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Agents & Buyers See More Competitive Market for Homes $100,000 and Up

By Michael Martinez, Detroit News

Metro Detroiters are showing a growing appetite for homes above $100,000, and they’re able to buy houses that may have been out of their price range before the real estate swoon.

Sales of homes and condominiums for $100,000 and above — almost 40 percent of the market in Livingston, Macomb, Oakland and Wayne counties — grew 20 percent in the first six months of the year compared with the same time in 2011, according to a report by Realcomp II Ltd., a Farmington Hills real estate information company, prepared for The Detroit News.

These are homes that may have sold for $150,000 or more before prices crashed in 2006.

By contrast, homes below $100,000 — representing more than 60 percent of the four-county sales — experienced a 2.6 percent drop, Realcomp found.

Luxury homes in the $1 million-plus price range saw the most drastic sales spike, but they represent a sliver of the home-buying action.

Howell couple Kristin and Mike Boucher are looking for a house in neighboring Brighton for about $200,000.

They’re expecting a child in December, so they need to upgrade from their small Livingston County condo.

“We’re looking within our price range, but are trying to get more house for our money,” said Kristin Boucher, adding that the fall in home prices in recent years has helped their search.

Sales in the $100,000 to $249,900 range rose 17.4 percent during the first six months of the year.

Detroit area home prices are 48 percent below their December 2005 peak, according to Standard & Poor’s/Case-Shiller home price index.

“There are some tremendous deals out there,” said Bob Walters, chief economist for Detroit-based mortgage lender Quicken Loans Inc. “Four-million-dollar homes are now going for half of that.”

Interest rates hovering at near-record lows are another factor helping homebuyers who qualify move up in price range. The rate on a 30-year fixed mortgage was 3.59 percent last week — 2.84 percent on a 15-year fixed. This makes monthly payments for higher-priced homes less expensive.

“People realize if they can afford a $300,000 house at a 6 percent interest rate, they can afford a $500,000 house at a 31/2 percent interest rate,” Walters said.

Since home sales started recovering in Metro Detroit about a year ago, the inventory of houses on the market has dwindled — 16.7 percent in June alone, according to Realcomp.

Now people get into bidding wars to snag homes in good condition or in desired neighborhoods, said Frank Brace of Keller Williams Realty in Plymouth.

“Because of low interest rates,” Brace said, “they’re willing to push the (price of a potential home) up.”

Carol Griffith of Brighton-based ERA Griffith Realty, is seeing multiple offers on homes for the first time in four years.

“I had a house listed for about $200,000 but it ended up closing for $220,000 because two offers came in,” she said. “We had a bidding war.”

Kristin Boucher said she had 10 showings for her Howell condo during the first five days it was listed. The couple about two weeks ago accepted an offer.

“We had other clients interested in placing offers, too,” she said.

Confident in jobs

The move-up in price range as well as the bidding wars reflect more economic security, Griffith said.

“People feel a little more positive about Michigan and confident in their jobs,” she said.

Ronni Keating, an agent with SKBK/Sotheby’s International Realty in Birmingham, sees the same trends.

“I think the confidence level has turned the market around,” she said.

But buyers are more hesitant to purchase homes below $100,000 because there aren’t as many available that are in ready-to-move-in condition — and some of the ones left aren’t desirable.

More of them tend to be foreclosed properties, Walters said.

The Warren-Troy-Farmington Hills region had the seventh-most completed foreclosures in the nation for the year ending in June, Santa Ana, Calif.-based housing information firm CoreLogic said.

“One of the challenges the lower-priced homes face is that oftentimes they need money in terms of painting, carpeting, flooring and general updating,” Walters said.

“Some of them require $10,000 to $15,000 in upgrades. That can become a detriment to potential buyers.”

As a result, lender approval is hard to get for home loans under $100,000, Metro Detroit real estate agents said.

“Certain agencies require certain things to be in place to receive a home loan,” Walters said. “The houses might take a couple thousand dollars to fix, so they can’t get the loan.”

Metro housing attractive

The question is whether the sales momentum can continue. The year-over-year growth of Metro Detroit sales has declined in recent months, coming in at a 3.4 percent increase in June, according to Realcomp. July sales are scheduled to be announced today.

The region’s home prices rose 0.6 percent in May, according to the Case-Shiller index, causing concern that the sub-inflation growth means sales will stall.

But real estate agents and economists say Detroit area housing remains attractive.

“I expect housing markets in Detroit to continue to improve through 2013,” Comerica Bank Chief Economist Robert Dye said, “as long as the U.S. does not fall back into recession.”

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