Housing market cools a bit

Local sales slow down, median price drops

Thursday, September 2, 2004
BY MIKE RAMSEY
News Business Reporter

The housing market around Ann Arbor has swung decidedly toward the buyer as more homes are sitting on the market for longer periods and eventually selling at lower prices, according to several real estate agents.
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The Ann Arbor market, which has seen remarkable growth in both values and the number of listings in the past five years, has largely been unaffected by the shaky economy to date. But there are indications prices might start falling due to oversupply.

July figures from the Ann Arbor Area Board of Realtors showed a drop in the median home price compared with July of the previous year from $239,000 to $230,000. It also showed a 25 percent increase in the number of homes pulled off the market.

The drop comes within the context that median residential home sales prices had been $179,000 in July 1999 and steadily increased until this July.

Officials with the Ann Arbor Area Board of Realtors have said July's figures are not an indication of a downward trend and that the market is strong. But several prominent agents disagree.

"Real estate is supply and demand. What we've got is an awful lot of inventory and not enough buyers," said Martin Bouma, one of the top-selling agents at Keller Williams Realty of Ann Arbor.

Bouma said there is a large inventory of properties on the market heading into September, a bad sign because sales are much lower during the colder months.

Bouma keeps regular statistics on market absorption. Absorption is tracked by determining the ratio of properties advertised in various price ranges to the properties in those categories that have sales contracts on them.

According to his figures, most categories in the Ann Arbor market are considered buyers' markets because fewer than 25 percent of the properties listed have sales pending. Worst hit are the homes listed at more than $800,000, which have an absorption rate of about 5 percent, he said.

Bouma, who carries between 50 and 60 listings at a time, said people trying to sell condominiums are in a particularly difficult situation.

In the Weatherwood and Heatherstone condominium complex near the Meijer store on Ann Arbor-Saline Road, there are 31 condominiums for sale, a large number of units in a similar price range. Bouma said the competition in the market has led to desperation among sellers, especially those who had purchased another home with the expectation of selling their condo.

"I've got about 10 people that way that are absolutely beside themselves," he said.

Bouma said new condominium complexes have sold well, taking the buyers from the existing condo market.

Some homes listed at more than $400,000 have been slow to sell and when they do sell, it's below their list price.

David Mueller, an agent with the Edward Surovell Co., said "it's a tough time to be a listing agent."

Mueller cited personal experience as an example. He purchased a new home earlier this year and put his existing house on the market for $437,000. After months of inactivity, he reduced his price several times and eventually sold it for $407,000, well below the comparable sales in the area.

"It's a great time to be a buyer," he said. "The supply-and-demand curve is out of whack right now. There's just too much inventory right now."

Mueller said he thinks there is a general uneasiness about the economy, including the welfare of the big automakers, the war in Iraq, the up and down stock market and uncertainty about the presidential election.

The competition for buyers has become fierce enough that sellers have been willing to take losses to sell their property, Bouma said.

Bouma said more people are bringing money to the closing table. Especially vulnerable are people who refinanced their homes to take advantage of a high appraised value. They are finding now that their homes won't sell for as much as they owe.

Meanwhile, the U.S. Commerce Department reported last week that national sales of both new and existing homes fell by more than 6 percent in July compared with June.

National economists have pinned the slowdown to threats of rising interest rates that drove people to buy houses in May and June. Rates briefly increased and then fell again, leaving buyers uncertain about when or whether rates would be climbing soon.

Jon Boyd, a broker who only represents buyers, said the number of people looking at houses hasn't fallen dramatically. But the number putting offers on houses has. Some buyers have told him that they are waiting on the outcome of the presidential election.

"I'm not sure if it's people who are worried about the outcome of the election, or if it's people worried about interest rates going up or what," he said.

Still, David Kwan - a developer who has about 150 condominiums units in various stages of construction in Ann Arbor, Scio Township and Chelsea - said he doesn't sense a real slowdown.

"Things have picked back up. This slow summer may be emerging into a stronger stance," he said. "There's been a pause in the $400,000 and up market, but it's picking back up."

Mike Ramsey can be reached at mramsey@annarbornews.com or (734) 994-6864.