JC Reindl, and Kristi Tanner

Detroit Free Press

One of last year's big surprises for real estate agent Caitlin Phillips came after a client made a cash offer for $700,000 for a 1920s house in Ann Arbor Hills and they were outbid.

She assumed the offer would win, even considering the area's fast-rebounding home prices and slim inventory. She and the client were quickly back on the prowl for new listings and with a new sense of the strength of the real estate market.

"Last year it just kept moving forward — we didn't have any stop," said Phillips, with Keller Williams Realty in Ann Arbor.

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An analysis by the Free Press of sales data for existing homes from 2009 through most of 2015 shows housing prices are finally back to prerecession 2007 levels across much of southeast Michigan, with some of the most dramatic gains in Oakland Township and in pockets of Livingston County such as the Howell and Gregory areas.

Even the city of Detroit saw huge percentage increases in ZIP codes where houses once sold for just hundreds or a few thousand dollars.

Other markets with significant rebounds since the recession's official end in 2009 include West Bloomfield, the Grosse Pointe communities, South Lyon, Taylor, Belleville, Ray Township and even Pontiac.

Nearly every community in southeast Michigan saw prices bounce back at least 20% in those six years. Birmingham saw median prices rise more than 50% to $305,000 from $200,000. Houses in Rochester Hills sold for $261,2650 last year, up 47% from 2009.

Using the app? Tap here to see median home sale values by ZIP Code

Homeowners in St. Clair Shores who have been anxiously waiting for their home values to rise have gotten some relief with increases of about 30% since 2009.

Real estate insiders attribute the region's home price increases to the state's improving economy, better consumer confidence, still-low mortgage rates and still-tight inventories of move-in-ready homes, especially entry-level houses priced around $200,000 and under.

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"Our big problem is that these people want to buy houses and I don't have the inventory to support it," said Realtor Andy Hargreaves of Coldwell Banker Preferred in Plymouth.

Back from near-dead

The latest Standard & Poor's/Case-Shiller Home Price index shows that while metro Detroit housing prices are back to fall 2007 levels, they're still about 18% off the region's price peak of late 2005 and early 2006, before the economy slowed.

Sale prices are finally at or close to their prerecession levels in most areas and fewer homeowners are underwater on their mortgages. Those factors pushed total sales for existing homes in Wayne, Oakland, Macomb, Livingston and Washtenaw counties to more than 66,600 for most of 2015 — the highest level since the recession, according to an extensive review of housing sales data by the Detroit Free Press.

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The median sales price last year for existing homes was $206,900 in Washtenaw County, $206,000 in Livingston County, $179,000 in Oakland County, $128,500 in Macomb County and $90,000 in Wayne County, according to the data collected from local deed offices.

A ZIP code by ZIP code analysis shows the region's greatest price increases since 2009 have typically occurred in markets such as Detroit, which are rising from extremely low sales prices, even below that of many used cars. But home prices in areas including Southfield, Howell, Oakland Township, South Lyon, Highland Township and Gregory also saw big price gains in the past six years.

The city of Detroit also was home to a ZIP Code that saw a rare sales price drop — a 64% decline to $15,000 since 2009 for a home in the 48217 southwest neighborhood that has been dubbed Michigan's most polluted ZIP code.

Supply will get better

Inventory is getting better in some southeast Michigan neighborhoods, helped by new housing construction, which marches ahead in hot spots including South Lyon and Oakland Township.

Several agents interviewed for this article said they expect inventories of for-sale homes to further improve as mortgage rates inch up and prices begin to stabilize. Overall, many predict 2016 will offer a more balanced market for buyers and sellers.

"I think we're going to see this year an influx of listings competing with the new construction," said Caron Koteles, an associate broker with Real Estate One who has witnessed the tripling of sales prices in parts of Oakland Township amid a flurry of new home construction.

"What we see now is a tremendous amount of sellers gearing up to make this year their year to sell," said Phillips, who is in Washtenaw County. "That's going to give us those inventory numbers that are going to stabilize those prices a little."





The expected rise in mortgage rates will likely affect the housing market this year to some degree.

Bill Emerson, CEO of Detroit-based Quicken Loans, said in an MSNBC interview last month that people looking to buy a house or refinance their mortgage have a three- to six-month window before mortgage rates start to rise appreciably.

However, he doesn't expect rates to significantly impact the size of properties that people can afford until they exceed 5%, which he thinks could happen in 2017. The average rate last week on a 30-year fixed mortgage was about 4%, according to a Freddie Mac survey.

"So I think that you have an opportunity here in the next six months to take advantage of still very, very historic low mortgage rates," said Quicken's Emerson, who is chairman of the national Mortgage Bankers Association.

Bulldozing and building

One fairly new trend that took off in 2015 involved buyers who snapped up modest ranches or bungalows, priced $150,000 to $200,000 and within walking distance of popular suburban downtowns in Royal Oak, Ferndale, Northville, Plymouth or Berkley. They then bulldozed the small house to build a larger new house for around $500,000 to $800,000 that ended up filling much of the lot.

"We even have a lot of investors who are just knocking on doors of smaller homes and offering them cash, and (the homes) are not even hitting the market," Hargreaves said.

The average value for a new single-family home construction permit in metro Detroit was $281,438 in November, or 7.5% higher than in 2014, according to the Home Builders Association of Southeastern Michigan. The number of new-home permits, however, was down 8% in the first three quarters of this year compared with the same period last year and far below prerecession levels.

Agents say that so-called starter homes in the suburbs priced around $200,000 and below were especially popular and hard to come by in 2015 — and not only among those who wanted to buy one just to tear it down.

"A majority of the market is first-time home buyers, so there is less of that inventory but more of those buyers," said Frank Tarala, a private real estate broker with Principal Brokers Network in Rochester. "It seems like the only entry-level housing that gets constructed new are condos ... that seems to be the only new quality entry-level product available."

Don't price it too high

Higher up in the market, the inventory of metro Detroit homes priced above $400,000 has been growing and even outpacing sales, according to a recent market report by Real Estate One. If such houses are priced too aggressively, they can easily languish on the market and become even harder to sell.

"For homes on the market under 30 days, there appears to be strong buyer interest, similar to that in the more active, lower price ranges," wrote Dan Elsea, president of brokerage services with Real Estate One. "But as the time on the market grows, the buyer interest narrows considerably."

Lynn Caldwell of Sine & Monaghan Realtors stressed the importance of realistically pricing homes, even if the current market still appears tilted to favoring sellers.

"The sellers who are pricing their houses right are selling them right away or they're getting multiple bids," said Caldwell, who observed sale prices up 8% last year in the Grosse Pointe communities, and 10% in St. Clair Shores. "The people who still are not in reality and say, 'No, I want to get top dollar,' those houses are just sitting on the market."

One market that is more forgiving of ambitious pricing is Ann Arbor, which has blossomed for sellers every spring since 2012, frustrating many would-be buyers.

Proving her observations, Keller Williams' Phillips said she recently conducted a market analysis for a $200,000 house on the west side of Ann Arbor and saw that eight similar properties all sold for about $30,000 over their asking price last year during the months of April through July.

On the whole, agents said that 2015 was a strong year for the real estate business and 2016 could be, too.

"Every spring we have more demand than we have supply," Phillips said. "It will be seven offers for every house."



