HOUSING REPORT NORTHWEST MICHIGAN 3RD QUARTER 2018

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1 NORTHWEST MICHIGAN 3RD QUARTER 218

2 Northwest Michigan Consumer Market Perception Is now a good time to buy a home? Is now a good time to sell? Although real estate markets go through cycles, there will always be people who need to move. But whenever possible, most consumers try to move when they think the market conditions will favor them. Consumer confidence and perceptions play a big role in shaping market movement. 63% falling 77% rising Good Time to Buy a Home Prices have been rising for several years. In the third quarter of 218, 63% of U.S. consumers believed that now is a good time to buy a home. While that number is still above half, it s been falling since 215. Across all demographics, the majority of consumers still feel that now is a good time to buy. But those who are currently renting, living with someone else, under age 34, or living in urban areas are less confident. Those demographics generally describe the largest population of first-time new home buyers, a.k.a. millennials. The Midwest scored highest in terms of consumer confidence with 67% of buyers indicating that now was a good time to buy. The Western region was lowest at 55%. Affordability is a big factor. The fewer property options consumers thinks they can afford, the less likely they will become active in the market. Good Time to Sell a Home Home prices have been on the rise since 211. As they continue to rise, increasing numbers of home owners are looking to sell. Seventy-seven percent of U.S. consumers believe that now is a good time to sell. That is the highest since 215 and is up 14% from the third quarter of 216. As seller confidence rises, more listing inventory is becoming available. Both buyers and sellers should keep an eye on these trending mindsets. In western markets like California, respondents to the poll were most likely (85%) to think that now is a good time to sell. This is also the region where the fewest consumers think it s a good time to buy. The Midwest markets usually follows behind the coastal trends. Final Thoughts: 1. Sellers who will be buying a replacement home wear both hats. 2. Rising interest rates reduce both buyer affordability and seller profits. How do forecasts of continued rising rates impact their positions?

3 TAAR 5 County Condos Traverse Area Association of Realtors 49 +1% from last year 362-7% from last year $247K +7% from last year $9M -1% from last year $3, $25, $2, $15, $1, $5, $ e Price Range Field 3rd Q 18 3rd Q vs 17 Available % Closed % All Months Supply % Avg. Sale Price 245k 238k 3% $ Vol (million) % Available % Closed % $1-15k Months Supply % Value Change 7% Available % Closed % $15-25k Months Supply % Value Change 41% Available % Closed % $25-5k Months Supply % Value Change -2% Available % Closed % $5k+ Months Supply % Value Change -6% Condo inventory is nearly level with last year in the lower and middle price ranges, while higherend inventory (over $5k) jumped 52% from 6 to 91 available properties. Despite the increase in inventory, there were 12% fewer condo sales and a 1% decrease in closed volume compared to the third quarter of 217. Year to date sales were down 7% and YTD closed volume was down 1%. While the YTD and third quarter average sale prices have been up, those increases were primarily caused by a change in the proportions of properties sold within the various price ranges. Having 3% fewer entry-level sales in the mix caused average price to rise. As the supply of upper-end condos has grown, the values of those properties have flattened. Over-supply may cause properties to sit and values to decline.

4 Waterfront TAAR 5 County Traverse Area Association of Realtors % from last year 452-2% from last year $485K +7% from last year $219M -15% from last year $7, $6, $5, $4, $3, $2, $1, $ e Price Range Field 3rd Q 18 3rd Q vs 17 Available % Closed % All Months Supply % Avg. Sale Price 514k 482k 7% $ Vol (million) % Available % Closed % $1-25k Months Supply % Value Change 2% Available % Closed % $25-5k Months Supply % Value Change 1% Available % Closed % $5-75k Months Supply % Value Change 15% Available % Closed % $75k+ Months Supply % Value Change 3% Although waterfront inventory increased during the third quarter, it was 22% lower than the same time last year. Both third quarter and YTD sales were down approximately 2% compared to last year, but average sale price was up 7%. Sales during this year s peak season were down compared to last year see the monthly gray closed sales bars in the chart above. Both quarterly and YTD sales have been down in all but the over $75k price range. YTD closed volume is down 15%. Higher and rising interest rates (up approximately one point from last year) will continue to contribute to slowing the market.

