Dearborn-area real estate pros predict, offer advice for 2022 housing market

Link to the original article can be found here. 

The wild ride for home sales — fueled for nearly two years by a pandemic, low-interest rates and shifting work-leisure lifestyles — is slowing.

Like much of the nation, the real estate market in Dearborn and Dearborn Heights is expected to moderate in 2022, but remain strong and active in the year ahead.

“We will continue to have an abundant number of buyers in the market that exceeds the available housing inventory,” said Jeanette Schneider, president of Re-Max of Southeastern Michigan. “We do expect a bit more of a typical seasonal market, and the spring market could be very busy and competitive again.”

Karen Kage, chief executive of Realcomp II, added: “In any given year, it has always been interesting to see an annual January uptick as people act on their living space evaluations from the holidays. That said, the pandemic has had individuals assessing this on an ongoing basis with working and school at home.”

Slower price increases and rising interest rates are expected, according to a survey by The National Association of Realtors.

The industry group predicted that annual median home prices will increase by 5.9%.

The Press & Guide asked veteran real estate professionals to size up the year ahead for the home market in Dearborn and Dearborn Heights.

Participating were:

• Mike Ayoub, real estate broker, Re/Max Team 2000, 23 years experience
• Ted Easterly, associate broker, Re/Max Team 2000, 41 years experience
• Brenda Goerke, associate broker, Real Estate One, 17 years experience
• Robert Marx, Realtor, Century 21 Curran & Oberski, 21 years experience

Q: Will residential real estate have a strong 2022?

Ayoub: The market will remain hot, primarily because it will take a long time to regain inventory. There just aren’t enough sellers out there right now who are anxiously waiting to put their homes up for sale come spring.

Many potential sellers are faced with the same dilemma: “If I sell and get top dollar for my current home, where will I move to? Will I have a challenge buying in this hot market?”

This is a legit concern. When having this conversation, the first question I ask a seller is, “Do you already have a place to move to?” If they say yes, they’re in an enviable position.

Lower mortgage interest rates encourage home buying. We saw historically low rates throughout 2020. Some homebuyers were lucky enough to get rates in the mid-2%. Now, rates have slightly increased, and I expect rates to rise modestly.

Bond traders will cash out and when traders sell mortgage-backed securities, prices will go down and yields up. Mortgage rates will follow yields on that upward trajectory. Rates are likely to continue to trend up through 2022 because inflation will remain elevated. Even if this occurs, we will still see rates low enough to where some buyers will not flinch. Low inventory plus low rates is a recipe for a continuous hot market.

Easterly: Residential real estate is prepared to have another strong year. Prices have continued to rise and inventory is still low. Interest rates may rise, but every time they do — and things slow — they slip back down. There is a balance that suggests little change for the coming year.

Higher prices attract more sellers. Buyers who have missed out are becoming more motivated. Interest rates and prices rising have made affordability lower, but the pandemic has made “where we live” a much higher priority.

Goerke: Spring will still be busy. I see no gloom and doom. No bubble bursting. Some adjusting will happen. Better qualified buyers are good for both sides of the deal. Crazy bidding wars are probably not happening on every deal, but there will be some on sought-after areas and homes. Listing inventory levels will begin to rise in the spring, but will remain lower than normal levels like those seen in 2019. Expect continued shortages of available homes in the entry- and middle-price ranges, which will limit sales in these ranges. Upper-end inventory will be closer to normal levels and sales will continue to rise. Strong demand will continue to keep sales at levels similar to what we’ve seen the past two years.

Inflation, rising prices, taxes will make homes less affordable and limit sales. Higher interest rates could also restrict sales.

Prices will temporarily dip through the balance of this year and early 2022. The decline will in part be due to the quality of the depleted year-end inventory. As new listings arrive, buyer competition and multiple offers will cause prices to rise, but we don’t expect the same level of competition as seen in the spring of 2021

Marx: Based on current stats, it appears that 2022 will remain consistent and strong. Recent month-over-month sales prices have gone up very slightly and days on market have decreased slightly, which is then reflected with a slightly lower months’ supply of inventory (per Realcomp data).

