Low inventories of homes for sale in metro Detroit pushed up prices and sales in February with heightened competition for the best addresses.
But despite record low interest rates for mortgages, a majority of those sales were for cash, meaning home loans are still tight and bargain-hunters are using cash to speed deals and avoid appraisals.
And homeowners still underwater on mortgages or who simply won’t sell at these still-low prices are contributing to the low inventories.
It’s a picture of a home market freeze in metro Detroit that’s only slowly starting to thaw, and very slowly, said Karen Kage, CEO of Realcomp, which tracks monthly real estate sales through its multiple listing service or MLS.
“We’re not seeing the banks so eager to loan. That has to change,” she said. “We need to see the banks loaning money because that’s what’s going to get those private sales moving and bringing in the inventory.”
Still, the February numbers were cause for celebration: Home sales were up 13% to 3,829 compared with 3,389 a year ago in Oakland, Macomb, Wayne and Livingston counties, according to data released Monday by Farmington Hills-based Realcomp.
The median sales price in February was up 5.7% to $58,000 from $54,850 in February 2011.
An improving economy and even a relatively snow-less February boosted active selling days, said Kelly Sweeney, CEO of Coldwell Banker Weir Manuel in Birmingham.
Houses in good condition and priced right are selling quickly, Sweeney said.
“We started the year with sort of a bang. We had just nice winter weather. That had a huge impact,” Sweeney said. “It’s not just about the weather. The local market and economy are in much better condition than they were a year ago.”
Keeping the market from a full rebound is the continued supply of foreclosures and the shadow inventory of those properties taken back by the bank but that have not been listed for sale, said Deborah Ronayne, a Realtor with Keller Williams in Northville.
“This whole distressed market is just pulling things down,” Ronayne said. “What concerns me is the number of homeowners falling into negative equity.”
In Michigan, 34.7% of homes with mortgages were underwater at the end of 2011, according to CoreLogic. Nearly 38% of the houses on the market for sale through February were identified as foreclosures or short sales, according to Realcomp.
The price surge was caused by the continued low inventories in the market that draws multiple offers to some houses for sale.
“We need to see those inventory numbers come up or it will be difficult to maintain that increase in sales,” Kage said.
The inventory of homes for sale in Realcomp’s coverage area, including metro Detroit and the Thumb, fell 18.4% to 26,670 in February, compared with 32,695 in February 2011.
Ronayne said low inventories have some of her buyers waiting for up to a year for the right house to be listed for sale. That’s a key driver for up to a 3% to 5% increase in sales prices last month in the Plymouth, Northville and Novi areas, she said.
“I continue to be strapped for listings,” Ronayne said.
Greta Guest, Detroit Free Press