5 Non-Waterfront TAAR 5 County Traverse Area Association of Realtors 1,97 +6% from last year 1,57-3% from last year $229K +7% from last year $344M +4% from last year $25, $2, $15, $1, $5, $ Available 1,97 1,34 6% Closed % All Months Supply % Avg. Sale Price 23k 226k 2% $ Vol (million) % Available % Closed % $1-125k Months Supply % Value Change -4% Available % Closed % $125-2k Months Supply % Value Change -1% Available % Closed % $2-35k Months Supply % Value Change 3% Available % Closed % $35k+ Months Supply % Value Change -3% Entry-level inventory continues to be tight, but the number of available listings has been up in the middle and upper price ranges. Despite brisk third quarter sales which were up 6% from a year ago, YTD sales have been down 3%. Entry-level markets have been shrinking with fewer available listings and sales. At the same time, upper-end sales have increased. This shift in the mix had third quarter average sale price up 2% and YTD average sale price up 7%. Change in average sale price is not always a good indicator of changing values. The increase in average sale price was driven by this year s sales mix which has fewer low-end and more upper-end sales even though the values of properties within most price ranges have been flat or declining. The average sale price for homes sold for more than $35k dropped 3% in the third quarter and 5% YTD compared to last year.

6 Waterfront Antrim County 117-1% from last year 12-21% from last year $482K +8% from last year $49M -14% from last year $7, $6, $5, $4, $3, $2, $1, $ Available % Closed % All Months Supply % Avg. Sale Price 52k 417k 24% $ Vol (million) % Available % Closed % $1-25k Months Supply % Value Change -3% Available % Closed % $25-5k Months Supply % Value Change 7% Available % Closed % $5-75k Months Supply % Value Change 23% Available % Closed % $75k+ Months Supply % Value Change 2% Heading into the 4th quarter, waterfront inventory was down 1% and YTD closed sales were down 21% from last year. Despite the drop in sales, the $482k YTD average sale price was up 8%. The third quarter average was significantly higher, but was based on a smaller/less reliable sample size. Recent trends with shrinking entry-level markets and expanding upper-end markets make it appear as if values are rising faster than they are. The 24% increase in average sale price between the recent third quarter and last year s third quarter was primarily caused by a 57% drop in sales priced under $25k this year. The rate at which values have been rising has been tailing off in all but the $5k to $75k price range.

7 Non-Waterfront Antrim County % from last year 155-7% from last year $161K +1% from last year $25M +2% from last year 3 $225, $2, $175, 2 $15, $125, $1, 1 $75, $5, $25, $ Available % Closed % All Months Supply % Avg. Sale Price 163k 146k 12% $ Vol (million) % Available % Closed % $1-125k Months Supply % Value Change -1% Available % Closed % $125-2k Months Supply % Value Change 8% Available % Closed % $2-35k Months Supply % Value Change 1% Available % Closed 2 1 1% $35k+ Months Supply % Value Change 28% Available inventory is down 17% from a year ago. While third quarter sales were almost even with last year, YTD sales have been down 7%. Values continue to rise average sale price has risen to over $16k. It was up 12% in the third quarter, compared to last year and 1% YTD. Roughly one-third of homes sold this year have sold at or above full asking price. This year s average sale price has been 96.3% of asking up nearly 1% from last year. In all price ranges, the best and most move-in-ready homes continue to sell faster and for higher prices while other properties sit and eventually sell for less.

8 Waterfront Benzie County 67-32% from last year 48-27% from last year $427K +18% from last year $21M -14% from last year $8, $6, $4, $2, $ Available % Closed % All Months Supply % Avg. Sale Price 391k 369k 6% $ Vol (million) 8 9-7% Available % Closed 6 1-4% $1-25k Months Supply % Value Change -39% Available % Closed 9 1-1% $25-5k Months Supply % Value Change 7% Available % Closed % $5-75k Months Supply % Value Change 41% Available % Closed 2 1 1% $75k+ Months Supply % Value Change -23% With the relatively small number of waterfront properties in Benzie County the averages tend to look sporadic in tables and charts particularly this year with both inventory and sales down. Over the past 4 years the Benzie County waterfront market has been on and off everyother year. Sales were up significantly in 215 and 217 and down in 216 and 218. This year s large average price increase can be misleading because of the small sample size, and fewer entry-level sales. To stay in tune with how this market is doing, keep an eye on how many listings are available in a given price range and how many sold in the past 3 months. For example, seeing that we re heading into the 4th quarter with 17 listings priced over $75k and only 2 sold in the third quarter paints a vivid picture. Sellers will need to offer extraordinary packages to get noticed.

