I hovered over my crystal ball all night last night trying to figure out what the universe has in store for Southeast Michigan real estate. That darned thing was cloudy until about 3am but by that time I had had about 3 martini’s and things started to happen (besides the headache and blurred vision!). The ball said I should layoff the liquor! It also told me what’s happening now in real estate and what to expect over the next year.
It seems there are 2 main factors affecting today’s market – Distressed Sales and Opportunism:
Distressed sales, of course, are foreclosures and short sales. We’ve learned a lot about these over the past year – a lot more than I ever wanted to know! The fact is that these sales are ruling today’s market. In the past 6 months most of the sales activity in our market has come from distressed sales and it’s been a real drag on market values.
Opportunism comes in the form of buyers who “want to get the best deal.” They are making ridiculously low offers on numerous properties until they find a seller who’s dangerously close to a financial disaster, or a bank that has to unload a property. They are, in many cases, buying a home that is missing the appliances, has not been properly maintained and is in need of significant repairs. In a lot of these cases the end result is that after spending the money to bring the house back up to snuff the buyer will have just as much money invested in the home as they would have had they bought a house that was in excellent shape. The reason? All homes are selling at a significant discount right now and homes in excellent shape are also selling “cheap.”
These are the things affecting the market but what does the future hold? Well, after wiping the crystal ball clean of slobber I found that over the next 12 months distressed sales will be fewer and fewer as the current wave of problem properties are pushed through the system and sold. Just yesterday The Detroit News reported that January foreclosure data shows that in the Metro-Detroit area foreclosure filings dropped between 10 and 30% (depending on specific area) compared to last year! That’s the best news I’ve heard this year. After the number of distressed properties drops to more historical norms and the market is driven by quality homes sold by the homeowner, then we’re going to see a slight bump up in sales prices and a return to stable real estate values. Yahoooooo! We may even get a mini real estate boom because there is so much pent-up demand right now. Gotta love that crystal ball. So stay tuned and optimistic because those real estate professionals that survive are going to prosper. You homebuyers out there better get off the fence and take action because the prices you are seeing now will not last. Next time I have to remember to ask that darned ball for a winning lottery number!
Photo by bb_matt