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Observation Of One Hot Market

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Michigander

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Was just trying to do a quick snapshot on what is happening in one area of my market.


Interesting statistics - median asking price of a house sold in the Ann Arbor school district, area 82 only, over the last six months was $298,000. This encompassed 143 total sales. The current median list price of the contracted properties in the same area (and the GLA was similar for the median) is $350,000 with 50 contracted properties. Since we are only comparing median list prices, this alone indicates an increase of 17.45% in the area in six months.

Assuming the list to sales price ratio is similar it shows greater than 17% and because of the number of multiple offer scenarios we've been having, likely a tighter ratio, meaning a greater increase.

Has our median household income risen 17% over the past six months?

If interest rates have increased on average half a percent, and a buyer for the typical house has 20% down payment, that means just on the monthly payment of the mortgage alone, the payment has gone from $1,104 (3.75% 80% LTV on 298K) to $1,377.43 for 4.25% at 80% LTV on 350K. This means the payment on the mortgage itself has increased almost 25% in six months based on these calculations.

How sustainable is this?
 

A K

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Do you think that the demand in your area is Trump related? Maybe the region is growing jobs.
 

Michigander

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Joe, not Trump (this is the liberal bastion of the Midwest). The university has hired, but it isn't just the university. We have a real lack of inventory. It is actually pretty acute, and building costs have skyrocketed so we don't have that normal pressure valve available.
 
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A K

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My cousin teaches at Ross and bought a house in Ann Arbor a year or two ago.
 

Michigander

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My cousin teaches at Ross and bought a house in Ann Arbor a year or two ago.

I just ran one year as opposed to six months, and it looks like there was some seasonality in place as well. When I run one year, the increase is only 11.11% in the median price. But still, with the increase in interest rates the effective rate is higher. Our wages are not up to that degree, and we are now higher than pre-bubble bust of 2004-5 (our zenith in prices).
 

A K

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I think we are about to see all areas breaking out to highs in the coming years. In my area the close in areas did that around 2013. The outer areas did not but are showing signs of high demand and low inventory right now. Distressed sales have dried up. I don't know if you are excluding distressed sales in your analysis but I think distressed sales drying up could could by itself boost median price by 10-15%.
 

Michigander

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Michigan
I think we are about to see all areas breaking out to highs in the coming years. In my area the close in areas did that around 2013. The outer areas did not but are showing signs of high demand and low inventory right now. Distressed sales have dried up. I don't know if you are excluding distressed sales in your analysis but I think distressed sales drying up could could by itself boost median price by 10-15%.

We haven't had many distress sales since 2012. Almost a non factor in the area 82 (is still in some, and I have segmented those normally). We hit bottom around 2009 here. Maybe 2010 in some places. We've been over pre bust prices in area 82 since 2015 I believe. I have been waiting for a collapse again for a couple years. Good thing I am not trying to beat the market, but I do want to buy and haven't because I can't wrap my head (or budget) around the current prices.
 

Mike Garrett RAA

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What? Not expecting a gigantic collapse?
 

Michigander

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Certified Residential Appraiser
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Michigan
This overview is dated but probably somewhat relevant. Waiting on prices to fall can be a fools game, with so many other factors such as personal housing needs and interest rates coming into play.

https://www.huduser.gov/portal/publications/pdf/Ann-ArborMI-comp-16.pdf
Thanks Greg that's good stuff. It is a little dated but I think that it is probably correct in terms of the housing and where we been. I appreciate this and I was not aware of this kind of information. Very good stuff and thank you again
 
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