market}

^{3. Click on Detroit, Metro Detroit real estate market: buyers beware in spring-summer 2021}

^{4. NAR.realtor.com, March 22, 2021}

<sup>5. Axios.com, April 11, 2021
6. CNBC, The housing market stands at a tipping point after a stunning successful year during the pandemic</sup>

^{7. Axios.com, April 11, 2021}

^{The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.}