Local housing market getting better
According to the Grand Rapids Association of Realtors, home sales in the region were up by 3.2 percent through October of this year when compared to the first 10 months of last year: 6,802 homes have been sold so far in 2011, while 6,593 traded hands through October 2010.
Sales volume this year stood at $827.1 million, up by 5.9 percent from the same period last year, when it was $780.9 million. The average home price this year was also up, at $121,605 — 2.7 percent higher than the 2010 figure of $118,452. GRAR reports on sales made in Kent, Ionia and portions of Allegan and Barry counties, and in Georgetown and Jamestown townships in Ottawa County.
“Within the last three or four months, we have seen an uptick in purchase transactions. Refinance transactions are still very, very heavy because interest rates are extremely low. With the rate of borrowing being low, it makes it very attractive to refinance,” said Joel Van Elderen, vice president and mortgage sales manager at Macatawa Bank, from his office in Holland.
“But what’s kind of neat here is — we’ve noticed both in the Grand Rapids market and in the lakeshore communities where we have our branches — we are seeing increases in purchase transactions, and those price points are also kind of interesting,” he added.
Van Elderen said Macatawa expected sales of lower-priced homes would be the first category to pick up, but that hasn’t been the case.
“What we’re actually seeing is the $150,000 to $250,000 range seems to be the most common price point where we’re starting to see an uptick,” he said.
Those sales, of course, are of existing homes. But despite the available inventory in the market, Van Elderen pointed out there is new construction going on in the region.
“Absolutely. We’ve got quite a few actually in the process right now of being built. I would say in the early fall, we saw a bit of a surge (in new construction loans), but obviously that is pretty weather related,” he said.
“If anybody is going to do something, the early fall is when they’re going to get their ducks in a row so they can start digging before the snow flies. It’s quieted a bit since then, but we definitely have some new construction going on right now.”
Despite the gains in sales and volume, Kent County Equalization Director Matt Woolford said this year’s residential assessments are likely to help produce an overall drop in taxable value countywide next year — somewhere around 4 percent. But he also said that assessed values haven’t fallen in every nook and cranny in the county.
“There are some areas that have really stabilized and leveled off, while other areas are still seeing some decrease. But we have seen, in a good share of our units, that the downward prices in some areas seem to be abetting, and we’re even starting to see some price appreciation in some areas,” he said.
“It’s very small and it’s certainly not the rule. But in terms of the assessments, we are seeing that some of the downward pressure on prices will continue into 2012. But there are some signs that some areas are stabilizing,” he added.
At the other end of the housing-market spectrum, the Dorothy Johnson Center for Community Research at GVSU tracked 1,126 foreclosures in Kent County through the first six months of this year. Since the center reported 3,011 foreclosures for all of 2010, on a year-long basis, foreclosure activity was down by roughly 25 percent through June 2011 from the first half of last year. That activity was expected to pick up this fall after lenders sorted out their mortgage-identification problems.
Industry analysts said the homes going through this process make up a shadow inventory of repossessed and soon-to-be repossessed houses. The impact those residences will have when they return to the listings is largely uncertain now, as up to 4 million homes could be back on the nation’s market in the near future.
In late October, Standard & Poor’s said it would take 45 months for the industry to work through the shadow inventory, which was welcomed as good news because the estimate was seven months shorter than the one made in March. But to highlight the uncertainty of the issue, S&P said a year ago that it would take 42 months to get through the inventory, three months less than its current estimate.
“There is talk of another wave of foreclosures. However, after talking with some Realtor friends, for the time being, I think that our inventory here in West Michigan is compressing. I don’t think there is as much inventory as there used to be,” said Woolford.
“So, certainly, in some areas, you’re starting to see where the downward pressure on prices is not so great. But certainly to the extent that foreclosures are still a significant part of the market, they will definitely continue to have a downward pull.”
As will the number of vacant residences. Using U.S. Census Bureau data, the GVSU center also reported there were 19,662 vacant housing units countywide in 2010, up by 77 percent from 2000 when 11,110 were empty. Eight percent of all residential units in the county were vacant last year. In Grand Rapids, the number was 10.5 percent. The center also noted that seven of the 30 townships and cities in the county saw the number of vacant units double from 2000-2010.
Although sales activity has gone up and the cost to borrow has remained low, Van Elderen said it isn’t near the volume that existed before the credit market entered into crisis mode in fall 2008. “But from a perspective relative to 2010, 2011 seems to be an awakening in the purchase market,” he said.
One factor that may or may not affect the market is what the downgrades S&P issued to the credit ratings of the nation’s largest banks will mean. Van Elderen said typically there is a trickle-down effect. For example, lending criteria could be tightened and some pricing ramifications could pop up.
“Now to the extent of that, I can’t really say,” he said. “If you’re not selling to some of those folks directly, that can have an impact. Sometimes, certain banks and/or lenders may be selling some of their mortgages to smaller institutions, and then those institutions, in turn, are selling to the larger institutions. So the trickle-down effect can ultimately happen that way, also.”
Even though it’s too early to tell what the downgrades will mean for the mortgage market, Van Elderen said lenders will keep a close eye on the after-effects and what they will mean for underwriting loans. As for next year, Van Elderen said he is hopeful that rates will continue to be stable, somewhere in the low 4 percent range, and not jump all over the chart like the Dow Jones Industrial Average has been doing. He also hopes that a key element that isn’t often discussed will surface next year and add an important ingredient largely missing from today’s housing market.
“From a market standpoint, my wishful thinking is there is going to be some confidence finally starting to build in everybody’s investments, and they’re going to begin to recognize that we’ve hit the bottom and we only really have one other direction to go, which is up,” said Van Elderen.
“My gut tells me that there is going to be, hopefully, a surge at some point of purchases because people are going to realize with price points being at a pretty low point right now, a lot of folks are going to want to jump on that bandwagon and make some of these purchases before we see an increase in appreciations start to take off. That’s what I’m hoping for.”