House (residential) real estate market
Will wait until the end of the week for “April” sales and
listing activity.
So far listing are up slightly 7.5% and sales are down
dramatically in Windsor (64%) but modestly in SE Michigan 6.5%.
My guess is that there will be a “lag time” with “sales”
being completed on contracts dated January through March but closed in March,
April and May 2020. These are buyers that feel they MUST complete the sale. In
SE Michigan the industry average for earnest money deposit is 3% rounded. In
Windsor typically the deposit is $1k over $300k = less than 1%. Buyers may look
at the minor deposit as an option rather than a “must close”. Simply blow off
the deposit or have negotiated an extension due to pandemic.
The “value” of real estate will, as usual, depend on the
demand-supply ratio. The SE Michigan MLS (Realcomp) is the 7th or 8th
largest in the USA. Law of large numbers works well with 16,000+ agents and
7,202 sold (closed) in March 2020. This compares to April to date (27/30 days)
at 3,668. Let us round that to 3800/7200 =or a decline of 48%. These are
special times and we will not get a better picture until June when the April and
May statistics are complete. Also, expect that the real estate industry will
open back up over the next 2 months.
If listings continue to rise and sales continue to fall,
Then expect deflation in real estate values as a result. There are many other
factors that enter into a market including but not limited to pent up demand,
interest rates, mortgage qualification factors (20% down vs 5% e.g.), Spring vs
holiday season, consumer confidence (UofM) and employment. None of these, however, is as important as the old fashioned economic rule of demand vs supply.
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