Metro Detroit home prices and sales rose in May making some believe the market has turned from a buyer’s to a seller’s market, creating renewed hope for a continued slow recovery in housing.
The strong case comes in the sharp increase in median home price in May compared with the same month last year. Prices are up because supply of move-in-ready homes is much lower than previously thought. The majority of buyers are chasing roughly one-third of all listings.
The other two-thirds of listed homes are less-attractive properties in foreclosure or just in need of repairs from years of neglect during the recession, when homeowners did not have the money to keep them up.
“The housing market, for all practical purposes, has shifted from a buyer’s market to a seller’s market,” said Dan Elsea, president of brokerage services for Real Estate One in Southfield.
The quality inventory on the market in metro Detroit has been attracting multiple bids, pushing the median sales price to $79,000 last month, up 21.5% from $65,000 in May 2011, according to Realcomp, a Farmington Hills-based multiple listing service.
Realcomp reported Monday that 5,023 sales closed in May, which is up by 10.9% from the 4,528 homes and condos that sold in the same month a year ago.
“It’s not a pure seller’s market yet, but the majority of buyers will tell you that it is because they can’t find properties,” Elsea said.
Even so, prices for homes on the market are still roughly 30% below 2000 levels, so it feels like a depressed market. But prices are on the way up.
Jason Matt, a Realtor with Coldwell Banker Weir Manuel in Plymouth, said he thinks it’s a buyer’s and seller’s market at the same time.
“A lot of homes are selling quickly, and buyers have to compete. We have buyers that we cannot find homes for,” he said. “It’s the real deal. We don’t see it dramatically spiking up, but a long, slow recovery.”
A seller’s market is defined as a supply of one to three months of homes for sale at the current sales pace. A normal market is defined as between three to six months of inventory, and a buyer’s market is six months or more of inventory.
The area technically has a 4.1-month supply of homes for sale at the current sales pace, but the market is really operating with a 1.5-month supply of homes that more than 80% of the buyers are chasing, Elsea said.
These homes — 30% of all listings — are the most desirable, priced right and in good shape. They are drawing multiple offers and selling fast with buyers sometimes pushed by the competition to pay above list price.
Nearly half, or 46%, of sales last month were cash sales, and homes were selling an average of 13 days faster with 84 days on the market, Realcomp said.
Inventories dropped 17.6% in May to 27,227 homes for sale in the entire multiple listing service area compared with 33,029 in May 2011. The MLS includes metro Detroit plus parts of the Thumb and Genesee County.
Home inventories are tight because prices have not increased enough to lift underwater homeowners and allow them to sell without taking a big loss.
With 35% of Michigan homeowners with mortgages owing more on their mortgages than the market value of the home, many people simply cannot afford to enter the market.
“The housing market has transitioned from pricing dynamics driven by economic weakness and high shares of distressed sales to one of restricted supply, which will likely exist for some time to come — a reason for optimism in many hard-hit markets,” according to a report released Monday by CoreLogic, a Santa Ana, Calif.-based consumer data company.
Sales gains were seen in all counties, with Oakland County leading the way with a 20.2% boost in sales to 1,717 in May. Macomb County was up 16.2% to 1,070, Livingston County was up 14.8% to 240, and Wayne County rose 1.4% to 1,996.
All four counties included in the metro Detroit stats — Livingston, Macomb, Oakland and Wayne — saw median sales price increases in May. Here’s the breakdown:
• Livingston: $149,450, up 12.8% from $132,500.
• Macomb: $75,000, up 11.9% from $67,000.
• Oakland: $137,900, up 19.9% from $115,000.
• Wayne: $45,000, up 34.5% from $33,450.
The Detroit area, which is defined as Detroit, Hamtramck, Harper Woods and Highland Park, saw median prices rise to $9,562, up 0.7% from a year ago, but sales dropped 18% to 547 in May.