Enjoy the presentation, the links below, and feel free to leave any comments!
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Enjoy the presentation, the links below, and feel free to leave any comments!
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Market in the Grand Rapids Area is in full swing: a seller’s market undoubtedly. But there are still opportunities for investors wishing to acquire new properties.
To better grasp what’s happening, GRAR makes available quarterly updates, as effective charts. In short, we are experiencing the lowest average number of listings in the first quarter of 2019 than in the past 16 years. Along, the average home sale price has increased to the highest ever experienced since 1998. At the peak of the 2006 market, before its collapse, the average home price was $163,924, compared to today’s $229,276!
At this time, we are observing multiple offer situations, as we have witnessed in the past four years, more or less. Over 20 offers for properties priced below $200,000 seems the norm, with winning bids going as high as $35,000+ above asking, waiving inspection, and non-refundable EMD’s. These properties are being sold within days anywhere a deadline to present offer is set, and within hours or before broadcast in all other cases.
Per my personal experience, and through in-depth conversations with other REALTORS®, it seems that cash offers have been dwindling, whereas financed offers, including FHA’s, are now the majority. One way to interpret this data could be that investors are seeing fewer opportunities to make a speedy profit, while many first-time home buyers are competing to make their first purchase.
Therefore, whereas investors look for properties in which to quickly build equity (REO’s, fixer-uppers, TLC’s etc.) most buyers are seeking turn-key dwellings. This is why move-in ready properties seem to be attracting the highest number of offers, and top dollars. Sellers are taking note, and responding adequately, marketing perfectly updated properties, in some cases with amenities found in higher-priced homes.
But what’s happening above the average selling price? Let’s look at single-family residencies priced in the $250,000 to $299,999 range.
Units sold are down compared to last year – while volume is increasing. In Kent County, in March 2018, 72 units were closed and 103 went pending, compared to 58 and 92 respectively in March 2019. Similarly, year-to-date numbers in 2018 were 157 closed and 223 pending, versus 138 and 203 in 2019.
Per my recent personal experience, I have observed a different attitude in sellers of properties in this price range than sellers of lower priced-homes. In my opinion, this is not fully in line with buyers’ desiderata. Could this vacuum soon become the new investor’s niche? We don’t have a definitive answer, but data is below.
Sellers of properties above $250,000 and below $299,999 seem to be generally placing more outdated properties on the market. These units seem listed too high in relation to what they offer, and typically above comps. Even if they are not necessarily selling at such high asking or above, they are selling nevertheless.
A good number of these 3- or 4-bedroom properties were built 15 to 25 years ago. The majority has original roofs, utilities, and appliances. Understandably, the investment needed to replace these expensive items might be among the reasons behind owners’ decisions to sell. Other reasons are outdated floor plans, bathrooms, kitchens, and amenities. At the same time, this is not what a good number of buyers at this price-point are expecting.
These are the twenty-one (at the time of writing) single-family properties within a 10-mile radius from downtown Grand Rapids, priced $250,000 to $299,999, built in the last 25 years. If we exclude the eleven (at the time of writing) new-builds, to-be-builts, and the ones who just hit the market, all other properties have been sitting unsold from 10 days to several months. Six of them experienced one or more price reductions – a sign that these properties were overpriced at the time of listing.
Of the 37 sold year-to-date, 10 sold below asking, and 9 at asking price; 2 sold above the $300,000 mark, one of which was newly built in 2018; 16 properties took from one month up to 171 days to sell.
Personally, I just experienced a multiple-offer situation in which we offered less than asking – with some attention to other details. Seller chose our offer. Property sold in one day.
The real estate market in Grand Rapids is rapidly changing. In order to be ahead of the curve, data analysis and direct experience is needed. Contact a REALTOR® for all your real estate needs. Happy house hunting everyone!
It did not take long for the Grand Rapids housing market to go into spring mode, mirroring the behavior of its past four years.
