Home sales are dropping in Metro Detroit, but it’s not because there are fewer people interested in buying.
There just aren’t enough houses to go around, real estate experts say.
Average home sales in the Detroit metro region have declined by 8.7 percent from last year, according to a March report from RE/MAX of Southeastern Michigan. At the same time, the median home sale price climbed by 10.7 percent from March 2021. Pending sales have meanwhile increased by 2.3 percent from a year ago, the report said.
In other words, demand is still outstripping supply just as it is for many material goods at a time of continued supply chain disruptions, 40-year-high inflation and shortages for raw materials and goods even as the Federal Reserve cranks up interest rates.
Despite raising interest rates from between 0.25 percent and 0.5 percent — the first increase the Fed made since 2018 — people who can afford it still are snatching up homes before rates rise even higher or before the home they were eyeing is gobbled up by someone else.
The market conditions have “buyers who were maybe sitting on the fence get off of that fence and into the market,” said Jeanette Schneider, president of the Troy-based chapter of real estate franchise RE/MAX.
St. Louis Federal Reserve Bank President James Bullard recently made the case for ratcheting up interest rates to an even higher 3.5 percent to dampen inflation, Reuters reported.
But for the time being at least, appetite for property is still high. Inflation and rising interest rates are signaling to prospective Metro Detroit homeowners that the time to buy is now, Schneider said.
While that’s the case across the Metro Detroit region, nowhere is that clearer than in Oakland and Livingston counties, the March RE/MAX report shows.
Although home sales have declined by 9.2 percent in Oakland County from March 2021 to March 2022, the number of days real estate stays on the market also dropped by an average of 24.3 percent, the report said.
“All across Oakland County we are seeing houses be put up and sold quickly because (it’s) a very sought-after place to live in, and Troy is one of the most sought-after cities to live in as well,” said Tara Tomcsik-Husak, president and CEO of the Troy Chamber of Commerce.
Troy, the largest city in Oakland County, with almost 84,000 people, is known for having good school systems, Tomcsik-Husak said. That helps drive home sales. And so does the city’s proximity to Detroit combined with “an influx” of international buyers moving for work. Troy is home to Altair Engineering, Flagstar Bank, Meritor and other engineering companies.
In nearby Livingston County, the draw is somewhat different. Being a relatively rural area, many people are drawn to Livingston as a place to buy a more spacious home with a larger yard and a little more space between them and their neighbors, said Brandon Denby, Livingston County’s register of deeds. The county also happens to have a fairly low tax base, Denby said, coupled with a close commute to Lansing, Ann Arbor or Detroit.
The county’s problem, likewise, is that there aren’t enough homes for interested buyers. And when people do buy, they tend to hang onto their property, Denby said.
According to the March RE/MAX report, Livingston County saw the largest year-over-year drop in home sales, with a 12.6 percent decline. At the same time, the median home price shot up by 17.7 percent, another signal that desire for property in the area is staying high.
“It really comes down to supply and demand, Denby said.
In the first quarter of 2022, Livingston County had 718 new listings for real estate. That was the same number of listings as last year. But this year, about 535 homes listed for sale were in fact sold. Six hundred and thirty one homes were meanwhile pending sale.
“My belief is some of these small towns are going to start to make a little bit of a comeback,” Denby said.
In Fowlerville, for example, The Michigan Strategic Fund recently approved a $1.45 million loan to help Cooke Capital LLC build a new $3.7 million apartment and commercial building, the Livingston Daily reported.
But how much development and sales can keep pace remains to be seen. From the Fed’s standpoint, slowing down growth with higher interest rates is the key weapon against inflation.
RE/MAX’s Schneider said she anticipates increasing interest could eventually chill the buyers market. Tamping down a hot economy decreases growth and also slows the rate at which the dollar loses value.
“We are attentive to the risks of further upward pressure on inflation and inflation expectations,” Powell said at a news conference last week, CNBC reported. “The committee is determined to take the measures necessary to restore price stability. The U.S. economy is very strong and well-positioned to handle tighter monetary policy.”