Pearson Group Real Estate

The 3.8% Tax begins January 1, 2013

There have been several emails sent out over the past few months that provided inaccurate information about the upcoming 3.8% Health Care Capital Gain Tax.  Although many people may not be affected, many will.  The National Association of Realtors has provided us with a brochure that may answer many questions you may have regarding the upcoming 3.8% Tax.

3.8% Health Care Capital Gain Tax Brochure

(Click on the Link above to View the complete Brochure)


Michigan Monthly Market Update – September 2012
October 3, 2012, 12:43 am
Filed under: Michigan Real Estate News

Just when we thought the market was going to take a pause, it picked up at an even faster pace. September brought us the highest median and average prices in the past four years (past two years for NW Michigan), as well as the lowest For Sale home inventories and highest number of sales, all indicators of strengthening buyer demand. So, is this sustainable or just a temporary release of pent up demand? The answer is both; demand is growing both short and long term. Just because values declined since peak 2005 and Sellers were not able to sell, does not mean all the reasons people need to sell stop (births, deaths, divorce, retirement, etc.). The result is a short term buildup of demand from six years of sellers holding back as well as a long term buildup as Gen X and Y move into their prime home buying years. So it looks good for us on all fronts, adjusting for the short term economic hiccups we will see (none like what we have gone through in the past six years).

Demand would be even higher if it were not for some industry-wide bottlenecks resulting from both the financial crisis and the sudden growth in demand. A recent economic report predicted that a shortage of staffing in the mortgage industry will hold back sales in the upcoming year which makes sense since in Michigan alone, we peaked at about 5,000 mortgage lenders and now we are in the 300s, with the same number of purchase mortgage applications! Add to that a shortage of listings, issues with appraisal values (which are getting better) and the tough lending standards and it is not surprising buyers can feel frustrated. The silver lining is all of these bottlenecks will go away and release even more buyer demand into the market. In fact a NAR study shows that unreasonable lending standards are holding back up to 700,000 real estate sales this year.

Below is an update of the chart we sent out two months ago. You can see that the majority of the market activity is well into the Seller’s Market range. Another telling point is the average days on market. In August, non-bank owned homes selling in the under 90-day category had an average market time of 13 days, while those over 90 days averaged 153 days.

Months Supply of Inventory (MSI) Analysis by Price and Time on Market

So with all this great news, how much “play” is there in buyer demand if mortgage rates rise and values jump? The housing affordability index is a good way to test the “play”. Here is how the index works:

Housing Affordability Index

So we have some room for the real estate market to continue to grow even with rising interest.

In spite of the strong activity, many Sellers are not seeing a benefit. Why do some areas look like a Seller’s Market to some and a Buyer’s Market to others at the same time? Here is the math: About 15% of homes are still declining in value (up to 10%) based on condition and location, while another 30% are being overbid by 9% on average, with the remaining sold being within 5% of asking price on average. The net result gives us a watered down average appreciation of about 3% when in fact it is the “overbid by 9%” segment that gives a leading indicator of where the market is headed. Keep in mind that the typical home on the market in excess of 90 days is on average 15% over priced, so to that Seller, it feels like the only way to sell is to take a deep discount.

If you’d like more information on the market, like to list your property, or want information on any property from any broker, you may call or email at anytime.

Michigan Monthly Market Update – August 2012
September 4, 2012, 4:19 pm
Filed under: Michigan Real Estate News

July pending sales jumped up from June’s pace, proving once again that our recovery is moving in the right direction but not in a straight line. Some months are moving up quickly, others just a bit, but so far, always up! The overall Months Supply of Inventory (MSI) for Southeast Michigan hit a five-year low at 4.6 months and NW Michigan was also at a five-year low of 9.1 months.

MSI Chart

The average MSI is the industry standard index for following the market direction, but to get to the true index number we look at the MSI in the market segment where the majority of buyers are, those homes on the market less than 90 days.

Value Chart

The pattern follows the same trends as the overall MSI, falling to the lowest levels during the market decline, and clearly showing a sellers’ market, which explains the multiple offers we are seeing in the under-90-day market. Low inventory is also helping fuel the rising price trends shown in the following charts with values picking up speed since the beginning of the year. Price per square foot is not a pure indicator of appreciation, but it does filter out some of the distortion found in median values as an indicator of general value trends.

Appraisals have been a challenge for the past 18 months as appraisal standards struggle to keep up with rising values. Although there still are many issues, the good news is we seem to have turned the corner with appraisal shortfalls shrinking daily.