First quarter 2024 sales statistics showed that the average sales price of Lansing area homes increased 13.8% from $217,376 at the end of the first quarter of 2023 to $247,308. This represents an average home value improvement of $29,927.
The fact that there were 121 fewer sales so far in 2024 (-11.1%) represents a lower number of homes being offered for sale with established homeowners reluctance to give up a 3.5% mortgage in order to enter into a now 7.17% mortgage on a different home.
The 13.9% increase in home value indicates strong buyer enthusiasm by those moving into the Lansing area and those able to adjust to higher mortgage rates. First time home buyers have been hit hard with the increased interest rates that require budgeting changes and higher down payments. Local lenders and the State of Michigan’s MSHDA program have offered relief with mortgage incentives that accommodate lower income buyers.
Snapshot of current Lansing area sales entering into the Spring selling season: Lansing Area Market View –May 1, 2024 436 – currently listed homes for sale in the five county greater Lansing area. 258 – homes with accepted offers. (Awaiting inspections and/or appraisal.) 381 – homes listed as Pending. (Have completed inspections and will soon close.) 1454 – homes that have closed since January 1, 2024.
Current Mortgage interest rates 30-year fixed – 7.17% ($677 per $1000) 15-year fixed – 6.44% ($868 per $1000)
When you put 20% down on a home using a mortgage loan, you own 20% and the lender owns 80%. As you make payments, most of the money goes to pay interest while some goes toward reducing your principal. Meanwhile, favorable market conditions may be increasing the market value of your home, giving you instant equity.
Equity is the amount of the home that you own, much like a savings account that pays interest on money you want to keep growing. After a few years, you may want to tap into that money to carry out home improvements, make a down payment on a second property, or pay off credit cards and other bills. Is it a good idea to use your equity?
The answer is this: you’re putting your home in deeper debt, so your reasons for using equity instead of another means of borrowing or consolidating must be worth the risk.
Home improvements are designed to add value to your home, a sure thing that will net you more money when you decide to sell it one day. Making a down payment on another home is riskier—as you’ll have two mortgages—but if you can afford it, you’ll have two properties potentially building equity.
Credit cards are unsecured debt so interest rates are high. Home equity loans are far less costly, so you could get much relief by paying credit cards off. However, you must avoid “reloading” the cards with new charges, which will take dedication and self-discipline.
In a fast-moving housing market, you may conclude that you don’t need to do much to sell your homes. But, selling a home “as is” may cost you more than you know.
Your listing contract will include a clause that says the home is being conveyed “as is,” which means you’re selling the property in its current condition with no intention to make repairs or improvements. That doesn’t absolve you of responsibility to the homebuyer—you’ll still have to provide a state-mandated seller’s disclosure attesting to what you know about the home’s condition.
If the buyer includes a home inspection contingency in the sales contract, it allows them to come back and ask for repairs before closing or they can ask for a price reduction. You can refuse, and the home will go back on the market, wasting precious marketing time. In the event that the buyer intends to tear down or gut the home, the sales contract can be drafted without an inspection contingency or it can be contingent to major systems only.
There’s also a stigma to selling “as is” which means the buyer is purchasing the property sight-unseen and will likely make a much lower offer—if they make one at all. Your home could stay on the market longer than you want, leaving you obligated to manage expensive carrying costs, including the mortgage, home insurance, HOA fees, utilities and taxes.
The spring home-buying season has begun, and it’s business as usual. The combination of high mortgage rates, and home prices, along with low housing inventory means that home buyers will have to adjust to the reality of elevated home prices and mortgage rates if they want to buy a home in the near future.
Will there be a significant change in the 2024 housing market? There has been discussion about rates dropping a percentage or two, but a 6% loan isn’t going to push current home owners into giving up a home with a 3.5% mortgage. Perhaps 5% will look attractive to first time home buyers…but would you give up your 3.5% mortgage to move in this competitive market?
Of course, lower mortgage rates would stimulate sales…but also drive up property values as it did during the years of 3% and 3.5% loans. Armed with affordable loans, buyers will need to make competitively high offers to land a home in a market with low inventory.
Snapshot of current Lansing area sales entering into the Spring selling season: Lansing Area Market View – April 1, 2024 418 – currently listed homes for sale in the five county greater Lansing area. 249 – homes with accepted offers. (Awaiting inspections and/or appraisal.) 325 – homes listed as Pending. (Have completed inspections and will soon close.) 982 – homes that have closed since January 1, 2024.
Current Mortgage interest rates 30-year fixed – 6.79% ($651 per $1000) 15-year fixed – 6.11% ($849 per $1000)
The severity and frequency of insurance claims, along with the cost of goods and services are why carriers are raising their base rates…and your coverage may not be keeping up with inflation. Rising replacement costs means that what used to be covered by your policy may no longer be sufficient.
