Residential properties are flying off the market in Southeast Michigan. The average time a home spends on the market dropped from 66 days in March of 2020 to 38 days last month. Properties are moving so fast that open houses aren’t necessary. First time home buyers and those lacking a hefty down payment are struggling against the competitive market.
A trio of developers are planning 65 townhomes in Detroit’s Woodbridge neighborhood. The $18.5 million development is at 3700 Trumbull St. between Selden and Brainard streets. The joint venture is a collaboration between Detroit-based Tekton Development, Detroit-based Civic Companies, and Bloomfield Hills-based Robertson Bros. The development would have 48 one-bedroom townhomes with about 1,300 square feet and 16 two-bedroom townhomes with about 1,600 square feet. Construction should begin in the fall and be completed within three years.
Dead malls are the ghost of retail pasts, but they’re being repurposed in creative ways. Amazon is using old mall space as new fulfillment centers. One dead mall has become the new headquarters for Fortnite creator Epic Games. To survive, malls are bringing in non-traditional tenants like bowling alleys, gyms, and grocery stores. Turnover and vacancy are high in mall real estate right now.
Supply chain hit hard by COVID-19 pandemic drives up house prices
Abandoned malls are getting second lives
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Lumber frenzy drives up home prices as suppliers can’t keep up
Former Scripps Mansion site in Woodbridge envisioned for 65 townhomes
Detroit greenway projects blaze trails for recreation, tourism
New downtown Detroit Meijer store will have a Mudgie’s Deli and more
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Perrigo breaks ground on new Grand Rapids headquarters
Metro Detroit home sales pace: on fire
Want that house? Get your bid in yesterday
Supply chain hit hard by COVID-19 pandemic drives up house prices
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Single-family starter homes harder to find, afford in metro Detroit
Boji finalizes purchase of former Linda Dresner building in downtown Birmingham
A new lease signed, Volkswagen’s Auburn Hills building put up for sale
Drought to close four locations, expand wholesale operation
Developer pitches homes, event venue, tasting room, mill for Erwin Orchards land in Lyon
Home sales in region hit hectic pace in March as showings, sales prices jump
Car wash planned for long vacant Westland corner along Ford Road
Michigan to trim offices in Lansing, whose downtown struggles amid pandemic
Family Fare property sold to Gates Family Real Estate Holdings in February
With apologies to Dickens, 2021 is the best of times for residential sellers, and the worst of times for retail landlords. There are several stories this week that emphasize this divergence in the real estate market.
First, the good news. The residential market in Michigan is still thriving. It is still an incredibly strong seller’s market. This week saw multiple stories about the rising prices for residential properties. There are, however, some clouds on the horizon. Because prices in some areas are rising so quickly, the “appraisal gap” is becoming an issue. The appraisal gap arises when the home does not appraise for the purchase price. This generally means the buyer will have to come up with more cash for a down payment, as the lender will only finance the appraised value. If this were to continue in the long term, this issue could prevent younger, less wealthy buyers from purchasing homes. The second cloud on the horizon is that because inventory remains constrained, the market volume could remain artificially low.
Now, the bad news. Stories about the pummeling retailers are taking as a result of the COVID-19 pandemic as well as the systemic shift to online retailing continues to dominate. One analyst predicts 80,000 retail locations, or 9% of all retail locations, will close in the next five years, for an annual average of 16,000 closures per year. These closures will include major anchor retailers. This compares with the previous high of 9,832 per year. As I have noted previously, malls are taking the brunt of the damage, with the increase in vacancies hitting an all-time high in the past year. Some analysts believe a quarter of malls will close in the next five years.
Millennials make up the largest population of homebuyers, but many are having a hard time finding homes within their budgets. In many Southeast Michigan areas, the median home listing price has jumped by 15%-19% when compared to previous years. Buyers are approaching the home buying experience like an auction, some even willing to skip home appraisals and inspections. In Michigan, homes are moving 34% faster with only 44 days on the market.
Texas courts are indicating that they will not enforce a federal order that would stop evictions during the coronavirus pandemic. While Congress has approved billions of dollars to help people pay their rent to avoid eviction, many of those tenants have yet to receive any of that money. The Texas Supreme Court did not extend its emergency order, and the Texas Justice Court Training Center issued guidance essentially telling judges it’s not their job to enforce the CDC’s order. Legal aid attorneys are gravely concerned about the tens of thousands (and possibly more) who will be left homeless.
Even with retail businesses taking advantage of cheaper rents and ample space, UBS predicts the upward trend will be short-lived. They estimate that 80,000 retail stores across the country will be closed by 2026. Online shopping had contributed to the downturn for retail storefronts pre-pandemic. Stimulus dollars and consumers’ focus shifting to goods over services has recently bolstered retail, with store openings outpacing store closings for the first time in years. UBS predicts that retailers that sell office supplies, sporting goods, clothing and accessories will be the hardest hit.
The vacancy rate for regional malls in the United States hit a record 11.4% in the first quarter of 2021 from 10.5% in the fourth quarter of 2020, according to Moody’s Analytics’ commercial real estate division. Shopping traffic to enclosed malls has been steadily decreasing for years due to Americans spending more online. In it’s latest quarterly report, Moody’s finds that other commercial real estate sectors are showing better progress, retail is still in crisis.
With the quick turn around in the home market, buyers are entering into bidding wars to secure their dream homes. Homes are selling above appraisal values creating a gap for buyers to make up. Many are tapping into retirement accounts or accepting loans from family in order to purchase their homes. With many sellers waiting in line to purchase one property, buyers must be prepared to come to the table with a substantial amount of money.
