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Metro Home Buyers in Bidding Wars

Despite a five-year housing slump that flooded the market, finding a move-in-ready house in metro Detroit has gotten a lot harder with a tight supply sparking bidding wars among house hunters.

Many of the homes available are trashed foreclosures or owned by people who could not afford needed repairs or updates during the recession — and buyers are taking a pass. Add to that, people are not putting quality homes on the market if their mortgages are underwater or they are waiting for higher prices to return.

That means a tight supply of good houses in good neighborhoods.

“As soon as anything hits the market, it’s a stampede to get there,” said Plymouth Realtor Andy Hargreaves. “It’s not uncommon for us to see five to eight offers on a good home.”

The lack of inventory of move-in-ready homes is hampering the market recovery as demand in general slowly begins to rise, said Dan Elsea, president of brokerage services for Real Estate One in Southfield.

Rob and Kim Draper spent a year looking for a house in metro Detroit — traveling from Chicago on weekends to search.

“With the economy being bad, I just thought there would be a lot more houses,” Kim Draper said. “I was surprised with how fast they were selling.”

The couple eventually made an offer on a Northville home based solely on photos from a Realtor’s BlackBerry and positive reports from a relative who looked at it. They bought the 2,800-square-foot, four-bedroom house for $425,000 and love it.

Metro house hunters choosy

Matt Accivatti thought it was a buyer’s market when he started looking for a house last year, but after getting beat on four offers, he realized things had changed.

Accivatti, 25, a Macomb County sheriff’s deputy, finally had his fifth offer accepted, on a home in Chesterfield Township. It was exactly what he was looking for — a manageable ranch-style home that was move-in ready.

The low supply of move-in-ready homes in metro Detroit has meant frustration and unexpected bidding wars for some buyers and pushed up prices for some sellers.

The market also is strained because owners of move-in-ready homes who have underwater mortgages don’t want to sell and take a loss. Others are waiting for prices — still at 1995 levels — to go back up before they try to sell.

“It’s good news for sellers … more buyers for fewer homes. It is a positive sign for values,” said Dan Elsea, president of brokerage services for Real Estate One in Southfield.

At the end of June, there was a five-month supply of homes on the market in the five-county metro area, according to the most recent quarterly data compiled from multiple listing services by Real Estate One.

That compares with an 18.9-month supply at the end of 2007 when the area was awash in foreclosures.

A normal market has three to six months — more than six months is a buyer’s market, and less than three months is a seller’s market.

The numbers would seem to indicate a normal supply of homes. But even at normal levels, many house hunters are turning up their noses at houses that aren’t move-in ready.

Brian Powers, a Realtor with Keller Williams Realty in Chesterfield Township, worked with Accivatti and others who have experienced the frustration of being outbid multiple times.

“It’s tough for these buyers, because it’s a buyer’s market,” he said, noting that interest rates remain at historic lows.

Accivatti was outbid on a foreclosure and a short sale, both in New Haven, and on two privately owned homes in Algonac. He finally scored, beating six offers on the 1,229-square-foot ranch. He bought the three-bedroom, 1 1/2 bath house for $115,000.

The home was bought by an investor last year, gutted and fixed to flip. “The basement is finished, it has new siding and everything was done,” Accivatti said.

Supply data

The tight market for move-in-ready homes has shown up in prices and supply data.

Metro Detroit home sales posted a 1.2% annual gain through July with strong summer demand, according to the S&P/Case-Shiller home price indices.

The number of homes for sale in the area dropped nearly 29% in July from the same period a year ago, according to data from Realtor.com.

And houses were being snapped up faster than the national average. The median age of inventory in metro Detroit in July was 67 days compared with 97 days nationally.

Supplies have tightened across the tri-county area in the past year. Oakland County had a 5.7-month supply at the end of June compared with a 6.8-month supply in June 2010.

In Wayne County, there was a six-month supply of homes in June 2010, which fell to a 5.5-month supply a year later.

Also crimping the supply is a national slowdown in foreclosure processing after it was revealed that some banks were taking shortcuts on mortgage paperwork. Fewer of those homes are coming on the market now.

Willing to wait

Robert Campbell, a Realtor with Max Broock Realtors in Birmingham, has been working with Mike Mikula and his wife, Dr. Debbie Mikula.

The couple own a 1,700-square-foot, three-bedroom home in Pleasant Ridge and want a larger home in the same area. Mike, 42, an engineer at Ford, and Debbie, 42, a Clarkston doctor, have four school-age children.

There’s little inventory in the more-than-$300,000 price range. Overall, there was a 7.7-month supply of homes in that city at the end of June. And while $300,000 might sound like a lot, it doesn’t go that far in the upscale area.

“Houses that are not distressed, and present well and are priced well are just flying off the shelves,” Campbell said.

The dual-career couple is willing to wait for better move-in-ready homes to come on the market. “It’s just a matter of time for us,” Mike Mikula said.

Campbell showed the couple a house recently that had a lot to offer, but it wasn’t for them. They toured a 3,473-square-foot house with five bedrooms and three bathrooms priced at $500,000.

The Mikulas said they thought that was a good price, but they doubted they would make an offer because they thought the property was too close to Woodward.

Pleasant Ridge and Northville were the only two cities in Oakland County that saw increases in homes’ assessed value this year.

Making it move-in ready

Tricia McFarlane, 35, a mortgage banker with Huron Valley Financial in Brighton, looked for several months before finding a house in May.

Unlike most buyers, McFarlane and her husband, Chris McFarlane, 33, a real estate investor, weren’t afraid to fix up a foreclosure.

They made a list price offer on a short sale the first week it went on the market, but they were outbid. They were successful on a second offer on a foreclosed house in Brighton the day it went on the market.

Now, just a few months later, the home is completely updated. The total bill for the house and repairs was $139,000; recent sales in the neighborhood are around $200,000.

“Essentially, we were looking for a house that we would be in a good equity position regardless of whether the market declined or not. That definitely limited our choices,” she said. “It would be horrible to be in the business I’ve been in for 11 years and end up underwater.”

By Greta Guest, Detroit Free Press

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