What’s Behind the Real Estate Frenzy — and How Long Will It Last?

With demand high and supply low, Southeast Michigan, like much of the country, has home-buyers frantic and sellers sitting pretty

southeast michigan real estate

Winter in Michigan isn’t usually the best time to show a house, let alone sell one, even without a pandemic raging. But neither COVID-19 nor a snowstorm could keep buyers from looking at the five-bedroom Ann Arbor home of Sarah Calderini and her husband in mid-February. 

Confirming what many industry experts are saying is the strongest seller’s market in more than a decade, the couple received multiple offers within days. “We put it on the market on a Friday and it was sold by Wednesday, despite salt and snow everywhere,” Calderini says of her former 3,500-square-foot home on the banks of Barton Pond. What’s more, every offer came in over the listing price of $1,785,000, and most prospective buyers didn’t care if the appraisal came in at less than the offer. They would simply make up the difference.

The offer they ultimately accepted wasn’t just the highest — $1,875,000 — but also the one with the best conditions. Buyers Amy and Bryan Pritchard waived the appraisal contingency, included an escalation clause to beat any competing offers, and told Sarah the family could stay in the house at no cost for a month following the closing. What’s more, while waiting to see if their offer would be accepted, the soon-to-be new owners wrote a heartfelt email to share a personal promise. “I know it’s a cliché,” Amy wrote, “but this is our family’s dream home. Know you can expect smooth sailing if you
should choose to work with us.”

The Pritchards, who were relocating from Chicago, both have professional real estate experience and knew they had to pull out all the stops to get their dream home in such a white-hot market. Amy Pritchard, vice president of sales at Jameson Sotheby’s International Realty, and her husband, Bryan, founder and CEO of the real estate firm Tricap Residential Group, relocated from a Chicago townhouse to a rental home in Ann Arbor in June 2020 with their two sons, yearning for a lifestyle change, spurred by the pandemic and a new puppy. 

“It was an amazing offer, and the email was a nice touch,” Calderini says. But it also was probably necessary: Calderini, a former chair of the University Musical Society Board of Directors, had also fielded a cash offer of $1,825,000.

It’s not just the highest end of the market that’s on fire right now, either. The median sale price for existing homes in metro Detroit sat at $267,824 in April 2021, up 14.3 percent over the median price in April 2020, according to a monthly report from RE/MAX of Southeastern Michigan. The number of homes sold in metro Detroit was up nearly 55 percent in the same period.

“This is the Wild West,” says Jeffrey Post, a Berkshire Hathaway real estate agent in metro Detroit, who says the region has just two months’ worth of inventory, a startling low that means there’d be nothing left to sell if no new listings came on the market in eight weeks. A buyer’s market, when prices fall or don’t rise so fast, would typically see a six-month inventory. “The market is so hot right now. Unless you make a very aggressive offer within the first 48 hours a house is listed, you won’t stand a chance. There are no tire-kickers out there. These are serious buyers, ready to go.” Offering cash or more than the list price is now simply the norm, Post says. 

southeast michigan real estate

Part of what makes this housing market unusual is how COVID-19 has affected it. In many cases, would-be sellers refused to do open houses in the era of social distancing, but that didn’t harm their prospects. Spending so much time at home had a dual effect: Sellers realized it was time to downsize, especially if they took a pandemic-recession economic hit, while many people who’d kept their jobs wanted more space. “People want bigger homes where they can entertain, work remotely, learn virtually, and exercise,” Post says. “Every
inch of space counts.”

Ryan Cooley, owner of O’Connor Real Estate and Development in Detroit, is seeing a similar trend: Condo sales are cooling as single-family home sales heat up. “Single homes have increased in value, but we have very little inventory,” Cooley says. “It’s actually not a fun way to sell real estate. There is very little to buy, and you see how hard it is for people to succeed in this market. ”

One issue Cooley has encountered in the Detroit market in particular has been that the market has been so slow for so long that there are often few comparable sales for homes upon which to base a price for something new to the market. Cooley knows that problem first-hand, having tried to get his own renovated Corktown home appraised accurately when there has been little turnover of fixed-up homes in recent years.

That began to change this past winter, though, when O’Connor Real Estate sold a row of seven historic brownstones on Leverette Street in Corktown in 10 days for about $600,000 each, far beyond the asking price of $530,000. Suddenly, Cooley had some comparable sales figures for an appraisal of his own home. The Leverette developer spent big on top-to-bottom renovations of the two-bedroom townhouses, from kitchens with stainless steel appliances to fireplaces, floating staircases, and plumbed basements that can become separate one-bedroom apartments.  