Home sellers currently receive historically high prices for their homes…yet fewer home sellers are putting their properties on the market…despite the temptation to cash in. The reason is, that mortgage interest rates are more than double what they were just prior to July 2022. Home owners with low interest rate mortgages are unwilling to give them up!
Many are only selling their home if they can pay cash for their next home, downsize to something smaller with less upkeep, or move to a new city and state where a similar home is less expensive than the one they’re selling.
Residential Real Estate Values Depend on Sales The number of available homes for sale (currently 447) is constantly growing or shrinking with market trends dependent on the sales prices of closed listings, time on market, price increases and/or reductions. It’s no secret that inflation, interest rates, uncertain economic conditions, weather, and even politics are having an affect on the 2024 real estate market.
Home Listings are Vital However, 5608 Lansing area homes closed in 2023 with mortgage rates as high as 8%. The 447 currently listed homes represent a residential housing inventory that will be ‘sold out’ in five weeks!
In the new year, homebuyers and sellers are still facing the same challenges as they did in 2023—high interest rates, sky-high home prices, and an inadequate supply of homes. As affordability issues slow housing sales volume, low supplies are keeping home prices high.
Mortgage interest rates reached 8.01% in October, the highest level since 2000, but since then rates have come down. Bankrate.com experts say there’s no likelihood of a housing market turndown as long as lending standards remain strict, and there aren’t enough homes to meet demand.
Banks are tightening their lending standards due to increases in credit card and car loan delinquencies, according to Freddie Mac. This is also impacting mortgage applications, credit lines and refinance activity – loan originations were down approximately 30% in October 2023 from the previous year. The good news is that mortgage delinquencies are low compared to other loan types. Inflation is waning, but still remains above the Federal Reserve’s target of 2%. Consumer spending will decelerate due to slower economic and weaker employment growth which will cause rates to come down in 2024. Continuing homebuyer demand will keep home prices elevating 2.6% in 2024, but with rates dipping as low as 6%, housing will be a little more affordable.
The Federal Reserve’s aggressive handling of inflation by raising overnight borrowing rates to banks has had a positive effect, and further rate hikes appear unlikely as the numbers get closer to the Fed’s target of 2% inflation.
Meanwhile, help is out there for those being squeezed out of the market. FHA-guaranteed loans require as little as 3.5% down. Numerous state and local governments have increased programs for first-time and lower-income homebuyers. Many lenders offer grants, down payment assistance programs, and mortgages with no closing costs. The National Association of REALTORS® offers the Housing Opportunity Program, with resources for homebuyers.
While many potential homebuyers have been knocked out of the market by higher mortgage interest rates and home prices, there’s hope on the horizon that they’ll have better luck in 2024.
An arm’s length sale in real estate is a transaction between an unrelated seller and buyer. In this type of transaction, each party acts independently and in their own best interests. The property is exposed on the market for a reasonable length of time and is unaffected by special financing or sales concessions. Therefore, the sale price most likely reflects the market value.
What does non-arm’s length mean in real estate?
A non-arm’s length sale in real estate is a transaction between a seller and buyer who have a connection by marriage, family, work, etc. Because of their relationship, each party may not be acting in their own best interests. Therefore, the final price may not reflect the market value of the property.
The 7 sale types in real estate
The type of sale can provide some clarity into whether the transaction was (or currently is) an arm’s length transaction, whether a comparable sale should be used, or whether an adjustment is warranted for the terms of sale for a comparable. By knowing the type of sale, you are better able to reconcile a current opinion of market value that falls above or below a current or recent transaction for the subject property.
For appraisals required to be Uniform Appraisal Dataset (UAD) compliant, you must indicate the type of sale for the transaction. You may report any other relevant information regarding the sale type in the appraisal report, including whether more than one sale type applies.
Here are the seven valid sale types, explained in detail below:
REO sale
Short sale
Court ordered sale
Estate sale
Relocation sale
Non-arm’s length sale
Arm’s length sale
REO sale
A Real Estate Owned (REO) transaction is a sale of a home that has been foreclosed and the lender is the owner/seller of the home. The transaction is between the lender and the buyer. Usually these homes are sold “as is” and typically are priced to sell relatively quickly. Sometimes the home is in poor condition or may require extensive repairs.
Short sale
Unlike an REO or foreclosure sale, the homeowner still holds title to the property, but sells short for less than what is owed on the property. Usually, the homeowner is suffering some type of financial hardship which is preventing them from meeting the mortgage payments. The homeowner and the lender must agree to accept a shortage and must approve the sale. Sometimes these sales require extended time to negotiate with the lender and obtain approval for the sale, and there may be some additional costs or outstanding liens that need to be paid off.
