GR housing inventory plummets
Homes selling within hours, not days, of listing leave first-time homebuyers frustrated.
(As seen on WZZM TV 13) The residential real estate market continues to remain tight in Grand Rapids, with an inventory that has decreased 61.9 percent during the past five years.
A study by Trulia found the Grand Rapids “trade-up” home inventory dropped 74.3 percent and “starter homes” dropped 70.5 percent, the most in the nation in each category. Home-for-sale inventory levels nationwide are at their lowest point since the industry began to recover from the Great Recession in 2012.
Grand Rapids realtors are finding Trulia’s study to be accurate, said Griffin Properties agent Jake Theoret.
“When I started, there was much more selection,” Theoret said. “At that point, buyers could ask for much more. Buyers aren’t asking for much now; they can’t be as picky, because there’s nothing else they can go into if that deal falls through.”
In February, the Grand Rapids area had 1,274 active residential listings, down 7.9 percent from last year, and more than 600 sales closed the same month, according to Ryan Ogle, broker and owner of Blu House Properties. Listings are at historic lows, Ogle said.
He said the inventory is tight because people are moving to West Michigan, college students are staying after graduation, sellers are nervous about ending up homeless after a quick sell and builders are swamped with higher-priced homes they make more money building.
Theoret said there have been numerous instances of a home listing at 4:30 p.m. and having multiple offers later that evening.
“It’s not uncommon for starter homes to sell within hours,” he said. “We’re starting to track days on market as hours, and that can be frustrating.”
According to Trulia, there were 277,937 starter homes on the market in the first quarter of 2016 compared to 253,735 this year. The trade-up home market dropped from 249,316 to 229,585.
Trulia’s study found the tight inventory is pushing affordability out of reach for homeowners, with starter and trade-up homebuyers needing to spend 2.9 percent and 1.6 percent more of their income, respectively, on homes than the same time last year. The median list price for starter homes is $165,015, while a trade-up’s median listing is $289,455. Premium homes are faring better with potential buyers needing to spend less than 1 percent more. The median listing for a premium home is $614,143.
Home sales in February remained 5.4 percent above the levels reported last year, but jumped from 4.69 million in January to 5.48 million last month, according to the National Association of Realtors (NAR).
“Realtors are reporting stronger foot traffic from a year ago, but low supply in the affordable price range continues to be the pest that's pushing up price growth and pressuring the budgets of prospective buyers,” NAR Chief Economist Lawrence Yun said. “Newly listed properties are being snatched up quickly so far this year and leaving behind minimal choices for buyers trying to reach the market.”
Griffins Properties agent Steve Van Wyck said he works with a lot of first-time homebuyers who have had their hearts broken day after day as homes can receive 10 to 20 offers quickly following the listing. Nationwide, properties stayed on the market for an average of 45 days in February, according to data from NAR.
“It’s diving in with all chips in,” Van Wyck said. “Whatever it takes to own a home.”
Sellers previously headed to closings ready to hand over the keys, which is where Theoret said there is beginning to be more flexibility, negotiating time for a seller to find a new house on the other side of closing.
While the inventory is tight and homes sell quickly, the market is not completely out of control, Theoret said.
“The selection is few, but people are still getting into the houses,” he said.
Ogle suggested building more homes in the $300,000-and-below range. Those on the fence about selling also could help increase inventory, he said.
“The word needs to get out that it is a sellers’ market and a great time to sell,” Ogle said. “People’s homes are worth a lot more than they think. A lot of homeowners who are not looking to move don't follow the market conditions. They have no idea that they could sell their home for so much money right now.”
Relief could come in the form of financing, since the Federal Reserve raised its interest rate 25 basis points earlier this month to 1 percent. Two more rate hikes are forecasted for this year, which could push prices beyond affordability and cut buyers out of the market.
The average rate on a 30-year, fixed-rate mortgage was 3.65 percent in 2016, but crept up to 4.15 percent in January and 4.17 percent in February, according to Freddie Mac.
Yun said the affordability constraints could keep renters from buying into homes, suggesting rental demand will remain high.
More houses also find “For Sale” signs in front of them as the weather warms up.
“There’s something to be said about affordability with low interest rates,” Theoret said. “There are more listings coming on the market, but they’re going just as fast because of the pent-up demand. It’s a great time to sell, no matter what time of year.”