Trevor James, general manager and head coach of Detroit City Football Club, and his wife, Tiffany Ebert, bought one of them in May after James extended his contract with the soccer team for three years. They put in a reservation on the 2,100-square-foot house they ultimately bought following a tour that took place before the renovations were completed, paying a fee to have first dibs on the property when it was finished. “We wanted a single-family home, and that is so hard to find, as most new builds in Detroit are condos,” Ebert says. “Detroit is a unique housing market, and we were just so lucky we got in early and did not have to fight off other buyers.”  

That’s no longer the case, Cooley says. In April, he sold a three-bedroom house in Corktown that had been vacant for 30 years before its owners, one an interior decorator, performed an extreme makeover on it that included adding a half-bath, a laundry and mudroom, and a porch. It went on the market at $385,000 and sold four days later after 13 offers and 40 showings for $478,000.

More diverse suburbs like Ypsilanti, where few houses are on the market, are seeing a similar mania. “I’ve been in the business for 28 years and sold more than 5,000 houses totaling more than $1 billion, and Ypsi is the hottest it has ever been,” says David Mueller, who runs DMA Real Estate in Washtenaw County. One house priced at $249,500 had 49 offers and ended up going for $300,000 cash, he says. “The last three houses I’ve sold went for 20 to 25 percent over asking.”

southeast michigan real estate

To find more inventory, Mueller dropped off hundreds of postcards in mailboxes in Ypsilanti-area ZIP codes asking homeowners if they might sell given the “Extreme Seller’s Market.” He also offered a free home valuation. “Typically, I would have 70 to 200 houses on the market at this time of year,” he says. “Instead, I only have 11.”

Unlike some competitors, he doesn’t mind the fact that buyers are willing to make up the difference between the appraised valuation and the sale price, because the price “should really be what someone is willing to pay for it. If you have 40 offers at one price and the appraisal comes in much lower, is it even accurate? And with interest rates so low, it feels like Monopoly money.” 

Realtor Kate Hayman of Hayman Property Group in Birmingham says houses in her area sell for anywhere from $300,000 to $3 million. Many homebuyers, she says, are looking to buy homes with exactly what they want, as opposed to paying less for something to renovate. “They don’t want to spend $70,000 on a new kitchen when they can borrow money at such low rates to buy the house that already has that great kitchen,” she says, adding that outdoor entertaining space is also at a premium, particularly backyards with fire pits and pools. “One buyer made it a condition of purchase that the seller, who had planned to put in a pool this spring, keep the appointment with the contractor, as there is a backlog to get pools installed here.” 

Mueller believes this seller’s market could extend as far as 2023, although he’s cautious about the future after enduring the housing market crash during the Great Recession. He takes comfort, however, in the fact that, thanks to post-crash regulations, lenders are increasingly cautious about offering loans to customers who can’t really afford to pay for them over the long term. Unlike in the 1990s and 2000s, when banks gave out loans to people with poor credit, and many of those loans were designed to keep monthly payments low for a few years before they spiraled up, most of the mortgages issued now involve a more careful review of a buyer’s ability to pay to reduce the foreclosure risks. “We always have new families moving here,” Hayman says, noting the housing demand should remain steady for a while, especially with the expected economic uptick of the post-pandemic era.

Cooley, whose focus is the city of Detroit, is more circumspect, given that many parts of the city remain blighted or stigmatized. “The news is more positive than negative with interest rates low and a moratorium on foreclosures for the moment,” he says, adding that an increase in the cost of building supplies means there also won’t be a flood of new properties arriving any time soon. “In the last five years, downtown Detroit rose. But much of the city still has more of a preconceived risk. We also don’t know what office culture will look like. Does that come back? The good news is, we are still a destination for young people.”

The tough part, as Sarah Calderini discovered, is that once you sell your old home, you have to find a new one. In April, when she spotted a two-bedroom condo for sale, she knew she “had to put forward an aggressive offer that day.” She offered more than the $399,900 asking price, added an early acceptance bonus of $14,000, and let the seller stay for free for six weeks after closing. Shortly after her offer was accepted, she learned there were two other competitive offers on the table.

The family was due to move into the new home on June 30. “I just feel super lucky to have gotten a place at all in this crazy market,” she says. “At this age, I feel too old to couch-surf.”