Some potential customers, as well as real estate practitioners, are concerned about a potential foreclosure market as the pandemic (hopefully) winds down. According to recent data, foreclosure/forbearance numbers are down month-over-month, but up over last year at this time. Michigan is not in the top few states for forbearance/foreclosures.

“Despite concerns about a pandemic-driven wave of defaults, mortgage delinquency rates and foreclosure starts have continued to decline due to government and industry programs, and a recovering U.S. economy,” said Rick Sharga, executive vice president of Realty Trac.

Q: What advice do you have for buyers and sellers in the year ahead?

Ayoub: Buyers should get pre-approved for your max amount, especially because you may have to pay asking or above-asking. Be prepared to make an offer immediately. Homes are selling in a matter of days and sometimes hours. Throughout this past summer, the average days on market was in single digits. That’s come up to approximately 12 days on market. You still need to be prepared to act quickly.

If you really like a home, and there are multiple offers, go above asking. Don’t be surprised if your real estate agent advises you to go 10% over asking. The demand is there, and people will pay. We’re seeing some of our clients offering well above asking and still not winning out. I had a buyer offer $575,000 on a home in Canton listed for $525,000. The winning bid was $620,000 —  $95,000 over asking!

The following will most likely decide if you’ll end up with the winning bid:

• Appraisal waiver. This means that you will buy the home for your offer price, regardless of what the home appraises for. If the home doesn’t appraise, you’re agreeing ahead of time that you will pay the difference on top of whatever your down payment is. You obviously will need to have extra money to do that.

• Waive or reduce the private inspection period. Consider walking your inspector/contractor through prior to submitting an offer. They may give you the thumbs-up at that moment. You may also decide against an inspection and completely waive it when making that offer. If you want to have one done, it’s smart to make that inspection period as short as possible. Try to get it done within 1-3 days. Many sellers, with a really strong offer, may be willing to consider an offer with an inspection clause if that inspection is completed really quick.

• Offer sellers free occupancy after closing if they need it. Some sellers will need to occupy the property post-closing for a period. If that’s the case, a buyer should strongly consider giving them that time at no cost. Normally, when a seller stays past closing, they become a tenant in the home and pay new owner rent.

In today’s hot market, some buyers will buy sight unseen. But sellers should consider at least the following:

• De-clutter: Simply toss what you don’t need and put away the rest. Let potential buyers walk through the home and give them the opportunity to see the home as neutral space. It will allow them to imagine what life would be like if they lived there.

• Paint: Interior and exterior if needed. A fresh coat of paint goes a long way. Using neutral colors is key.

• Landscape: You don’t need a complete overhaul. If you have mulch, top it off. Trim bushes and plants.

Easterly: Buyers need to be well prepared if they want to compete with multiple offers. Talk to the lender first and have an updated pre-qualification or pre-approval.

Listen to your Realtor regarding the value of the property you are interested in; sometimes they are priced too high and sometimes they are not. Your Realtor will know.

Know your tradeoffs, which items are more important than others. Do a budget. Every home will need updates, repairs and or improvements over a period of time. Be careful not to overspend.

Goerke: Buyers will be better qualified with more funds to put down. I have had a lot of first-time buyers ask what they can do to be more prepared. I tell them to save money — as much as they can and get the debt paid down. Not fun, but necessary. I tell them interest rates will change and they need to be able to still afford the home they want.

The majority of my sellers are older. They are taking advantage and cashing in equity and either downsizing or moving to what was a vacation property (Up North, Lake Columbia in the Irish Hills, West Michigan near Saugatuck, or Florida or the Carolinas). Some will be back in spring to buy a small condo close to family here. With prices the way they were, they decided to hang out in the warmth over the winter and wait for the pace to slow. This is a great time to sell due to less competition. Desirable areas and well-taken care of homes are still selling quickly.

Marx: I have cautioned my buyers to be very conservative in making offers. As much as they would like to win a bidding war, sometimes it’s not in their best interest. In the past couple of months, we’re still seeing some multiple-offer situations, but buyers would be wise to check on homes that have been sitting for a bit in hopes of getting a better deal.

