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Local 1Q Housing Very Encouraging

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Poised for the busiest selling season of the year, local Realtors are reflecting on the “very encouraging pace in both number of houses sold and total dollar volume in sales” during the first quarter of the new year. The housing market in Southwest Michigan has enjoyed month-over-month increase in the number of houses sold, while prices have been fluctuating.

Gary Walter is Executive Vice President of the Southwestern Michigan Association of Realtors. His major concern is the continuing lack of inventory to showcase to available buyers. Walter tells us, “The real issue for our local market is the continued decline in inventory for buyers.” He adds, “Moving into the peak selling season for the year, hopefully, the inventory levels will increase.”

Walter says, “At the end of the first quarter, the number of houses sold increased 12-percent over the first quarter in 2015 (624 vs. 559). There were just 2 houses difference between the numbers of houses sold in March 2016 versus March 2015 (243 vs. 245).” Walter says contributing to the first quarter results, housing sales in January were up 30-percent, and in February sales were up 14-percent over the same months in 2015. The number of houses sold in the first quarter peaked in 2006 at 691 and sales in 2016 landed in second place in the year-to-year comparison.”

The total dollar volume for the first quarter was up 13-percent ($108,631,937 vs. $96,329,483). Again, the first quarter results were boosted by double digit total dollar volume increases in January and February.  In March, the total dollar volume increased 3-percent ($40,717,803 vs. $39,443,923).

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With bouncing average selling prices, the average selling price at the end of the first quarter settled to within 1-percent of 2015 ($174,089 vs. $172,325). In January, the average selling price was $200,335, dropped to $156,965 in February and rebounded to $167,562 in March. In March 2015, the average selling price was $160,996 which put the average selling price in March 2016 up 4-percent.

The median selling prices in the first quarter also fluctuated, however, the median selling price at the end of the first quarter in 2016 was up 10-percent over the first quarter in 2015 ($121,000 vs. $109,900). In January, the median selling price was $134,000 which dropped to $109,950 in February and rebounded to $125,900 in March. The median selling price in March 2016 increased 9-percent from the March 2015 median selling price of $115,500. The year-to-date median selling price in 2016 was the highest for any year going back to 2006.

The median price is the price at which 50% of the homes sold were above that price and 50% were below.

The housing inventory at the end of the first quarter was 7.1-months supply. Comparing March 2016 to March 2015 there was a 3-percent decline in inventory (1,991 vs. 2,046).

The number of bank-owned or foreclosed homes as a percentage of all transactions in our market increased to 20-percent in March. In February the number of transactions was 14-percent and 18-percent in January.  The percentage in March was the lowest percentage in the month of March since 2009 when we peaked at 60-percent.  The highest percentage was in February 2009 at 75-percent of all transactions and the lowest percentage was 9-percent reached in July and October of 2015.

Locally, the mortgage rate increased to 3.84 from 3.76-percent in February.  Last year in March, the rate was at 3.91.  Nationally, the Freddie Mac mortgage rate in March was 3.67-percent compared to 3.66-percent in February for a 30-year conventional mortgage.

According to the National Association of Realtors, existing-home sales, bolstered by big gains in the Northeast and Midwest, bounced back in March and remained slightly up from a year ago.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, jumped 5.1-percent to a seasonally adjusted annual rate of 5.33 million in March from a downwardly revised 5.07 million in February. Sales rose in all four major regions last month and are up modestly (1.5-percent) from March 2015.

Lawrence Yun is Chief Economist for the National Association of Realtors. He says home sales had a nice rebound in March following February’s uncharacteristically large decline. He points out that “Closings came back in force last month as a greater number of buyers – mostly in the Northeast and Midwest – overcame depressed inventory levels and steady price growth to close on a home.” He adds, “Buyer demand remains sturdy in most areas this spring and the mid-priced market is doing quite well. However, sales are softer both at the very low and very high ends of the market because of supply limitations and affordability pressures.”

The median existing-home price for all housing types in March was $222,700, up 5.7-percent from March 2015 ($210,700). March’s price increase marks the 49th consecutive month of year-over-year gains.

Yun tells us, “The choppiness in sales activity so far this year is directly related to the unevenness in the rate of new listings coming onto the market to replace what is, for the most part, being sold rather quickly.” He quickly notes, “Additionally, a segment of would-be buyers at the upper end of the market appear to have been spooked by January’s stock market correction.”

Regionally, existing-home sales in the Midwest jumped 9.8-percent to an annual rate of 1.23 million in March, and are now 0.8-percent above March 2015. The median price in the Midwest was $174,800, up 7.0-percent from a year ago.

The share of first-time buyers was 30-percent in March, unchanged both from February and a year ago. First-time buyers in all of 2015 also represented an average of 30-percent.

Yun reminds us that, “With rents steadily rising and average fixed rates well below 4-percent, qualified first-time buyers should be more active participants than what they are right now.” However, he notes, “Unfortunately, the same underlying deterrents impacting their ability to buy haven’t subsided so far in 2016. Affordability and the low availability of starter homes is still a major barrier for them in most markets.”

Tom Salamone is President of the National Association of Realtors. He is also broker-owner of Real Estate II Inc. in Coral Springs, Florida. He says despite modest improvements, mortgage credit is still difficult to come by for many first-time buyers and middle-income households. He argues, “Reducing the Federal Housing Administration’s annual mortgage insurance premium rate and repealing its life-of-loan policy requirement would certainly expand options for more of these buyers.” He says, “These changes would save consumers money and further strengthen the FHA’s program by enticing more credit-worthy borrowers to seek out FHA-insured loans.”

All-cash sales were 25-percent of transactions in March (unchanged from February) and are up from 24-percent a year ago. Individual investors, who account for many cash sales, purchased 14-percent of homes in March, down from 18-percent in February and unchanged from a year ago. Sixty-six-percent of investors paid cash in March.

Nationally, the total housing inventory at the end of March increased 5.9-percent to 1.98 million existing homes available for sale, but is still 1.5-percent lower than a year ago (2.01 million). Unsold inventory is at a 4.5-month supply at the current sales pace, up from 4.4 months in February.

The numbers reported for local sales include residential property in Berrien, Cass and the westerly 2/3 of Van Buren counties and should not be used to determine the market value of any individual property.  If you want to know the market value of your property, please contact your local Realtor.

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