Washtenaw Housing Report August 2018

Is the market shifting?

Increasing Number of Price Reductions

Over the past few months, there has been an increasing number of listings with price reductions. In May, 26% of Washtenaw County active listings had at least one price reduction. By August, 38% had reductions. Is this a sign that the market is shifting?

Comparing last year to this year (the dark columns represent reduced 2017 active listings), we see the same pattern with the frequency of price reductions rising through the summer. The rising numbers are primarily seasonal. As sellers sense the end of summer approaching, they often adjust their prices in their attempt to land buyers who may be looking to be settled before the start of the new school year.

July Closed Washtenaw County Sales

Year

Closed Sales

Avg. Sale Price

% of Price Reductions

2015

2,242

$281k

26%

2016

2,270

$300k

25%

2017

2,218

$316k

21%

2018

2,097

$339k

19%

When comparing YTD closed sales from this year with sales from the previous 3 years, the Washtenaw County market is holding its own. Although closed sales have been down, closed volume and average sale price were both up and the percentage of properties that had price reductions prior to selling were lower than any other year.

This year, 57% of Washtenaw single family sales were at or above the full asking price—the highest in the past 4 years. A market shift will come, but the current numbers suggest that while there has been some leveling, the 2018 market is still holding its own even when compared to some record setting prior years.

Declining Affordability

Real estate values have been appreciating faster than incomes for the past 7 years. Interest rates are roughly one point higher than they were a year ago. While a 1% shift in interest rate doesn’t sound like much, on a $100k home it increases the payment $58/month. That’s just the interest.

The average sale price also rose 6% over the past year. Combining the interest with price appreciation, a home that cost $100k last year will now cost $106k and will be financed at roughly 4.5% instead of 3.5%. What would have been a $449/month payment (principal and interest) for that $100k house last year will be $537 this year—$88 higher.

Whatever the price range, by combining the rise in interest plus a 6% increase in average price, the monthly payment of the same home this year will be about 20% more than what it would have been last year. Buyers who have been struggling to find quality inventory in the past are now faced with eroding affordability.

Looking Ahead

While there is some shifting and leveling, Washtenaw County values continue to climb. With declining affordability expected to continue, both buyers and sellers who are thinking of moving should act sooner rather than waiting. Historically, interest rates in the mid 4’s are still amazing low. It might be a mistake to assume they will remain this low.

This article is from the August 2018 Housing Report. To get more in-depth info about the Washtenaw County housing market, Download the full report (PDF).