Factors Influencing the Washtenaw County Real Estate Market
One of the biggest changes has been the significant decrease in inventory. In Ann Arbor we are entering 2012 with only 434 homes for sale, which is a 14% drop in inventory from 2011. The Ann Arbor condo market has seen a 25% drop in inventory as we head into 2012 with only 203 listings. The decrease in inventory is even more stunning when compared to the peak years. Since 2007 the residential inventory in Ann Arbor has dropped 49.55% and the condo inventory has dropped 69.8%.
Some of the decreases from 2011–2012 in other schools districts were as follows:
- Saline entered 2012 with 199 listings – a 3.86% drop in inventory
- Dexter entered 2012 with 150 listings – a 23.8% drop in inventory.
- Lincoln entered 2012 with 164 listings – essentially the same as last year.
- Ypsilanti entered 2012 with 66 listings – essentially the same as last year. In 2007 there were 289 listings, so this market has changed significantly.
Should inventory remain low, the hope is that price increases will follow. The main reason for the decreased inventory is the fact that many seller’s are underwater with their mortgage and can’t afford to sell, so they stay put, or they rent their home.
Prices peaked in 2005-2006 when the average price/square foot in Ann Arbor was $174/SF for the residential market and $145/SF for the condo market. Several of the sub-markets have seen small increases for 2 years in a row, and with decreased inventory, job growth, and low interest rates, the hope is that this will continue. I don’t see prices increasing too rapidly though. Every time prices increase a little, there will be a surge of sellers who will now have enough equity to sell their home, which will keep a lid on huge price increases.
The drop in building permits has been so massive, that many builders have gone out of business. 2003 saw 1955 building permits pulled. In 2011, only 222 building permits were pulled – an 88% drop. The good news is that we are seeing a surge in new construction. With the inventory being low and pent up demand for new construction being high, I believe that 2012 will be a turn around year for builders. This trend can also be confirmed by the 21% increase in vacant land sales.
The job market is looking very promising for the first time in a number of years. After losing 13,429 jobs from 2006–2009, we saw over 4,000 jobs added in 2010. The prediction is that we will add an additional 8,840 jobs from 2011–2013. This has brought the unemployment rate down to 7.2% in 2011. Since jobs bring buyers, this is a good sign for the Ann Arbor real estate market.
There is a lot of talk about the “shadow inventory” of bank owned properties that are going to be released by the financial institutions, however, we are not seeing this for Ann Arbor homes. In 2011 there was a 19% drop in recorded Sheriff Deeds which is the first drop we’ve seen since 2002. There are still certain communities where over 80% of the sales are distressed. With prices slowly firming up and job growth picking up, this trend will slowly reverse itself.
The Ann Arbor rental market has exploded as many sellers can’t afford to sell their homes. In 2011, 494 properties were rented out. This represents 27% of all the transactions in the Ann Arbor MLS (Multiple Listing Service). In the last 2 years alone, there have been a total of 1043 rentals in Ann Arbor. That’s a considerable amount, considering that there were 1063 residential sales and 422 condo sales in 2011. I expect this trend to continue until property values exceed what seller’s owe on their homes. The downside to all this, is that we are developing a very large pool of property owners that are waiting for prices to increase, who will put their homes on the market as prices inch upward, which in turn will prevent prices from rising quickly.
For more in-depth information on what’s selling in your particular Washtenaw County neighborhood, give me a call at 734-761-3060 and find out what your home is worth. With the spring real estate market just around the corner, now is a great time to get your Ann Arbor area home listed for sale. To find out more about what The Bouma Group can do to get your Washtenaw County home sold, read about our seller services here. And be sure to bookmark and check our Ann Arbor Real Estate blog for the latest Ann Arbor and Washtenaw County market updates!