Is it a good time to buy or sell a home in Ann Arbor, Michigan?
Here is what to expect for the Ann Arbor real estate market in Spring 2023.
Home Sale Prices Continue to Move Up.
Year to date, Ann Arbor home prices are up 6.9% (as of 5/1/23). Home sale prices continue to rise even though rising interest rates have increased the price of purchasing a home by approximately 24% over a year ago. Many people predicted a fall in home sale prices as rates priced people out of the market.
The mismatch between supply and demand will likely sustain prices. When Interest rates began to rise sharply a year ago, predictions were for a substantial decline in housing prices and maybe even a market crash. The market has proven to be quite resilient, and prices are still rising! Demographic trends, record home equity, a shortage of new homes being built, and record savings in banks are all fueling continued strong demand for homes and buyers with the ability to pay!
According to the Urban Land Institute, rising rates correlate with rising prices because interest rates usually increase in a strong economy to fight inflation. (We have seen the Federal Reserve aggressively raise interest rates over the last year).
“One might expect sharply higher rates to slow home price appreciation to below-average levels… Although we do expect home price appreciation to decline, we believe it will remain above its more-than-45-year average of 5.1 percent.”
Are We Still In a Seller’s Market?
Ann Arbor remains in a strong seller’s market in the Spring of 2023. Even as interest rates and home prices have risen, sellers with homes in top condition and in the best locations are being amply rewarded with closing prices at or above last year’s highs.
Homes in lesser condition are seeing increased time on the market and price reductions. While many buyers have been priced out of the market because of higher interest rates and steadily increasing home prices, those with the means and need to purchase are looking for move-in-ready properties and are willing and ready to pay for them.
Inventory Is Still LOW.
The market is moving toward a more balanced market; slowly, we are seeing inventory and time on the market begin to rise, and we are seeing buyers being able to negotiate repairs and concessions a little more successfully than last year. However, Ann Arbor’s inventory of homes for sale is under two months, well below a balanced market level of 3-6 months’ supply.
Can Even I Find A Home In This Housing Market?
Successful buyers this spring and summer will know their target neighborhoods and the amenities they require in a home. They’ll have their financing in place to quickly and confidently place a competitive offer when the right property hits the market.
Buyers, be prepared. Only a few good options will be available at any given time.
The supply of inventory is so low that all buyers in the most popular price bands are all literally looking at the same small few properties! If you have been searching online for homes, I am sure you have noticed how fast they go under contract! Because of this, homes in top condition are selling immediately. Homes in lesser condition may sit on the market, though.
Will The Market Cool Down This Summer and Fall?
The market will be hot and cold. After a scorching hot spring 2022 market, we saw a very slow summer market and then an extremely slow 4th quarter. Then a winter sales surge to start 2023, and here we are again in the hot spring market. Prices will be hard to predict.
Summer is typically a slower time for real estate; Fewer buyers and sellers in the housing market as families and people relocating to Ann Arbor for the University of Michigan are completing their moves in the next few months.
Expect Fewer Total Home Sales in 2023
With fewer discretionary moves taking place, the market could become quiet. NAR predicts 4.78 million existing-home sales in 2023, down 6.8% from 5.13 million in 2022. Some experts expect total home sales (units) for the year to be off 20% or more from peak sales levels.
According to JPMorgan Chase CEO Jamie Dimon,
“American consumers should be prepared for higher interest rates, for longer. I don’t know if it will happen, but be prepared for that tide.”
There is very little chance interest rates will drop much, and they could increase as the Fed continues rate hikes. We expect rates to range from 5-7 percent this year.
Inventory will remain low as sellers refinanced when rates were very low and cannot replace that rate/payment now in a new home purchase. Add Michigan’s pop-up tax, and staying in your present home is often the more economical option.
It may take longer to find the right home. Have your finances in order and an updated bank pre-approval. Be clear on your target neighborhoods and watch for the next home to hit the market. Good homes are hitting one at a time and going under contract quickly. Homes in excellent condition and priced right can still sell their first weekend on the market, some with multiple offers.
This summer, you may have a little more time to consider a property, fewer bidding wars, and more negotiating power on inspection items than at the peak of the spring market, but you may be surprised by the strength of the market. The average home in the Ann Arbor MLS is on the market for a little more than one month in May 2023.
We are here to help. If we can answer any real estate questions or help you put together a plan to buy, sell or invest in real estate, please get in touch with us.