The median sales price of homes and condominiums in Metro Detroit hit an eight-year high of $165,000 in May, while total sales of residential properties jumped by 8 percent compared with a year ago, according to data by Farmington Hills-based Realcomp II Ltd.
The sales figures continue to show the new normal in the Metro Detroit housing market: prices steadily climbing as inventory remains far below pre-recession levels.
The result is that home buyers often find themselves in bidding wars over properties, said Patrick Carolan, a realtor for Coldwell Banker Weir Manuel in Birmingham.
“It is competitive, lots of overbids, lots of multiple offer situations,” Carolan said.
Like many realtors, Carolan said it’s too hard to predict more inventory will come online.
“If it was going to change this year, it would have probably already happened,” he said. “It’s my sense, many people are not underwater anymore but still not ready to make a move. But things continue to improve.”
The region’s median sales price of $165,000 hasn’t been that high since at least January 2009, when Realcomp began to collect monthly data for the region of Wayne, Oakland, Macomb and Livingston counties. Metro Detroit came close to this price last July when the median price hit $164,000.
At the bleakest point of the mortgage crisis — when foreclosures flooded the market with 39,500 properties for sale — Metro Detroit’s median price sank to $38,000 in March 2009, according to Realcomp.
For the past several years, scarce inventory has plagued the market. Last month, there were 13,363 properties for sale — a 17.1 percent drop from May 2015. Sales were up last month to 4,925, compared with 4,561 in May 2015, an 8 percent improvement.
■In Oakland County, May’s median price was $208,000, up 6.3 percent from May 2015. Sales increased to 1,845, for a 7.5 percent gain. Inventory shrank by 11.9 percent, to 5,190 properties.
■In Macomb County, May’s median price was $140,000, up 3.8 percent from May 2015. Sales climbed to 1,101, an 8.4 percent improvement, but inventory plunged to 2,170, down 29.2 percent.
■In Wayne County, May’s median price was $118,000, up 3.1 percent from May 2015. The number of sales increased by 9.8 percent, to 1,685. Inventory shrank by 15.3 percent, down to 5,123.
■In Livingston County, May’s median price was $216,750, up less than 1 percent from May 2015. The number of sales essentially was flat at 294, but inventory shrank by 20.5 percent, to 875 properties.
Inventory remains low for a number of reasons. The number of new homes built in southeast Michigan since the Great Recession has been far below the 40-year-average of about 10,000 new housing permits a year. The Home Builders Association of Southeastern Michigan predicts a little more than 3,000 new housing permits from March to August this year.
Another reason for low inventory is that many current homeowners will lose money if they sell. Data shows that about 21 percent of Metro Detroit home owners are underwater — meaning the amount owed on their mortgages is higher than the value of their home — though that percentage has been steadily dropping for three years.
In Detroit, most sales are still made in cash, because the ability to get a mortgage is limited.
The Metro Detroit housing market mirrors national trends.
“Americans are concerned about this widening inequality” of wealth, Lawrence Yun, chief economist of National Association of Realtors, said as part of a recent survey. “One of the contributors is that the home ownership rate is at a 50-year low. For most middle-class families, they have always perceived housing equity as their main source of wealth building. But fewer people are participating in home ownership, particularly among the younger generation, and that is tied to student debt, at least according to our survey.”
Earlier this year, Detroit launched a $40 million program that aims to create 1,000 new home mortgages in the city. With Detroit Home Mortgage, qualifying borrowers will get a first mortgage for the appraised value of the home, and a second mortgage up to $75,000 to fill the gap between the appraised value and sale price, and/or the cost of renovations. The website DetroitHomeMortgage.org launched earlier this year.
Detroit Mayor Duggan said earlier this year only 500 home mortgages were granted out of 3,000 homes sold in Detroit last year. Other data, including reports from the real estate research firm RealtyTrac, shows about 2,000 mortgages were approved last year for single-family homes and condominiums. But no one denies that getting a mortgage in Detroit is very difficult.
“It is absolutely depressing the property values and the comeback of our city,” Duggan said during the launch of the Detroit mortgage program. “The reason has nothing to do with credit scores and income. It is 100 percent a problem with appraisals.”
Appraisals — the independent evaluation of what a home is worth — have become a major stumbling block because of the high number of foreclosures. That means appraisals are often much lower than the sale prices, and that gap kills any chance for buyers to get a mortgage without increasing the size of their down payment. Federal law doesn’t allow banks to approve mortgages much higher than the appraised value of a home.