Extremely low inventory – a measly 1010 residential listings in the entire Kent County – is once again giving sellers an advantage. No matter the property, design, age, area, school district, and price point to a lesser extent, multiple offers seem again the norm.
Whether a $180,000 ranch in Kentwood, a $135,000 cape cod in Wyoming, a $200,000 bilevel in Grand Rapids, or a $250,000 house in NE Grand Rapids, in this price range buyers are experiencing – and sellers are enjoying – competitive biddings, up to 9, 14, 20, and even 24 offers, the highest I am personally aware of. As we write, an offer of $20,000 above asking price no longer seems sufficient to win a bid for the most sought-after properties.
Properties are selling within days, if not hours, and in some cases before broadcast. Hence, buyers are competing at all levels: allowing Sellers to occupy the property for a number of days after close at zero cost to Sellers; offering partially or totally non-refundable EMD’s; limiting inspections to shorter periods than the typical ten days; bringing cash at close if property does not appraise – a logical consequence of offers above market value; willingness to pay seller’s closing costs; and in some cases even waving inspection.
Rush is a feeling buyers would prefer to avoid. However, in this market there seems to be no time to reflect. Your REALTOR® will be able to answer all of your questions and device the best strategy to help you market your property, or craft the best offer.
Happy house hunting everyone!
We have all been there: hiring a REALTOR® to represent us in a real estate transaction. As REALTOR®, my best advice to you is to… follow the advice of your REALTOR®. This is key to success in real estate.
Two cases in point.
CASE #1. Jim places a cash bid on a REO property priced in the low $60,000’s. After a few days Jim’s REALTOR® shares that there are six competitive offers on the property. Jim asks his REALTOR® what he needs to do in order to secure the property. REALTOR®’s advice is to go $8,000 – or about 12.7% – above asking price. Jim has to tap into his 401k in order to find the extra funds, and knows that the property will additionally require approximately $7,500 in repairs. Nevertheless, Jim OK’s his REALTOR®’s advice with no hesitation. Jim wins the bid and secures the property. Jim rents out the property at $1,000/month. Three years later Jim’s property is worth about $130,000.
Let’s do some quick math:
In short, Jim’s agent’s advice was potentially worth $84,450.
CASE #2. Louisa hires a REALTOR® to purchase a residential property. This is Louisa’s first time buying a home and she has never worked with a REALTOR® before. Upon finding the perfect property, REALTOR® advises Louisa that due to market conditions and in order to win a multiple-bid situation, she’ll have to offer about $10,000 – or about 6.7% – above the $150,0000 asking price. Property could potentially be worth $190,000 after three years. Although Louisa has the ability to write a higher offer, she chooses to play prudently, and against her REALTOR®’s advice: $5,000 above asking price but not more. Louisa is outbid and she loses her dream property.
Let’s do some quick math:
These two cases are similar. In both instances a REALTOR® recommended an offer above purchase price. The former yielded a 100% return over three years, the latter a 0% over the same time span.
Your REALTOR® is working for you, and your best interest is her/his goal. Your REALTOR®’s judgement and experience are worth every penny!
Happy house hunting everyone!
Time to look at the housing market behavior.
Generally speaking, inventory in the GRAR area has further decreased, and likewise sales, while in the last month listings have seen an uptick. Residential new listings have been in line with the same level of last year (833 in January 2019, vs. 835 in January 2018) multi-units have dropped by 34.4%. Vacant land instead has witnessed a sharp increase, from 82 new listings in January 2018 to 143 last month.
Closed sales have dropped by 8.4%, both compared to last year and year to date. However total volume has increased by 6.7%. The good news for homeowners is that property values have increased on average by 16.6%.
The average home now sells at $230,545 based on closed deals, while the pending suggests an even higher value, at $235,281.
No matter at how we see the market, it is going to be another hot season. Snow is melting, buyers are very active, competition abounds. My personal experience suggests multiple offers – up to 24 already! – over $20,000+ above asking price, and more properties sold before broadcast.
