It looks like it might be shaping up to be an interesting spring market. Although the trend of rising inventories is still taking hold, a combination of good weather and continued buyer interest at all price ranges, has kept For Sale inventories lower than we had expected which is good news for sellers. What won’t be clear until April or May is whether the increased sales activity for the last 4 months is borrowed business from the spring or a true increase in buyer demand.
Under $250,000 inventories are falling and buyer activity is rising, causing a continued scramble to find a home to purchase. Although inventories are rising in the over $250,000 price categories, new contracts are rising faster than new listings, which is keeping the expected inventory jump this winter much less than anticipated.
For the economy in general, economists seem to be pessimistically optimistic. Economic activity is moving forward but at a slow enough pace that it is vulnerable to sudden change in any world activity. With stock prices lower, upper-end markets should slow as well and with stronger home equities, many more sellers will be able to sell, creating more inventory, and potentially slowing appreciation rates, if supply exceeds demand. All that said, it is also as likely that buyer demand still has some kick left in it, as first time home buyers and as many “boomerang” buyers jump back into the market (see chart below). So we will simply have to wait and see how the spring market unfolds. It does appear the real estate bulls vastly outnumber the bears in relation to the spring market and 2016 in general. So, with inventories low and demand still strong, those Sellers who may be waiting until spring to put their homes on the market should consider entering the market now.
To get a feel for how far values have recovered relative to peak values back in 2005/6, here is a chart showing Michigan in comparison to the rest of the country. It shows Michigan back to 92% of peak values, which when adding in the pay-down of mortgages during the past 10 years, puts most Michigan homeowners with more equity than that at the peak.
So far it looks like an early spring for both the weather and for real estate activity, so for both buyers and sellers, don’t be afraid to jump in now, the water might be still a bit chilly but it is heating up fast.
