Good News on the housing front & just in time for the Holidays in Grand Rapids, MI. In a market which has seen the worst of times in recent years, arecent article in the Grand Rapids Press heralding an increase of 35 PERCENT in home sales over 2008 was more than welcome…local professionals are ecstatic!
It’s been great to touch base with so many agents who tell me they are busy again. We sold most of our inventory within the last couple of months and are “re-stocking the shelves.” The ‘HOT PRICE’ range is $100,000 ~ $140,000.
This has helped to increase the average Home Sale Price to $109, 826 which was 3.2 percent higher than the same period in 2008. But…year to date, home prices are still down by 15.1% over 2008, a number which can be attributed to the on-going issues with foreclosures and short sales in the local market.
Other noteworthy improvements in the Grand Rapids, MI market include the decreased number of Short Sales and Foreclosures in September and the possibility of the extension of the Home Buyer tax credit which served to enable over 200,000 new jobs last year according to a quote by Jerry Howard, President of the National Home Builders Association in this article.
Now, all this good news does not necessarily indicate we are totally OK. There are still huge inventory of foreclosed properties which have not yet been placed on the market and joblessness continues to be a scourge on the Michigan economy. As we near the end of the year, what happens in these two areas as well as the credit markets will send strong signals about the on-going journey of recovery.
If You’re a Homeowner…
These past several months have created some glimmers of hope. Inventory levels have declined and housing prices have inched up. More importantly, Sales have increased substantially. One of the critical assessments that homeowners who need to sell a home can make is the OPPORTUNITY COSTS CALCULATION. It’s a fairly simple calculation which aids in determining how long you should hold on to your home, if this is a time to sell your home and what your carrying costs without a Sale actually are.
An Example...Calculating the OPPORTUNITY COST
For example, let’s say your home is valued at $140,000. You’ve been in the home for less than a decade and you currently owe approximately $120,000. The OPPORTUNITY COST is determined by taking approximately 10% of your current expected Sales Price and dividing it by 12. In this case:
140,000 X .10 = 14,000
14,000 / 12 = $1,167 = OPPORTUNITY COST per month
That number $1, 167 is approximately what it will cost you EACH MONTH if home prices DECLINE another 10% over the next 12 months. This year, home prices declined approximately 15% overall from last year, and since 2006, there has been a 30% DECLINE nationwide. So an improvement to a decline of only 10% is not unreasonable. You can manipulate the numbers to see a range of options, but most experts seem to think that we can expect declines within the neighborhood of 6% – 10% in home prices over the next year.
An Example…Calculating Your Specific OVER-PRICING PENALTY
OPPORTUNITY COST + CURRENT MORTGAGE PAYMENT = OVER-PRICING PENALTY
For example: $1,167 + $1,100( est. Mortgage Payment) = $2, 267 (OVER-PRICING PENALTY PER MONTH)
OR…$27,204 PER YEAR
Adding the OPPORTUNITY COST to your current mortgage payment gives you a unique perspective of what it will actually be costing you to OVER-PRICE your house in today’s market. If you’d like a detailed report about housing & pricing in your specific Grand Rapids, MI neighborhood, please give us a call at 616-791-0511 or e-mail us at firstname.lastname@example.org.