Year End Report ~ How Did the Grand Rapids Real Estate Market Fare in 2011?

As the last embers of 2011 burn slowly into recent history, it’s always instructive to take a look back at where we’ve been with regards to the real estate market in the greater Grand Rapids metropolis.  The numbers released by the Grand Rapids Association of REALTORS® show improvements in a number of areas.  Here are some of the highlights:

1.  Inventory Levels reduce 25%

With over 20,000+ listings for 2010, the numbers are significantly lower at 15,000+ listings Year to Date for 2011.  There was a reduction in the number of foreclosure listings driven in part by some of the legal challenges that banks faced about foreclosure proceedings and the MERS ruling.

2.  Dollar Volume and Number of Homes Sold/Closed Increases!

There was a 3% increase in the number of homes sold in 2011 vs 2010 and a 6.1% increase in the dollar volume.  This trend seems to indicate a stabilization of the marketplace over the past twelve months.  If the overall economic situation with regards to jobs continues to improve even marginally, we can expect to see continued modest improvements in this area.

3.  Overall Average Home Sale Price increases 3% this Year.

With so much dire economic news, it’s sometimes difficult to hear the good news hidden within the chaos.  Home sale prices have increased in spite of the foreclosure and short sale transactions which are still very much a part of the real estate landscape.  This was accomplished within a context which included over 1400 homes that sold for less than $40,000.  The increase was fueled at least in part by 88 homes which have Sold/Closed so far above $500,000.

Click this link to view the raw data release courtesy of the Grand Rapids Association of REALTORS®

Forecast Prediction of Lower Foreclosure Starts in West Michigan Proves Accurate!

A forecast report by CoreLogic released by the National Association of REALTORS for the Grand Rapids/West Michigan area at the end of August predicted a decline in foreclosure rates in the last half of the year.  So far, this prediction has held true.  As the charts below indicate, foreclosures have dropped in the Greater Grand Rapids area as a percentage of sales volume and the absolute numbers continue to hold steady with modest declines.

This is a good sign and indicator that the steady rise of home prices will continue as inventory levels remain low.  In a related survey, the National Association of REALTORS statistical survey also indicated a drop in  the 60 and 90 day delinquency rates.   Business Week magazine reported a Bloomberg study in which Michigan is said to be recovering from the recession at the second highest rate in the nation, second only to North Dakota where the boon in economic recovery has been fueled in part by the discovery of oil.

If you are currently considering selling your home and may need to sell your home by Short Sale to avoid Foreclosure proceedings, please contact us for a confidential interview to review the options which may be available for you.

*Data Sources:  National Association of REALTORS, Grand Rapids Association of REALTORS

Pent Up Demand…Is Black Friday Frenzy a Mixed Bag?

Shopping

Over the past several years, we’ve watched consumers tighten their belts; boosting their saving rates and working to clean up their credit.  With the economic crisis that has blanketed the nation over the past several years, reforming our spending and saving habits is appropriate and healthy.

In light of this reality, the economic data within the past thirty days is particularly insightful.  It is most accurately reflected in what we witnessed during the recent Thanksgiving weekend.

Sales were up 16% over the same period last year; with the average shopper spending $398.62 as opposed to $365.34 last year. What’s most interesting is the 44% indicate that they spent this money on themselves!  That’s right…me, myself and I!  This was not shopping for Christmas presents.  This was about satisfying the driving craving to buy something…anything.  To feel good again.  Consumers seem to be indicating that they’re ready to move on with their lives.  They’ve adjusted to the ‘new normal’…at least for now.

What Does Black Friday Frenzy Have to Do With Real Estate?

So, what does this have to do with real estate?  Potentially a lot.  I believe there is a pent up demand to enter into the housing market again.  Just like retailers used deep discounts to lure shoppers into the marketplace for deals which lead to other purchases, real estate is currently deeply discounted across many parts of the country.  Some heavy hit areas like Las Vegas and Florida are already seeing an upward trend in sales from investors. West Michigan inventory levels are the lowest since 2003.

But unlike, the frenzy that fueled sky rocketing prices in the period between 1998 – 2005, this market is being driven by a market which is awash with real estate at discounted pricing of 25% – 30% in many areas and a fairly substantial level of current inventory. ( although inventory levels are currently declining in many areas of West Michigan)  In addition, today’s borrower is healthier.  We are witnessing an increase in ‘Cash’ transactions and because lending standards have become so stringent, borrowers who do qualify for mortgages are considerable less likely to be candidates for default in the future.

 On the national level, the Midwest region led the nation in the rise in Pending Sales during the month of October.  According to this article in US News and World Report, Jed Kolko, the Chief Economist at Trulia is quoted as saying,

“This is a forward-looking indicator of what’s likely to happen with completed home sales,  It points to a bump in seasonally adjusted home sales for the rest of the year.”

However, this ‘bright spot’ is tempered by another sobering reality.  During the same period of time, the number of transactions which failed to close also jumped to the highest levels seen in quite some time.  Contract failures climbed to 33% from 18% during the previous month of September.  The main reason for the volatility seems to be issues with financing, as many contracts fell apart because loan commitments were denied after the initial acceptance/negotiation phase of the transaction.

This poses a real dilemma. A mixed bag of sorts… On the one hand, there is pent up demand.  On the opposite hand, banks remain skittish in their lending habits, sometimes denying loans for the merest perceived infraction.  During the most recent NAR convention, Economist Lawrence Yun indicated that if lending standards simply went back to pre-crisis mode, there would be up to a 15% -20% increase in activity almost immediately.  Yet, consumers are indicating a willingness to look again as renting rates have increased 6% overall while the cost of owning a home has decrease 2.6%.

Photo credit courtesy of Gandhiji’s photostream on Flickr via Creative Commons license.