9 Non-Waterfront Benzie County 14 +1% from last year 17-4% from last year $27K +4% from last year $35M even with last year $3, $25, $2, $15, $1, $5, $ Available % Closed % All Months Supply % Avg. Sale Price 25k 27k -1% $ Vol (million) % Available % Closed % $1-125k Months Supply % Value Change 3% Available % Closed % $125-2k Months Supply % Value Change 1% Available % Closed % $2-35k Months Supply % Value Change -2% Available % Closed 7 5 4% $35k+ Months Supply % Value Change 16% October 1st inventory was up about 1% from both last year and last quarter. Third quarter sales were up by 37 units compared to the 2nd quarter and up slightly compared to last year. The recent average sale price dropped slightly compared to both the 2nd quarter and last year. Viewing the average price alone can be misleading. The drop in the third quarter average was not due to falling values. It was caused by an increase in the number of entry-level sales. The values within the price ranges were generally level and even jumped a bit for upper-end properties. Year to date, sales are down and average price is up. That combination has YTD closed volume even with last year. Looking at the chart above, the pattern of this year s sales numbers looks almost identical to last year. Knowing that provides a clue as to what to expect in the months ahead.

10 Waterfront Grand Traverse County % from last year % from last year $499K +12% from last year $79M -9% from last year $6, $5, $4, $3, $2, $1, $ Available % Closed % All Months Supply % Avg. Sale Price 52k 48k 5% $ Vol (million) % Available % Closed % $1-25k Months Supply % Value Change 17% Available % Closed % $25-5k Months Supply % Value Change 15% Available % Closed % $5-75k Months Supply % Value Change 24% Available % Closed % $75k+ Months Supply % Value Change -13% Waterfront inventory has been down especially in the over $5k price ranges. While third quarter sales were up by 24 units compared to the 2nd quarter, they were down 9 units from last year. The 158 YTD sales is 18% lower than last year. The third quarter average sale price was up $3k compared to the 2nd quarter and up $22k compared to the third quarter of 217. The $499k YTD average price was up 12% compared to a year ago, but the amount of change varies within each price range. It s important to be aware of the different market shifts and movements within various areas and price ranges.

11 Non-Waterfront Grand Traverse County 52 +9% from last year % from last year $245K +3% from last year $21M +9% from last year $3, $25, $2, $15, $1, $5, $ Available % Closed % All Months Supply % Avg. Sale Price 248k 262k -5% $ Vol (million) % Available % Closed % $1-125k Months Supply % Value Change -12% Available % Closed % $125-2k Months Supply % Value Change -1% Available % Closed % $2-35k Months Supply % Value Change 1% Available % Closed % $35k+ Months Supply % Value Change -9% Inventory has been up compared to the last quarter and heading into th 4th quarter it was 9% higher than the same time last year. Third quarter sales were strong. With 366 closed units, sales were up by 84 units compared to the 2nd quarter and 51 units compared to the third quarter of last year. With 857 closed units, YTD closed sales are up 6% and the $245k average sale price is up 3% compared to last year. Through both the third quarter and YTD the number of closed sales has been up in all but the under-$125k price range. While sales activity in the upper price ranges have been slowing in most markets, they continue to be strong in Grand Traverse County. Upper-end values, however, are showing signs of flattening with both third quarter and YTD average price and price per square foot down slightly from last year.

12 Waterfront Kalkaska County 55-2% from last year 48-29% from last year $234K +6% from last year $11M -25% from last year $4, $3, $2, $1, $ Available % Closed % All Months Supply % Avg. Sale Price 227k 239k -5% $ Vol (million) % Available % Closed % $1-15k Months Supply % Value Change -5% Available % Closed 3 6-5% $15-35k Months Supply % Value Change 37% Available % Closed 1 2-5% $35-5k Months Supply % Value Change -55% Available % Closed 1 1 % $5k+ Months Supply % Value Change -1% The number of available Kalkaska waterfront properties was up by a dozen listings compared to last quarter but down by 14 from last year. Third quarter sales were about half of what they were in both the prior quarter and the third quarter of last year. The 48 YTD closed sales were down by 2 units from last year. In all price ranges, the best listings sell quickest and for the highest price. Nearly one-third of this year s sales have sold for full asking price or above. Unless a property features a great location, today s buyers aren t looking to do work. The small number of Kalkaska County waterfront listings/sales combined with seasonal effects caused its averages and percentages to bounce dramatically. In markets like this, the available listings and closed sale numbers tell most of the story.

13 Non-Waterfront Kalkaska County % from last year % from last year $118K +11% from last year $19M -9% from last year $15, $125, $1, $75, $5, $25, $ Available % Closed % All Months Supply % Avg. Sale Price 116k 13k 13% $ Vol (million) 9 8 8% Available % Closed % $1-75k Months Supply % Value Change -15% Available % Closed % $75-125k Months Supply % Value Change % Available % Closed % $125-2k Months Supply % Value Change 2% Available % Closed 9 3 2% $2k+ Months Supply % Value Change 2% The third quarter ended with inventory up about 1% compared to both the prior quarter and last year. Likewise, closed sales were also down 5% compared to the prior quarter and the third quarter of last year. Entry-level markets under $125k have generally been shrinking with 92 YTD sales compared to 133 last year. The number of sales above $125k has increased slightly from 61 last year to 67 this year. Having fewer entry-level sales in the mix helped boost the YTD average sale price to $118k, which is up from $17k last year. Be careful of putting too much weight on these averages. The increase had more to do with the shift of proportions in the various price ranges, as opposed to actual increases in the values of the properties sold.

