28 September, 2022

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Homebuyers compete to score in metro Detroit residential real estate frenzy

Paul Mruk of RE/MAX Classic in Novi has dozens of examples where homes sell over the asking price in just about any metro Detroit community. In February, a three-bedroom, 3,000-square-foot Farmington Hills home listed for $475,000 had 94 showings its opening weekend and received 22 offers to purchase it. Mruk’s buyer offered $515,000 in cash, and it was accepted.

“Buyers are hardened,” Mruk said. “The challenge right now is if you don’t waive the appraisal, if you don’t give an inspection clause and if you don’t give free occupancy, then you’re not going to get these houses.”

Home tours are hopping with 15-minute showings to accommodate the huge number of shoppers in hot cities like Royal Oak, Novi, Dearborn and Livonia. Homes that appeal to first-time buyers between $150,000 to $400,000 have kitchen islands stacked with dozens of business cards from agents passing through. Brokers are advising their clients to come with their best offer on the first try or be passed by someone willing to offer more than the asking price on what typically is an entry-level home.

Many real estate agents said they believe their workloads will continue at hyper speed in the next six to nine months, a shift from the start of 2020 when a global health crisis due to coronavirus led to mandated real estate pauses. In spring 2020, Gov. Gretchen Whitmer had deemed real estate as “nonessential” from March 23 through May 7, which resulted in less-than-optimal Zoom showings and limited sales.

Buyers who held off last spring got into the market during the fall and winter only to come up against a tougher-than-usual sellers’ market. As a result, there are more people hungry for a home who are still searching, agents said, coming up against a market with a shrinking inventory of available homes.

“The minute (Michigan’s) restrictions were lifted, things went crazy and stayed that way,” said Karen Kage, CEO of Farmington-based Realcomp LTD, the largest multiple listing service in the state.

Realcomp said in its February report that days on market — or how long a home goes from listing to sold — dropped 34 percent to 44 days on average compared to 67 days during the same period in 2020. Showings per individual home also doubled from 8.5 to 15.3, its report showed.

The same is true in Detroit. Austin Black II, head of Detroit-based brokerage City Living Detroit, lives in Sherwood Forest, where there isn’t a single house for sale out of about 435 homes. University District, south of his home, has about 1,400 homes with just two on the market.

“I’ve never seen that in these neighborhoods,” Black said. “Usually, in a winter market, you’ll see fewer listings but nothing like we’re seeing now.”

Those homes Black has on the market are selling quickly. A three-bedroom, 1,839-square-foot Colonial Victorian Park house near Detroit’s Jefferson Chalmers neighborhood Black listed for $250,000 was on the market for five days and sold for $265,000 with a January closing.

Black said one reason for the buying spree is many white-collar workers never lost their jobs because of the coronavirus-related economic slowdown. They’ve also padded their savings from staying in and not eating out as much. Plus, with major companies such as Ford Motor Co. keeping many employees at home to work, metro Detroiters are thinking differently about how and where they want to live, Black said.

That was true for William Kelly and Meryl Ethridge, both 30. The couple wanted more space with Kelly working from home in sales and Ethridge’s variable schedule as a surgery resident at Ascension St. John Hospital. Plus, a noisy neighbor at their Brush Park apartment pushed their house hunt forward. They started looking in October and closed in February on a 2,100-square-foot, three-bedroom home in Detroit’s LaSalle Gardens neighborhood.

Kelly and Ethridge saw a dozen houses in Corktown and other areas before finding their 1916 charmer with a large lot and tall windows. Drawn to its renovated interior, they put in a low offer and were rejected. After some back and forth on the original asking price of $339,000, they settled at a price only to have the appraisal come back lower. Further negotiations with the buyer resulted in a final sale at $308,000 with the seller making up the difference.

“We were told inventory was low in our price range, which was a $200,000 to $400,000 starter home. We had friends looking in Grosse Pointe but they told us it was cutthroat. They’d go to put an offer in on a house and find out there were already five cash offers in. We wouldn’t have ended up buying if we were in that scenario,” Kelly said.