I caution sellers to not get greedy. I’ve seen sellers try to price at the top end of what would normally be the highest of bids, rather than what the current market price would be. That often leads to frustration as the buyers might reject that as a starting point and not make a bid at all. The market will tell you where to go. Using a competent agent will still get you a fair or better price.

For those who definitely have to move: Remember, it’s all relative. You might sell at a high point in the market, but you’ll be buying at a high point, as well. Luckily, low-interest rates continue to help out on the financing side.

Q: What pandemic-related conditions do you expect to influence the market next year?

Ayoub: The obvious and, in my opinion, the most important, is we still have a pandemic. Will we shut down again? Will those who returned to work be forced to go back and work out of the house? Will there be layoffs? Nobody knows for sure, but we will need to keep an eye out as we navigate through buying and selling real estate.

Other factors that will influence the market? Inventory. As I often say, people fell in love with their homes again. This is why we’re seeing lines at Home Depot and contractors are months out before they take on more work. What does this mean? It means fewer people are likely to sell their homes. It means people are enjoying their homes and their new, completed projects.

We are living in a time of uncertainty. We don’t know where we go next with this global pandemic. It has changed the way we work, live and play. As for now, we are transitioning from a super-hot real estate market to a normal hot one.

Easterly: The pandemic is not going away, but it is making our home more important. Make the best decision for yourself.

Goerke: People are looking at home differently. I think it means safety and family. The pandemic did that. Some companies will stay remote. It is cheaper and is working.  Some will hybridize so they can pivot as this virus does.

What people want is a little different than pre-pandemic. I am seeing more requests for pools and outdoor living space and higher-end finished basements for more indoor living space. I am getting asked about walkout basements and even small cottages on larger properties. Buyers need extra space for family.

Baby boomers are downsizing or rightsizing into homes that make more sense. I have been getting a lot of sellers that want to know about multigenerational living. Our family did this for more than 15 years. Homes are expensive, but pooling resources and buying something that fits several generations together is smart and helps conserve generational wealth.

The pandemic and the mess in senior living facilities — where no one could go in or out — was devastating to families. Adult children took their parents out of these facilities and made do with what they had at home. Now they are trying to find a better solution.

Children and grandkids have been searching and getting beat out on every house. They are moving home to save more, get better childcare options and family is much more important everyone. One perfect house for everyone makes sense. The builders have not caught on and there are only so many of these large ranches available. A good contractor is valuable. There are a lot of issues and care options that need to be addressed. This market share is growing, but you need someone who understands it to get it right. These homes are generally nonconforming, so it takes a perfect buyer family to make it work. The market share for this lifestyle has gone from 11% pre-pandemic to 15% in a year. This trend may continue to grow.

Marx: Here’s hoping the pandemic is winding down and coming to an end.

Due to the lockdowns and people having to work at home, we are seeing a lot of companies go to that move on a more permanent basis. Many folks are finding out that they can work just as productively at home, so they are looking for a new home with a dedicated space to do just that.

Without getting too political, I know people are tired of not being able to do what they need to do for work or play. So, in the event that further restrictions come into play, I know there’ll be some pushback. That said, we saw how the market took off the first time around. I wouldn’t be surprised if further restrictions resulted in the market being squeezed again and the result being less and less inventory and rising prices as a result.

In the moment, though, we are seeing things level off just a bit —  not quite a normal buying and selling market, but certainly not the craziness we had in the spring.

Market highlights

The Dearborn-Dearborn Heights market for home sales remained strong as 2021 entered its final month, according to data from leading real estate services.

Realcomp, Michigan’s largest multiple listing service, said November sales in the combined Dearborn-Dearborn Heights market topped the year-earlier month by 7.2%, 208-194. The median price was $182,500 — a 6.7% increase from November 2020.

Realcomp said November closed sales increased 12.6% in Dearborn, to 116  from the 103 the year-earlier month. The median price climbed 15.6% to $208,000. Closed sales on 81 homes in November in Dearborn Heights was 6.6% greater than 76 a year earlier. The median price slipped 8.8%, to $150,000 from $164,500.