Pent-up demand, minimal inventory spur bidding wars for Detroit area homes
The McDevitts of Roseville fell in love with a home — again. The well-cared-for split-level in West Bloomfield Township offered space for entertaining and had lake access down the street.
"After we walked through for the first time, there were two other couples there waiting their turn to walk through with their Realtor," said Kim McDevitt, a 39-year-old manager for a residential design and build company. "Here was the competition.
"I think I said something like, 'This house is terrible. You don't want it.' I was thinking, 'This is my house. Go away.'"
Mike and Kim McDevitt put in an offer of $18,000 above the $249,500 asking price. This time around, they won.
Like many homebuyers in Metro Detroit, the McDevitts have faced the frustrations of minimal inventory and stiff competition since the state lifted pandemic home-showing restrictions and mortgage rates hit record lows. Bidding wars are leading to offers of $20,000, $30,000 and $40,000 over asking, agents say.
“It’s insane,” said Susan Kelke, a real estate agent with Real Living Kee Realty in Rochester. “There’s definitely a peak that’s happening, and I don’t know how long it will last. My colleagues and I have never seen anything like it.”
The McDevitts contacted a real-estate agent shortly before the outbreak escalated. They were ready to move on from their home of 18 years, having saved a nice sum and with interest rates so low. But after two offers were defeated by all-cash bids and an open house was canceled due to a pending offer as they were on their way to visit, the couple was feeling pretty defeated, Kim McDevitt said.
"You see your dream come true for a moment," she said, "then you see them come crashing down in one fell swoop."
According to Realcomp, the state’s largest multiple listing service, pent-up demand by homebuyers in June led to an 114% increase in closed sales from the previous month. There was a 29% increase in pending sales and an 8% increase in new listings for the same time period.
Compared to last year, there was a 14.9% increase in pending sales for June 2020. The median home sales price was up 6.6%, with the average sales price increasing by 2.8%.
For several weeks starting in mid-March, real estate activity was limited because buying or selling a house was generally not considered an essential activity under the stay-at-home order imposed by Gov. Gretchen Whitmer. During that time potential home sellers and buyers relied on virtual showings. Traditional in-person home showings resumed in May, and open houses were allowed to resume in mid-June.
“It’s kind of like we took the spring market that normally hit, picked it up and moved it two months forward,” said Karen Kage, CEO of Farmington Hills-based Realcomp. “Now we just have to hope it keeps going.”
Fueling the demand are historically low mortgage rates. The average rate on a 30-year loan is 2.98%, the first time they have dropped below 3% in nearly 50 years of record-keeping, according to the Federal Home Loan Mortgage Corp., also known as Freddie Mac. Mortgage applications rose 5.1% over the course of one week through July 10, according to the Mortgage Bankers Association.
The housing market is being driven by a jumble of forces right now, said Robert Dye, senior vice president and chief economist for Comerica Bank.
“It may take some time for a dominant pattern to emerge,” he said. “Low mortgage rates are making houses more affordable, providing an incentive for buyers. However, some potential buyers may not be feeling secure in their jobs.”
Christina Gennari, the McDevitts' real estate agent with Keller Williams Domain in Birmingham, said she’s noticed an increase in buyers in the market.
“I attribute that to people not being able to move during the spring market, during COVID shutdown,” she said. “We were restricted and there were people who had life changes happening. They’re getting married, they’re starting new jobs in the area, downsizing. All these factors that play into life decisions of moving and they’re still happening.”
Emer Kenny, a real estate agent with Real Living Kee Realty, said she’s seen most of the activity in homes priced below $500,000. The owners of one of her listings, a four-bedroom home in Rochester Hills, recently accepted an offer for $410,000, which was $10,000 above asking.
“If a home is updated it’s selling very fast,” she said. “The homes that are updated, we’re seeing multiple offers over asking.”
Agents say potential buyers are not only offering prices above asking, but they’re beefing up their offers by guaranteeing to make up with cash any gap between the appraisal and the approved mortgage amount. They’re also offering sellers more flexibility on when they have to move out.
Kenny said that buyers are bypassing the typical lull that the vacation season brings. She said they also don’t seem concerned about timing a move with the start of the new school year as things are up in the air due to the COVID-19 pandemic.
“If they want to move, they’re moving anyway,” she said.
By fall and winter, Gennari said she expects the market to see the typical number of buyers and sellers.
“As for pricing, I think we’ll continue to see it appreciate, but I think for the winter months, we’ll have more of a balanced consistent market,” she said.
Gennari said she also expects the real estate market to remain steady through the pandemic and for interest rates to remain low.
“I think real estate will be protected,” she said.
There is hope for homebuyers, too. Despite multiple other offers, the McDevitts on Friday won a contract for the West Bloomfield home with their $267,500 bid that offered some other concessions.
"I think if we didn't get this one, we would have to take a break," McDevitt said. "This year has been kind of crappy, and we wanted to try to make our lives better. With this home, I think we will."