Sellers, time to make your move. Waiting won’t give you an advantage: low inventory is driving prices up. Buyers do not sit on the fence. You’ll probably have to go through a few biddings before securing your dream home. And if you are planning to buy contingent to marketing your house, do so with confidence. Your own property will sell in a matter of days, if not hours!
Happy realestating everyone!
If my personal activity as REALTOR® during December 2018 and January 2019 can offer any indication, then my prediction for the Grand Rapids real estate market is that of another positive spring.
Work has been incessant on both sides: buyers and sellers.
On the buyers’ end, starter homes and properties priced in the high $100,000’s or below are quickly moving under contract – quickly in the Grand Rapids area refers to days, or hours – and in a few cases presented with multiple offers. Properties in the $300,000 to $500,000 range are also receiving immediate interest, but taking a few more weeks to go under contract.
At the same time, given the low inventory, I have been scouting for additional properties not yet or not at all on the market for my clients. And I have found property owners generally amenable to open their doors.
On the sellers’ side, inventory is now at a historic low per GRAR statistics – lowest number of listings submitted to the MLS since 1997 – yet owners are actively preparing their properties for the upcoming market: I will list one house this week that has been thoroughly renovated with gusto. When buyers have more choices, sellers tend to offer partially or fully remodeled or updated homes.
Commercial properties are also being sought after. One of my commercial listings is pending, another is attracting many showings, while at the same time I am helping a few clients who are looking to expand, or acquire new holdings.
The recently passed referendum approving Proposal 1 is bringing new business to Grand Rapids. Commercial- or industrial-zoned properties in designated areas are now being targeted by investors, some of whom I am representing: a unique opportunity to learn about a new business and possibly becoming an expert in a real estate sector with enormous potential.
The rental business is also abuzz. These past weeks I experienced a spike in calls from people seeking help in securing a place for rent. Alongside, as market rents increase and options seem to dwindle for tenants, landlords appear to be investing in improvements: fresh paint, new floors, higher-end appliances, renovated bathrooms.
In the end, whether you are planning to sell, buy, or both, always seek the help of a REALTOR®.
I am always contactable if need be. Happy 2019 property hunting everyone!
Many, many, many – did I say many too many times? – many people have been wondering and asking what’s happening to the housing market these days. And rightly so. Because we are observing a shift.
This question is especially relevant when deciding to sell, or buy. All indicators point to a market slightly winding down and becoming more balanced. As we have discussed in previous analyses, rising interest rates and house prices have been affecting market trends. While pockets in the US are experiencing down times ahead, such as in Dallas, TX, in Kent County, and the wider Greater Grand Rapids Metropolitan Area, the field is currently healthy.
In Kent County, we are still hearing of a few multiple offers, and sales above asking, but far from the double-digit number of offers seen during last spring and summer.
Down to the details, in the Greater Grand Rapids Metropolitan Area the year-to-date average months of inventory for the first time appears to have stabilized at the the same levels of 2017. This follows a continuous, steady decrease, from the 13.3 months in 2008 to just 1.5 in 2017. Kent County reflects the same trend: levels for 2017 and 2018 are at 1.4 months.
Noticeable is the percentage in pending sales compared to last year. In Kent County, a 1.6% increase in pending sales has been met by a 15.2% increased volume. For closed sales these numbers are 4.6% and 18.6% respectively. Based on closed deals, the average home now sells at $230,662, an 11.7% yearly gain. That number is even higher based on pending sales, at $232,102. Property value continues to grow while residential new listings are also up 6.8%.
Multi-family units continue to be much sought after and to increase their value as investment. The number of multi-family listings has decreased in October, while overall it has increased year-to-date compared to last year: pending sales are down 30%, with volume up 12.1%. Volume for closed sales in October alone has gained a noticeable 89.6% compared to last year.
Sales of properties priced $500,000 and above has been slightly below market share during the past months, now at 3.4% of closed, and 3.9% of pending, with an overall year-to-date at 3.7%.