14 Waterfront Leelanau County 89-32% from last year 96-13% from last year $62K -8% from last year $6M -2% from last year $8, $6, $4, $2, $ Available % Closed % All Months Supply % Avg. Sale Price 686k 743k -8% $ Vol (million) % Available % Closed % $1-2k Months Supply % Value Change 1% Available % Closed % $2-4k Months Supply % Value Change -1% Available % Closed % $4-8k Months Supply % Value Change 11% Available % Closed % $8k+ Months Supply % Value Change -9% Listings, sales and average price were all down in the third quarter compared to last year. Heading into October, with only 89 available waterfront listings, inventory has been down dramatically down 15% from the prior quarter and 32% from the same time last year. The 49 third quarter sales were down 1 units from both the prior quarter and the third quarter of last year. The $687k third quarter average sale price was down 8% from the $743k third quarter average of a year ago. YTD, the average sale price was $62k this year compared to $676k last year. At the upper-end (over $4k) of the market, the YTD number of sales dropped from 85 last year to 65 this year. Values for sales above $8k have flattened with declining averages. Higher-end properties are often the first to show signs of market shifts.

15 Non-Waterfront Leelanau County % from last year % from last year $332K +16% from last year $55M -4% from last year $4, $3, $2, $1, $ Available % Closed % All Months Supply % Avg. Sale Price 35k 289k 21% $ Vol (million) % Available % Closed % $1-125k Months Supply % Value Change 1% Available % Closed % $125-2k Months Supply % Value Change 2% Available % Closed % $2-35k Months Supply % Value Change 11% Available % Closed % $35k+ Months Supply % Value Change -1% Inventory levels are up compared to both last quarter and the third quarter of last year. Despite having 2 additional listings, third quarter sales fell 19 units compared to last year, but the average sale price of $35k was up 21%. YTD sales were down 17% but average sale price was up almost the same amount, leaving the $55m closed volume $2m shy of last year s pace. Compared to last year, the number of third quarter closed sales priced under $2k was cut in half, falling from 6 to 3. At the same time, the number of above-$2k sales rose from 34 to 43. That shift in the mix of what sold will cause an increase in average price and give the appearance of values rising faster than they are. While values have generally been rising in this market, values of upper-end properties are showing signs of flattening, and in many cases, declining.

16 Waterfront Wexford County 32-32% from last year 6 +18% from last year $243K +24% from last year $15M +46% from last year $35, $3, $25, $2, $15, $1, $5, $ Available % Closed % All Months Supply % Avg. Sale Price 233k 192k 22% $ Vol (million) % Available % Closed % $1-15k Months Supply % Value Change -39% Available % Closed 6 5 2% $15-25k Months Supply % Value Change 44% Available % Closed 7 1 6% $25-4k Months Supply % Value Change -16% Available % Closed 4 1 3% $4k+ Months Supply % Value Change -6% 218 has been a good year for Wexford County waterfront sales. While available inventory has been down compared to the third quarter of last year, sales have doubled jumping from 14 to 28. The third quarter $233k average sale price was up $41k from a year ago and closed volume was up 143%. YTD numbers show similar gains. Because of the relatively small number of waterfront listings in Wexford County, a small swing in numbers can create astounding shifts in averages. That said, it is noteworthy that the number of closed third quarter waterfront sales priced over $25k went from 2 last year to 11 this year. YTD it jumped from 13 to 25.

17 Non-Waterfront Wexford County % from last year 333 even with last year $123K +11% from last year $41M +11% from last year $15, $125, $1, $75, $5, $25, $ Available % Closed % All Months Supply % Avg. Sale Price 132k 116k 13% $ Vol (million) % Available % Closed % $1-125k Months Supply % Value Change 8% Available % Closed % $125-2k Months Supply % Value Change 4% Available % Closed % $2-35k Months Supply % Value Change 5% Available % Closed 2 2 % $35k+ Months Supply % Value Change 8% Although available listings have been down, third quarter sales were up 8% compared to last year. With only 139 available listings, there were 123 third quarter sales. This market has been active. The 3.4 months of supply is less than any of the other counties covered in this report. The YTD average sale price of $123k was up 11% compared to last year. The $132k third quarter average (a 13% increase over last year) indicates that values were still rising at a fairly steady pace through the third quarter. While sales will drop off over the next few months, Wexford County s affordability will help it weather the rising interest rates that have been affecting other area markets.