JC Reindl

Detroit Free Press

Inventory of for-sale homes was especially tight this winter

Metro Detroit home prices will be about 7% higher this spring than last year as selling season gets under way, essentially back to late 2007 levels, according to the latest Standard & Poor's/Case-Shiller Home Price index released Tuesday.

Local real estate experts say the still-tight inventory of for-sale homes has helped to lift sale prices. Multiple offers and bidding wars made a return this winter, frustrating some would-be buyers.

However, the arrival of spring, with its influx of new listings, should help boost the availability of homes and restore some balance to the market, said Realtor Jason Matt of Keller Williams in Plymouth.

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Matt said the first quarter has been a definite seller's market, with properties often attracting several offers. That dynamic proved especially discouraging for FHA buyers, who routinely get outbid on homes when demand outpaces supply.

"They are really struggling because with multiple offers and people putting 20% to 30% down with a conventional mortgage, it really is hard if you're that FHA buyer and need a few concessions," he said. "So I said, 'Hang in there.' A lot more people are putting their home on the market in the springtime, and we're seeing inventory rise slightly."

The closely watched index showed housing prices rising 7.1% in January compared with a year earlier across Wayne, Oakland, Macomb, Livingston, St. Clair and Lapeer counties.

That's 60% higher than the lowest point in April 2011, but still about 18% below the metro Detroit region's housing price peak in late 2005 and early 2006, the index shows.

Despite the region's price rebound, many homeowners still lack enough equity to sell, which has constrained the available inventory, said Joe Sabatini, vice president and regional director for RE/MAX of Southeastern Michigan.

"The second problem is that the individual who does have equity in their property and can sell, there's such a small amount of inventory for them to choose from and so they can't move," Sabatini said. "They're kind of stuck in a situation where they'd love to move and buy up, but the problem is once you sell your property, where do you go?"

Nationwide, the Case-Shiller index showed home prices rising 5.4% year-over-year in January. Portland, Seattle and San Francisco experienced the highest gains with 11.8%, 10.7% and 10.5% price increases, respectively. The smallest annual increases happened in Chicago (2.1%), Washington D.C. (2.2%) and New York City (2.8%).

“Home prices continue to climb at more than twice the rate of inflation,” David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said in a statement. “The low inventory of homes for sale — currently about a 5-month supply — means that would-be sellers seeking to trade-up are having a hard time finding a new, larger home."

"While low inventories and short supply are boosting prices, financing continues to be a concern for some potential purchasers, particularly young adults and first time home buyers," Blitzer added

The Case-Shiller index is a lead indicator of home prices, although its data lag the market by several months and doesn't specify actual sale prices.

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A report on February home sale prices in metro Detroit by the Realcomp multiple listing service showed the median price at $138,000, up 7% from a year earlier. And total sales were up nearly 14% compared with February 2015. Private sales and for-sale-by-owner transactions were not included in the Realcomp figures.

Sabatini said he anticipates more modest gains in local home sale prices for the next few months and noted how mortgage rates are still near all-time lows. The interest rate on a 30-year, fixed-rate mortgage was 3.7% last week, according to loan enterprise Freddie Mac, the same average rate as March 2015 and below the 4.34% rate of March 2014.