Real estate: Supply and demand rule the roost | Business
Editor’s note: This article originally appeared in the special publication Record-Eagle’s Momentum ’22. For more stories about Northern Michigan’s economic engine, click here to read Momentum in its entirety online.
TRAVERSE CITY – Supply and demand rule the Traverse City housing market. Demand is high and supply is low, so prices have gone up.
“I often call it binge eating,” said Renae Hansen, Associate Broker and Realtor for Century 21.
“We have a very, very low inventory. I don’t know if we have more buyers than usual, but the buyers we have are all competing for very limited inventory. »
“We say stocks have been low for 10 years. I finally looked at it, and it’s been steadily declining for 10 years. It is the law of supply and demand. With low stocks, prices will go up,” she said.
“It’s a national phenomenon, not just in our region.”
But would-be buyers looking for accommodation in Traverse City could be forgiven if they think it’s a local phenomenon.
Imagine someone walking into the real estate supermarket in Traverse City and finding nearly empty shelves. They wander down the aisles and eventually spot something on the shelf – not exactly what they wanted, but it will assuage their hunger. They walk to the cash register only to find someone else hurrying up and yelling at the clerk that they will pay more than the posted price. Swallowing his pride, the first buyer pulls out a credit card to pay off this inflated amount. But it’s too late – the cashier has already sold the item to a third buyer who has shelled out even more money – in cash.
“Our market right now – this year and last year – is 36% cash buyers in our five county area: Grand Traverse, Leelanau, Antrim, Benzie, Kalkaska,” said Sam Flamont, realtor at eXp. Realty.
“I think right now what’s happening: Traverse City is becoming very trending nationally,” Flamont said. “It’s starting to get more national attention than we’ve ever had, because of the number of direct flights we have and where they’re coming from.”
“When a city becomes trendy, like Aspen (Colorado) or Jackson Hole (Wyoming), you start attracting buyers from everywhere. You start attracting people with lots of money who want to be there. people with money come, more people with money come. It creates a multitude of circumstances. Some are problems, some are just what it is. You create pressure in the market.
“It’s harder for people between $300,000 and $500,000 to buy a house,” said Flamont, a graduate of Traverse City Central High School who played professional baseball before returning to Traverse City as a realtor seven years ago.
The inventory of homes for sale in the area has decreased. The pace of construction has not kept up with demand.
Hansen recently reviewed statistics from the local association of real estate agents, Aspire North Realtors. Less than a decade ago there were typically around 1,000 homes in the five county area (Antrim, Benzie, Grand Traverse, Kalkaska and Leelanau) available for purchase at any one time.
At the start of April this year, there were only 235 homes in the system not under contract, still available for purchase. Of these, 138 were in Grand Traverse County.
“That leaves less than 100 homes available in the remaining four counties,” Hansen said. “You can see why there is such a frenzy for buyers.”
This frenzy translates into a rush every time a new property appears on the market. A typical list can quickly get 25 or 30 showings, she said, and between two and 20 offers.
“It’s great for sellers. It can be very frustrating for buyers,” Hansen said.
“The waterfront is always popular,” Flamont said. “We achieved more $1 million in sales than ever, more than $2 million in sales than ever, and more than $3 million in sales than ever – during this time.”
The price of waterfront properties continues to climb, but not as quickly as typical neighborhood homes.
Much has been said in recent years about condominiums and the changing texture of downtown.
“I know people say we don’t need condos, but the market says differently,” Flamont said. “Our team probably gets 20-30 calls a week for people looking for downtown condos.”
None are available.
“And the buyers’ agents too,” Hansen said. ” It’s hard. You do a lot more work.
“Consider if you’re making an offer for a buyer and there are about a dozen other offers on it. That means 12 agents are working with 12 potential buyers and writing 12 offers, and only one of them is going to buy that house. So the other agents go back to square one and look for other houses. We do a lot more legwork and run around selling houses.
Real estate agents generally work 100% on commission. So if they don’t make a deal, they don’t earn any income.
“And we still have expenses. We do not earn revenue, but we still have office fees, board fees, MLS (Multiple Listing Service) fees and others. Each agent is like a sole proprietorship, an independent contractor,” Hansen said.
“More people have become real estate agents, but it’s probably the hardest time to be a real estate agent – because there’s nothing to sell. Since I’ve been in the business, it’s been the most stock lowest we’ve ever had,” Flamont said.
The COVID-19 pandemic, and the resulting increase in the number of companies allowing employees to work from home, has led to a new boon for workers who prefer to live in a beautiful small town rather than a big city. business oriented.
“There has been a small increase in people coming from Chicago or downstate cities, due to the pandemic and the ability to work from home,” Hansen said.
“The waterfront has definitely increased in value, but at a slower rate than the average homes people want to live in.
“Most people are looking for family homes, just places to live. Rent is so expensive, and has been for some time, that with the low interest rate, buyers are trying to get into their own homes. It fueled the market.
Increase in equity
The housing market is difficult for potential buyers. But it’s great for the owners.
“Over the past 2 years we have had a serious increase in equity,” Flamont said. “If you’re someone who’s been here 20 years and you’re looking to retire and move, this couldn’t be better for you because you’re getting a dollar amount you could never imagine getting for your home.”
Hansen has seen offers on homes up to $150,000 above the asking price.
Homeowners near downtown Traverse City have never had trouble finding buyers. People who own properties further from the city center are now joining this club.
“Before, buyers wanted to be as close to downtown Traverse City as possible,” Hansen said. “Everyone was like ‘downtown, downtown’. Now since they can work from anywhere, they don’t have to commute and you can get better prices in outlying areas, I see people more willing to watch outlying areas like Grawn and Kingsley and further into Leelanau County.
Flamont mentioned Fife Lake, Cadillac and Kalkaska as communities that are seeing increased interest.
Neither he nor Hansen see any change in the situation anytime soon.
No change soon
Flamont recalls people suggesting in 2015, when he became a real estate agent, that the Traverse City real estate market was ripe for a crash. This suggestion was wrong.
“There are houses in some places that were selling for $150,000 or $180,000 that are now selling for $350,000 or $360,000,” he said.
Home prices have surged rapidly, especially since the start of the pandemic.
“It’s crazy. We can’t continue to have 20% increases in value every year,” Flamont said, leading some to fear again that a crash was on the horizon.
“But what happens is all of a sudden there’s only 10% appreciation left, which is still huge – and people are like, ‘Oh, it’s falling apart’, Flamont said.
“It doesn’t crash, you just can’t keep up with 20%. A crash means you lose value. This does not mean that you simply have less value increase.
“If I bought a house a year ago for 20% above market value, it’s still going to appreciate by 10%, so it’s still more than what I bought it for” , said Flamont.
“Unless we run out of inventory, I don’t see the market slowing down or the competition letting up at all,” Hansen said.
An increase in interest could slow the market slightly, she thinks, but not enough to make much of a difference to sellers or buyers in the Traverse City market.
“There’s a lot of construction going on, so that’s going to help,” she said. “But I don’t think it’s going up fast enough to change the market quickly. I still think we have a couple, three years or so what we have right now.