It’s official…2016 is now the new benchmark for a peak market year in the modern history of Michigan’s Great Southwest. As Philip Amodeo puts it, “Like climbing a ladder one rung at a time the SWMI housing market has reached the top rung.” Amodeo is Association Executive for the Southwestern Michigan Association of Realtors. He adds, “The housing market in 2016 posted the highest numbers across the board in our year-over-year comparison since 2006. The previous peak year was 2006. Then the housing market began to slide until 2012 when the number of houses sold yearly began to climb. 2016 will now be our new benchmark for a peak market year.”
Amodeo says “In 2016, we had eight months when the number of houses sold was above 289 houses. In 2015, we had 6 months and in 2014, 5 months when the number of houses sold exceeded the same number.” He notes, “The range for the number of houses sold in a month was 289 to 388 in 2016.”
Looking at the market from another point of view Amodeo says, “A record set in 2016 that was not one to celebrate was the drop in our housing inventory to a new low of having a 5-months supply of homes for buyers to purchase. The housing inventory in 2016 ranged from a high of 8.4-months supply in July to 5.0 in December.” Previously in 2015 the lowest level was 6.7-months supply and the highest was 10.2-months supply.
The number of houses sold in 2016 was 3,589 compared to 3,302 in 2015 for a 9-percent increase. For the month of December, 293 houses were sold versus 252 in December 2015, representing a 16-percent increase.
The average time a home was on the market before it sold in 2016 was 117 days compared to 133 days in 2015. That was a 12-percent decrease in market time. The decrease in time on the market reflects the low inventory and the homebuyers’ push to make a purchase.
The total dollar volume in 2016 was up 12-percent over 2015 ($718,654,703 vs. $643,226,393). Comparing December 2016 to December 2015, the total dollar volume also was up 12-percent ($58,433,257 vs. $52,058,013).
The average selling price in 2016 increased to $200, 238 from $194,799 in 2015 for a 3-percent rise. However, in December 2016 the average selling price dropped 3-percent from December 2015 ($199,430 vs. $206,579).
The 2016, median selling price rose 5-percent to $140,000 from $133,000 in 2015. In December 2016, the median selling price was $140,000 which was an 8-percent increase over the December 2015 median selling price of $130,000.
The median price is the price at which 50% of the homes sold were above that price and 50% were below.
At the end 2016, there were 1,508 houses on the market compared to 1,850 in 2015. That was a 19-percent decline and resulted in 5-months supply of homes for sale at the current pace. In November 2016, the inventory level in the local housing market was 6.3-months supply of homes for homebuyers. In 2015, the inventory level was 6.7-months supply.
In all of 2016, there were 9 months when the number of bank-owned or foreclosed homes as a percentage of all transactions in the market ranged from 8-12 percent. In October 2016, the percentage was 8-percent which was the lowest percentage since 2009. The percentage peaked in March 2016 at 20-percent. In February 2009, 75-percent was the highest percentage of bank-owned or foreclosed homes recorded.
Locally, the mortgage rate jumped from 3.92 in November to 4.375 in December. In December 2015, the rate was 4.6. Nationally, the Freddie Mac mortgage rate in December rose to 4.32 from 4.03 in November 2016.
According to the National Association of Realtors – Existing-home sales closed out 2016 as the best year in a decade, even as sales declined in December as the result of ongoing affordability tensions and historically low supply levels.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, finished 2016 at 5.45 million sales and surpassed 2015 (5.25 million) as the highest since 2006 (6.48 million).
In December, existing sales decreased 2.8-percent to a seasonally adjusted annual rate of 5.49 million in December from an upwardly revised 5.65 million in November. With last month’s slide, sales are only 0.7- percent higher than a year ago.
Lawrence Yun is Chief Economist for the National Association of Realtors. He says the housing market’s best year since the Great Recession ended on a healthy but somewhat softer note. He reports, “Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market.” He adds, “However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”
Yun points out, “While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end.”
The median existing-home price for all housing types in December was $232,200, up 4.0-percent from December 2015 ($223,200). December’s price increase marks the 58th consecutive month of year-over-year gains.
Regionally, existing-home sales in the Midwest decreased 3.8-percent to an annual rate of 1.28 million in December, but are still 2.4-percent above a year ago. The median price in the Midwest was $178,400, up 4.6-percent from a year ago.
First-time buyers were 32-percent of sales in December, which is unchanged both from November and a year ago. First-time buyers also represented 32-percent of sales in all of 2016. NAR’s 2016 Profile of Home Buyers and Sellers revealed that the annual share of first-time buyers was 35-percent.
Yun tells us, “Constrained inventory in many areas and climbing rents, home prices and mortgage rates means it’s not getting any easier to be a first-time buyer.” He adds, “It’ll take more entry-level supply, continued job gains and even stronger wage growth for first-timers to make up a greater share of the market.”
On the topic of first-time- and moderate-income buyers, the National Association of Realtors President William E. Brown, a Realtor from Alamo, California, says Realtors look forward to working with the Federal Housing Administration to express why it is necessary to follow through with the previously announced decision to reduce the cost of mortgage insurance. By cutting annual premiums from 0.85-percent to 0.60-percent, an FHA-insured mortgage becomes a more viable and affordable option for these buyers.
Brown reports, “Without the premium reduction, we estimate that roughly 750,000 to 850,000 homebuyers will face higher costs and between 30,000 and 40,000 would-be buyers will be prevented from entering the market.”
All-cash sales were 21-percent of transactions in December, unchanged from November and down from 24- percent a year ago. Individual investors, who account for many cash sales, purchased 15-percent of homes in December, up from 12-percent in November and unchanged from a year ago. Fifty-nine percent of investors paid in cash in December.
Total housing inventory at the end of December dropped 10.8-percent to 1.65 million existing homes available for sale, which is the lowest level since NAR began tracking the supply of all housing types in 1999. Inventory is 6.3-percent lower than a year ago (1.76 million), has fallen year-over-year for 19 straight months and is at a 3.6-month supply at the current sales pace (3.9 months in December 2015).
Yun suggests, “Housing affordability for both buying and renting remains a pressing concern because of another year of insufficient home construction.” He notes, “Given current population and economic growth trends, housing starts should be in the range of 1.5 million to 1.6 million completions and not stuck at recessionary levels. More needs to be done to address the regulatory and cost burdens preventing builders from ramping up production.”
