ANN ARBOR - It's no secret that the real estate market in Ann Arbor is hot.
In fact, it's so hot this time of year it might as well be classified as molten lava.
We sat down with local realtor Martin Bouma, of The Bouma Group, who gave us some expert insights into this year's market trends.
Condos are in high demand before they're even built
Development in downtown Ann Arbor is booming, and this is driven by the demand for high-end luxury condos.
"It used to be a sort of sleepy downtown and what we have now is it’s become like a downtown Chicago as far as the market pricing goes with a lot of the new condos going for over $500 per square foot," said Bouma. "And what’s driving that are Baby Boomers."
In many cases, these are University of Michigan alums who are looking to retire in Ann Arbor.
"They’re not as driven by value. We’re literally hearing people say, 'This is my retirement house, Martin, I just want it. I don’t care. I want to be downtown.' So if you notice, pretty much everything that’s being built now downtown, the high-end condos, is one-floor living to the point where there’s elevator access to every single unit."
And these units are selling fast, especially the premium ones. In some cases, units are being reserved long before the project passes city planning. "Penthouses are gone immediately," he explained. Most penthouses are priced at $1M or higher.
Market is driven by outside forces, not locals
As mentioned above, Baby Boomers coming from outside of town are a major force, but so are wealthy families of University of Michigan students.
"(Nowadays) these kids want granite countertops, Jacuzzis, health clubs -- it’s different than it used to be," explained Bouma. "We have parents spending $1M on a condo for their kids. Some will keep it as an investment property, most of them will sell when their kids graduate."
Rate of appreciation is slowly decelerating
Could Ann Arbor properties finally see a plateau or dip in value?
"Every spring, we’ll see this craziness starting about February," said Bouma. "Last year, we had houses going for more than $50K over list. This year what’s very interesting, and I’m watching it very closely, is inventory’s even lower than last year. When we list properties we’re getting multiple offers, but we’re not getting very many that go way over list. It's nothing like what we saw last year."
"I think Ann Arbor might be a little bit unique and somewhat exempt (from price deceleration) but at some point, nothing can go up forever. The average economic cycle is eight to nine years, we’re already at year nine."
Good luck getting a house under $500K
"The underserved market is $500K and under," explained Bouma.
For buyers, that is. For sellers, it can be quite the opposite.
"If you’re in a prime neighborhood and your house shows absolutely perfect, and is somewhat a traditional floor plan, it will sell immediately," explained Bouma. He emphasized the importance of investing in good staging and professional photography.
In his years of experience, he's encountered realtors who don't see the point in staging a property, but he said they almost always sell faster.
If your house doesn't sell in a week, it's going to sit
Since it's such a hot market, if your house doesn't sell quickly, it sends a message to buyers that something might be wrong.
"The fear of loss disappears," explained Bouma. "It’s a real interesting dynamic. I’ll tell sellers this, I’ll say, 'You guys, if you really push the price you’re going to miss out and the minute you miss out on that window, you’re not getting a full price offer.'"
Fallout buyer rate is at an all-time high
The downside of a hot market is that buyers will employ unconventional tactics to secure a sale, but will backtrack on the deal. This is called fallout.
"People will try different things. Buyers will say, 'We’re prepared to pay $400k (full price) but if you accept our offer by 6 p.m., we’ll pay $410K.’ We’ve seen that kind of stuff, we’ve seen escalation clauses. I don’t like working with those because buyers are saying they don’t really want to pay that price; they’ll only pay that if someone confirms their decision," Bouma said.
"I've been doing this 32 years. We’ve had more fallout this last year than in a long time. They get buyer's remorse."
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