Out of the Slump?
Out of the Slump?
Second-quarter signs suggest the worst might be over
By Al Parker
REGION – The uptick is on. After three grueling years of plummeting, then shaky home sale prices (both median and average), and volume sold, the region is looking poised for a comeback.
The proof? Small, but mostly steady growth in the first two quarters of 2011. Residential units in the Traverse City region are selling for slightly higher prices this year than during the same period last year. For the first six months of the year, there were 932 residential units sold in the five-county area, which includes Grand Traverse, Antrim, Benzie, Kalkaska and Leelanau counties.
That volume is down from the same time period in 2010 when 983 units sold. But the units that are selling are generating a slightly higher average selling price ($171,102 to $169,156) and median sale price ($129,950 to 127,000).
The numbers promising – at least at some levels, says Brad Platt, co-owner of Century 21 Northland.
"I do feel that we have bottomed out. The only debatable point there is which price point. Under $200,000 is a hot price point, and the inventory there is much more limited than, say, the $300,000 to $400,000 price point. In my opinion, the worst is certainly behind us."
However, Platt warns that the positive trend won't be without some negatives in the months to come. "We will have a lot of foreclosures move through the market this year. Fortunately, they don't last long on the market."
That's for good reason, says Traverse City realtor Jack Lane of Real Estate One: "Traverse City continues to be a sought after place to live. When the decline is officially over, we'll go back to being a robust market. In comparison to other Midwest markets, we shine."
Traverse City realtor Meagan Luce of Century 21 Northland is hopeful but wary. "In my opinion, the median and average sale prices are up slightly because there are less distressed properties on the market than there were a year ago," she says. "Distressed properties, whether they are bank-owned, short sale, foreclosure or auction properties invariably drive prices down.
According to Luce, in the first two quarters of last year 35 percent of the sales in the region were distressed sales, compared to only 28 percent this year. Also, she notes, last year's sales figures were boosted by a homebuyer tax credit that expired in May, 2010.
"Keeping that in mind, I think that the fact that the number of sales last year and the number of sales from this year are so close is certainly a positive indication of stabilization in our market," she adds.
So what do realtors see for the rest of the year?
"We are very busy and seeing a lot of pent up buyers looking for a great deal before prices start to inch up and mortgage rates," says Elk Rapids realtor Stephen Karas of Exit Northern Shores. "Most of my agents, including myself, have been showing homes very consistently for the past few months."
According to Lane, the underlying fundamentals of the area are growing stronger – population inflow vs. outflow, supply and demand, employment, wages and interest rates. "If our 'feeder areas' like Detroit, Chicago, Indianapolis, etc., continue to improve, the appetite for northern Michigan real estate will rebound," he predicts.
Is it safe to say we are rebounding now?
"In my opinion, we are at the end of the housing slump. However, I think the climb of home sale prices is going to be slow," says Luce. "We are going to have a new 'housing market norm,' and I don't believe we may ever see the over-inflated prices we saw at the height of the housing market bubble."
Karas feels warily optimistic about ending the housing market slump. "I am cautious that we are finally starting to see light at the end of the tunnel of the slump," he says. "It might not be completely over, but we're definitely a lot closer than in recent years. Our growth in population in our five-county area is helping us inch out much quicker than other parts of the state and country."
Lane notes that consumer confidence is crucial to ending the slump. "For the past four years, we've seen a lot of false starts in consumer confidence," he says. "When I have four deals headed to closing in the coming week, and '60 Minutes' does a segment on how terrible the real estate decline is, I take Maalox and wrist restraints with me to the office the next morning."
According to the Traverse Area Association of Realtors, for all of 2010, there were 2,045 residential units sold with an average price of $185,246 and a median price of $137,500. Those homes were on the market for an average of 192 days, just over six months.
There were 1,087 sales in Grand Traverse County followed by 262 in Antrim, 247 in Leelanau, 231 in Kalkaska and 218 in Benzie.
So what type of homes are selling or not selling?
"We have been seeing a lot of waterfront buyers this summer as always," Karas says. "But even more-so recently."
Like Platt, most of Luce's sales have been in the $200,000 to $300,000 range. "Almost 30 percent of my buyers this year have purchased second homes and I currently have several second home sales pending."
According to Lane, about 80 percent of the sales in this region are under $200,000. "Thanks to interest rates, owning a house in this range is often cheaper than renting…and there are still programs with 0-3 percent down to help with those sales, so that area's strong," he says. "Also the family move-up market is pretty strong. There's been a move to downtowns going on for the past 10 years – but it's very strong now."
The weak segment of the market is the higher priced homes at $500,000 or more, according to Lane. To sell those homes, they have to be in top condition and priced aggressively against the competition.
"People move because life happens to them – babies come, empty nesters, retirement, death, divorce or even more lively events," Lane notes. "In the early years of this decline, sellers didn't 'get it' and buyers thought they wielded a preposterously big hammer. Today, both sides are coming to grips with where the new value levels are and are coming back into the market because, well, life has been happening to them."
Happily, says Platt, compared to the rest of the state, most of the action is happening here - and have a good chance to continue in that direction.
"This is arguably the best real estate market in the state of Michigan," he says. "Based on the amount of cash deals we are seeing coming out of state – Texas, California, Washington D.C., and Florida, for example) it's obvious that the word is spreading.
"People that are sitting on cash are typically very well educated financially and have the patience to wait till the time is right," he adds. "The only X factor right now is the politicians in Washington and Wall Street. If things move forward positively on those two fronts and consumer confidence has an uptick, our markets may accelerate sooner than expected. Broader access to jumbo loans will also help things along. This is actually a very exciting time in real estate." BN