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Detroit’s Rental Market Shows Decline

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The vacancy rate for apartments rose 16% in the fourth quarter, double what it was in the first quarter of 2020.  Pre-pandemic occupancy rates were at 92%. They currently hover in the mid-80s. Landlords are offering move-in deals and lower rental rates to moderate the decline. Anecdotal data suggests that renters left when their jobs pivoted to virtual work or with the closures of area businesses like restaurants, bars, and sports and music venues. Developers predict the downward trend is temporary.

Homebuyer Mistakes That Can Derail or Delay Closing

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Sometimes, first time home buyers don’t know what they don’t know.  Buyers need to be proactive at the start of the home buying process or common mistakes can stall their efforts. Some proactive steps include paying attention to the paperwork when it’s first received to check for errors, making sure the property assessment matches or is under your offer by doing your market research before submitting your offer and keeping a tight rein on big-ticket spending prior to closing.

Weekly Brief – February 15, 2021

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One of the biggest unknowns of the real estate market in 2021 is the impact of the lifting of COVD-19 forbearances, and the expiration of foreclosure moratoria.

The number of mortgage loans in forbearance is still quite high, at 5.38%. And the pace of borrowers exiting forbearance plans is the lowest since tracking began in the summer of 2020. This could mean that borrowers are unable to resume regular mortgage payments due to continuing weakness in the economy.

However, some commentators argue that an accelerating economic recovery due to the reduced impact of the COVID-19 pandemic will lead to borrowers being in a position to resume mortgage payments. If this is the case, the rate of foreclosures once moratoria are lifted could be lower than expected.

The other unknown variable is whether we will see further governmental relief targeted to the housing and mortgage industries. This could be an x-factor that upends the normal market forces.

Obviously, the rate of foreclosures will have a significant impact on home prices. Right now, home sales are increasing at a healthy rate. Perhaps even too quickly. Too many foreclosures, however, could shift that pendulum back to stagnant, or even decreasing home prices.

The ultimate outcome of the COVID-19 economic crisis and its impact on housing prices will be a trend to watch this summer and in 2022.

Home Buyers Face Bidding Wars

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Due to a record low supply of homes on the market, 56% of home buyers face bidding wars in their offers. This is an increase of 52% from December of 2020. More than half of the homes listed go under contract in less than two weeks. Lower interest rates are making expensive homes more affordable, but a low market supply forces homebuyers to act quickly.

Mortgage Forebearance Crashes to a Halt

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With 2.7 million Americans still taking advantage of mortgage forebearance programs as late as mid-January 2021, the reality of a housing crisis looms. The CARES Act programs will end at the end of March unless changes are made to the rules. Most of the programs have a 12-month cap. If no intervention occurs, 600,000 Americans will have to begin paying their mortgages again.

Washtenaw County Treasurer Halts Tax Foreclosures

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The Washtenaw county treasurer declared a moratorium on tax foreclosures for residential, occupied properties. Catherine McClary is amending the Financial Hardship Policy in an effort to assist small business owners, landlords, and homeowners. The moratorium will extend the tax foreclosure deadline to next year.

Home Builder Proposes 56-Home Luxury Subdivision

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Toll Brothers is proposing a 56-home luxury subdivision in northeast Ann Arbor. The intent is for the development to meet the needs of first time luxury home buyers, retirees, families, and working professionals. The subdivision proposal still needs to go before city staff for review and to Planning Commission and City Council for approval.

Northern Michigan Communities Report Strong Residential Sale Trends

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Median prices for residential real estate sales increased in Charlevoix, Otsego, Cheboygan and Emmet counties. The number of residential transactions also increased in three of those counties. The quick rebound in sales once pandemic restrictions eased is due to low supply and high demand and buyers’ desires to relocate to smaller communities. This trend could cause issues if it continues as working-class families may find themselves priced out of the housing market in Northern Michigan.

Detroit Demolition and Renovation Begins Soon

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With the passing of November’s Prop N, which approved the sale of $250 million bonds, demolishing and renovating is set to begin (again) in Detroit. The project starts with $175 million in bonds, and the city plans to sell another $75 million next year. 8,000 homes blighted homes will be destroyed, and another 8,000 salvageable homes will be renovated. The seven companies taking part in the project are headquartered in Detroit. Five of those companies are black-owned.

Overvalued Housing Markets: A New Nationwide Epidemic

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In a new report, Fitch Ratings estimates that home prices are 5.5% overvalued nationally. However, Michigan is one of the few states where housing is undervalued.

The demand for housing far exceeds the available inventory nationwide. This trend is due, in part, to homeowners’ reluctance to list homes during the pandemic. Metro areas around the United States are overvalued by more than 10%. Las Vegas (28%) and Dallas-Fort Worth (20.24%) are prime examples. Idaho (30-34%) is the highest overvalued state on the list, with Nevada coming in a close second.