Happy New Year! It’s hard to believe that the year is 2020. Just as “time waits for no man,” neither does the real estate market. Fortunately for homeowners in Michigan, we continue to be in one of the best markets in the Midwest, prices continue to climb, appreciation continues to go up, and we live in the Midwest, which is currently one of the most affordable regions in the nation.
Affordability may be changing with an eminent shortage of inventory in the coming years. According to a Michigan state housing affordability study reported in the Detroit News, predicts that by 2045, the shortage will reach “near crisis level.”
Moving on up
For now, home prices will show limited growth, a conservative rate of 2.5-3.0%. In some areas, the low inventory of homes will have more of a significant affect on the percentage of growth.
This is good news for those looking to sell this year but you might find that holding out as long as possible may yield higher returns (of course, then buying a different home may prove to be more difficult and costly). Entry level homes are currently easier to find, whereas if you are the owner of a mid-range family home with 3+ bedrooms and 2+ bathrooms at the median price of 290k, your home is more desirable because of lower inventory. Owners of higher-end, 400k+ homes will have a more difficult time selling and getting a larger profit margin and will want to give careful consideration to the market in the area to avoid overpricing.
According to Forbes, there are a few reasons for the lack of homes on the market. One of them is that many baby boomers are staying put in their homes for longer. Likewise, people are healthier and living longer. Gen Xers are staying put also since retirement is still a long way off. On the flipside, the mid 20s-30s millennials are looking to upgrade and expand away from their smaller starter homes, but a lack of inventory is making it difficult.
Another reason many may be staying put is that their homes are continuing to appreciate. As for Michigan, according to NeighborhoodScout, a comprehensive database of hyper-local real estate data, the appreciation rates on homes continue to grow every year and are up another 1% in quarters 2 and 3 of 2019 and up 6.9% in the last year.
While new home construction is expected to grow somewhat, it is only growing at a rate of 6% according to Realtor.com which isn’t enough to meet the growing demand. Likewise, much of the construction is for smaller, start-up homes so those in the market for an upgrade are finding it much more difficult to find the right real estate.
Tips for buyers
On the contrary, if you are buyer, 2020 will be much more difficult for you with the smaller supply, high demand, and conservative lending practices. This sounds like bad news for you buyers out there, but it doesn’t have to be, it just requires more patience and adaptability. One of the major positives in 2020 for home buyers according to The Motley Fool is that the mortgage rates are predicted to down this year. Some economists think they might reach a record 3.3% due to an economic downturn predicated by the trade wars; be aware that more conservative experts believe they may stay the same around 3.73% for a 30-year fixed mortgage.
Because of low housing inventories in many areas, price inflation will likely occur along with bidding wars in trending areas. You will have to be patient and persistent in order to find the right home in your price range.
You will need to be prepared to adjust your wish list and potentially look at homes that might not be turnkey ready. If you can find a home in the location that you prefer and the price is right, considering a remodel might be a great option.
No matter what, whether staying or going, buying or selling, utilize your real estate agent! Some people try to do all the hunting and research on their own, but no one can find the right house, in the right location, for the right price like a real estate agent. Likewise, those great internet sites don’t know the market research for selling your home like an agent. Enlist his/her help to weed through all the predictions and data to make sure that your biggest purchase/sale is positive and predictable.