My own experience as REALTOR® on the field seems to corroborate these numbers. When inventory is really low, or properties experience high number of offers and then sell in a few days or hours, rarely there is need or room to schedule open houses not connected with an offer-due-by deadline. Conversely, with properties sitting for a few weeks on the market, more space for promotional activities is available. Of the 10 open houses I held in the last three months, 5 happened in the last thirty days, and a next one is scheduled in just two days: a clear acceleration in pace in line with market behavior.
We’ll continue to monitor the market as we move through the holiday season. Thanks to limited competition, data seems to support that this might be a good time to sell, depending on property value; more confidently so for land and multi-units. In spring we expect higher interest rates, which combined with raising home prices might place a few properties out of reach for some buyers. If not yet prepared to sell, this might be the perfect time to start renovating and updating your home ready for a spring listing. With increased listing prices and less competition, buyers now expect something more for their money.
Happy holidays everyone!
When showing a house, a visit to the basement – if and where accessible – is indispensable. Here one can gather many clues about the property. Some basements are in perfect shape, other in various conditions and degrees of maintenance. While each situation is different and property age must be factored in, remediation is generally possible where warranted. Obtaining an expert opinion during inspection or secondary inspection – and possibly a quote from a reputable company – represents the best way to one’s peace of mind.
When walking through a basement, one should look for structural soundness or lack thereof, signs or humidity or water, any potential active or inactive infestation, cracks, bowing walls, supports, beams, plumbing, electrical, furnace, water heater, and any other elements that can help assess the overall quality of the property.
These pictures were taken from a few past showings and inspections of unfinished basements, and might help familiarize with some of the possible findings:
These are but a few examples. When walking through a property, and especially a basement, it’s good practice to keep the seller’s disclosure handy – always mandatory in Michigan for residential properties, 1-4 units. At the time of offer, basement conditions should be given consideration in the purchase price. While it is possible that seller might be willing to negotiate on unexpected findings, it is unlikely that negotiations will ensue due to evident and/or disclosed issues.
Being able to identify potential defects during your showing will save time and money. This is why the service of a REALTOR® is always recommended, because through your agent’s experience many questions can be answered immediately, and be reflected in your purchase agreement.
As usual, I am always contactable if need be. 24/7. Happy basement explorations everyone!
Now that we are approaching the holiday season and the end of the year, how is the real estate market behaving?
In September we predicted a continued strong market. Data shows that the trend is at pace with our forecast, whereas growth is expected to slow down nationally. Per Freddie Mac’s analysis, the increasing interest rates, combined with other indicators, will pull the breaks on home price growth in the years ahead: 5.4% in 2018, 4.6% in 2019, and 2.9% in 2020.
GRAR’s monthly statistics in Kent County and the Grand Rapids area – both by comparison to last year and year-to-date (YTD) – show fewer new listings, closed deals, and pending properties. Yet, volume has increased significantly. By how much?
In the GRAR area, compared to last year, closed sales were down by 5.6%, and YTD by 3%. Volume on the other hand increased by 0.8% and 5.8% respectively. YTD average sale price has gained 9.1% based on closed sales, and by 9.4% based on pending deals, confirming the home price growth trend.
Multi-family units are behaving somehow differently. We observe a 2.1% rise in listings, and a 75.9% increase in closed volume compared to last year, in spite of a 11.4% decrease in transactions. Across Kent County the multi-family volume has increased by a staggering 99.9% during the same period. Freddie Mac is pointing to similar interest in new multi-family homes nationally, in spite of overall slower growth in the third quarter.
In Kent County, sales of single family homes valued at $500,000 or above have continued steadily at 4.3% of market share, with 34 units closed in August 2018 and 298 since the beginning of the year.
This general tendency is sustained by the average months of inventory, which has been decreasing steadily from 2.3 in 2014, to 2.0 in 2015, 1.8 in 2016, 1.4 in 2017, and 1.3 as of September 2018.