Court ordered sale
A court ordered sale may be the result of a dispute among the owners, divorce, death of one of the owners, or a foreclosure where the borrower defaulted on paying the mortgage. Once the redemption period expires (if applicable), the court will issue an order directing the sale or other disposition of the property. This is the point at which the owner has lost control over the ability to sell the property. The property is sold by an official (trustee or sheriff) appointed by the court, usually to satisfy a judgment or implement another order of the court.
Estate sale
The estate is the real estate owned by a decedent at the time of his or her death. The estate is probated so that the real estate can be sold and the proceeds are distributed to the decedent’s heirs. The sale is handled by a representative (executor) named in a will and/or appointed by the probate court.
Relocation sale
Larger companies hire a relocation company to sell the property of an employee that is being transferred or moved to another state. The relocation company may buy the property at an agreed upon price with the corporate employee, then in turn sell the property to the market in an “as is” condition. Often, the property is attempted to be sold quickly, so the property may not be exposed as long as competitive properties in the market.
Non-arm’s length sale
As stated above, a non-arm’s length sale is a real estate transaction in which the seller and buyer have a connection by marriage, family, work, etc. As a result, this type of transaction’s final price may not reflect the market value of the property. Lenders and appraisers view this type of transaction as riskier because the parties involved are not necessarily acting independently of each other.
Arm’s length sale
As explained above, an arm’s length sale is defined as, “A transaction between unrelated parties who are each acting in his or her own best interest.”1 For this type of transaction, the property is exposed on the market for a reasonable length of time and payment is in cash or its equivalent. The property sold is unaffected by special or creative financing or sales concessions. This type of sale is the least risky to the lender and is most likely to be closest to market value.
What is market value?
In general, market value is defined as the most probable price a property should bring in a competitive and open market. This definition requires an arm’s length transaction with each of the parties acting in their own best interests. Additionally, it requires that the buyer and seller are not acting out of undue haste or duress and that the real property has been exposed on the market for a reasonable period of time.
Reference: The Appraisal Institute, The Dictionary of Real Estate Appraisal, 6th. Ed.
If you’re wondering if those sniffles and low-grade headaches you or your family are experiencing could be due to air-borne allergens, you may be surprised to learn that there could be another cause. According to the Environmental Protection Agency (EPA), 90% of our time is spent indoors, so breathing problems could be caused by poor air quality in your home. If you test the air quality in your home, you may get some surprising answers.
Purchase air quality sensors that test for the following:
Humidity: can increase the potential for mold and mildew growth.
Temperature: high temps can cause insufficient humidity and health risks.
Volatile organic compounds: chemical pollutants can come from building materials, carpet, and other installations.
Particulate matter: dust mites and other allergens are airborne.
Air quality index: this measurement is provided by the EPA for both indoor and outdoor air quality.
Air quality sensors test for toxins, harmful gases, and pollutants as well as specific problems such as carbon monoxide, a toxic gas. The sensors take in air, run algorithms to capture the number of particulates, store the data and prepare it for analysis and read out.
The EPA recommends that you monitor your health symptoms for a few weeks to identify improving or worsening symptoms. If you’re nauseous and confused, carbon monoxide may be present, while allergies tend to present with a scratchy throat or watery eyes. Lastly, buy a good air purifier to help remove particulate matter from the air.
Cold weather won’t deter a motivated homebuyer. Corporate relocations often take place before the new year and those employees want to find a home now. Buyers want to get their children enrolled in school before the second semester begins. Homebuyers may feel they have a better chance of finding a home while their competitors nest at home until the snow melts.
You also have a timeline to sell, move, and settle into a new place, perhaps for a new job, birth of a child, up- or down-sizing, etc. Why not sell when there’s less competition from other homeowners who’re waiting to sell until spring?
There are a few things you’ll need to do to make your home attractive for cold weather shoppers:
Decorate for coziness. Some homes are at their best in the winter. Pull out your most fabulous afghans and quilts. Throw some logs on the fire, or keep the gas or electric fireplace on for showings.
Fill the home with evocative aromas. Cinnamon, cloves, and oranges boiling on the stove will stimulate pleasant memories. Use a pine or lavender-based cleanser on your floors and surfaces.
Make a place for muddy shoes. Buy a box of booties and put them next to a chair for homebuyers to put on. Taking their shoes off will make them feel welcome and more comfortable.
Keep the drive, sidewalks, and walkways cleared. Snow drifts are dangerous and could discourage homebuyers. Keep your Berkshire Hathaway HomeServices network professional informed of road conditions.
