Home prices are shooting up across metro area, especially in Detroit

JC Reindl | Detroit Free Press

Home sale prices continue to shoot up across metro Detroit, delighting many sellers but causing nightmares for the would-be buyers who keep getting outbid for the few properties on the market.

Some of the biggest price jumps have happened in the city of Detroit, where home values hit rock bottom following last decade's market crash.

Across the metro area – defined as Wayne, Oakland, Macomb and Livingston counties – the median sales price of a home or condominium was $194,900 in June, up nearly 5 percent from a year earlier, according to Farmington Hills-based Realcomp multiple listing service, which doesn't count private sales or for-sale-by-owner transactions.

Real estate agents say the relative scarcity of home listings in southeast Michigan has been pushing prices higher.

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The total listings across metro Detroit was down nearly 22 percent in June from last year, according to Realcomp, and the number of sales fell 8 percent.

In the city of Detroit, the median sales price hit $38,500 in June, up 41 percent from a year earlier, according to a report released Monday by Realcomp.

Detroit's median home sales price is now about 275 percent higher than it was five years ago ($10,325), back when many houses in city limits still sold for less than the cost of used cars.

"You have to put that in perspective, but at least it’s coming up – and it’s coming up pretty quickly," Realcomp CEO Karen Kage said of the sales price increases.

For sellers in metro Detroit, houses can get multiple offers within just hours of hitting the market. The average number of days on the market is down to 25.

The sweet spot for sellers is generally between $175,000 and $350,000, agents said.

Successful buyers will often offer above asking price and, if caught in a bidding war, may waive contingencies such as the home inspection to make their offer more attractive.

Nearly 90 percent of houses have been selling for above asking price, said Hassan Ahmad, an associate broker with RE/MAX Leading Edge in Dearborn Heights. Buyers typically bring extra cash to the closing in those circumstances because their offer can exceed the appraisal.

"It’s definitely a seller's market right now. Many of the listings used to sell in a few days, now they’re selling in a few hours," Ahmad said.

Overall, home prices across metro Detroit were up 88 percent this spring from their post-recession lows in April 2011, according to April figures from the S&P CoreLogic Case-Shiller national home price index.

Amid the current competition for listings, would-be buyers have been making offers on about 10 different homes before one of their offers will get accepted, he said.

“There’s definitely some frustration for the buyers," he said.

Realtor Jason Hill of Historic Realty Detroit recalled how a client of agent Lisa Funchess in his office recently received nearly 20 offers in the first 24 hours of listing a three-bedroom bungalow in Oak Park for $170,000.

The house ultimately sold for $195,000 to a buyer who made up the difference between the offer and the property's appraisal.

Hill said they were surprised by how intense the interest was in the house.

“People are either getting priced out of Royal Oak and/or Ferndale, and so Oak Park becomes like the new Ferndale and the new Royal Oak," Hill said.

Although many houses in the city of Detroit still sell for less than $100,000, the large number of property investors scooping up properties can still make buying a challenge for those who can't pay in cash.

Detroit neighborhoods including East English Village, University District, Sherwood Forest and Bagley are viewed as especially hot.

“When you do have a home in an affordable neighborhood like a Bagley, there is a lot of competition with investors wanting to buy in those markets," Hill said. "So if you are a first-time home buyer, you are competing with a cash buyer.”

Bob Tesh, marketing director for Detroit-based Downtown Realty, said the housing around the city's Avenue of Fashion on Livernois is also seeing a lot of buyer interest.

"It’s all these beautiful big homes, and everybody is willing to put their money in there," he said.

Many Detroit home buyers who aren't property investors get financing assistance through programs such as the Neighborhood Assistance Corp. of America and the Detroit Home Mortgage program.

The programs write loans that traditional lenders might not, due to appraisal issues, the low price of a home or the condition of a property that needs significant repairs. Seller-financed deals, known as land contracts, are still happening in the city but are less common than in past years, according to Tesh.

"The major banks, the way they do their calculations, really don't work for Detroit many times," Tesh said.

Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @JCReindl.

Median home sales prices in June by county

Wayne: $139,500, up 6.1 percent.

Oakland: $259,900, up 4.4 percent

Macomb: $169,950, up 3.6 percent

Livingston: $270,000, up 8 percent

Washtenaw: $286,200, up 8 percent

Monroe: $169,950, up 8.1 percent

Source: Realcomp data released Monday