All these indicators point to a consistent and more balanced market in which home values are increasing significantly in our area, above national average. My personal local knowledge and experience align with the data. While multi-offer situations have decreased – there are seasonal adjustments to take into consideration – demand is still strong.
Whereas mortgage rates are expected to increase for the upcoming two years, raising to 5.6% in 2020, the real estate market continues to benefit from low unemployment combined with solid employment rate.
This seems a perfect time to sell and buy. Home prices are increasing, to sellers’ satisfaction. Loans can be secured with a more favorable rate now, to buyers’ advantage. Fewer multiple offers prevent buyers from overpaying, and sellers from losing a deal due to buyer’s remorse.
Time to make your move!
Happy market everyone! And yes, I am extremely contactable if need be.
With the market in the Grand Rapids area becoming more balanced, we are observing a number of buyers walking away from properties under contract.
Paragraph 15 of our West Michigan Regional Purchase Agreement gives buyers 10 days after the Effective Date (we’ll address Effective Date in a different post) to complete all “inspections and investigations.”
This time is considered sufficient for any buyer to conduct an inspection of the property, as well as anything related to zoning, ordinances, codes, and the ability to obtain homeowner’s insurance. A land survey contingency is addressed separately. It is not uncommon for buyers and sellers to agree on a shorter or longer inspection period, or to extend it as needed – for example to investigate further unexpected issues.
The Seller’s Disclosure Statement – which is mandated for residential dwellings of no less than 1 and no more than 4 units, per Act 92 of 1993 – can provide an initial understanding of potential problems affecting a property for sale. Are appliances, systems, or services, available and in working conditions? Has there been evidence of water in the basement? Is the roof leaking? These are just a few of the items sellers are required to disclose – with a few exceptions.
When a legitimate question is raised by buyers within the agreed timeframe, sellers are typically amenable to compromise and negotiations. For example, if pest inspection reveals presence of termites unknown to seller, or if buyer provides a precise quote from a reputable company for a disclosed basement defect, there is a legitimate expectation that both parties will work together to solve the issue and move forward with the transaction.
However, issues may arise when there is lack of attention to details or good faith on one or both sides of the transaction. It is not uncommon to encounter Seller’s Disclosure Statements that are left blank, or incomplete. Sellers are legally responsible for what they disclose. A roof in poor shape, mold, an unfit electrical system, a wet basement, a leaking pipe, all would be easily discovered during inspection, whether disclosed or not. However, any unexpected major discovery, if undisclosed, may raise suspicions on the true conditions of the property. In the very least it could lead to buyers heavily countering their offer, or walking away from the deal altogether.
In a real estate market heavily skewed towards sellers, buyers often agree to accept some flaws, whether disclosed or not, as part of the deal. When the market balances out however, buyers are no longer feeling the pressure of losing their only chance to secure a deal because they feel they have options. Therefore if any issue is discovered buyers might be inclined to avoid negotiations and end the deal within their ten days, believing there will not be repercussions. Most of the times this is correct, sellers and buyers agree, sign a mutual release, and buyers are refunded their EMD.
Problems begin when there is disagreement, for example if buyer perceives bad faith on seller’s part in disclosing potential issues. Or if seller believes that buyer is ending a deal due to frivolous reasons. The first item to be contended in these instances is the EMD. Without a mutual release, if the deal fails to close, the Broker holding the EMD will notify the parties on Broker’s intention to dispose of the EMD. If one or both parties objects in writing within 15 days after the notice, the issue could potentially end up in litigation. In short, walking away from a deal could be a costly and time-consuming decision.
In conclusion, when selling a property, sellers should complete the Seller’s Disclosure Statement to the best of their knowledge. When acquiring a property, buyers should place an offer only if they intend to close on the deal in all good faith. These simple steps will avoid major headaches later on, assure a pleasant and smooth transaction, and grant a rewarding experience on both sides.
Questions? As usual, I am extremely contactable at any time!
Happy house hunting!