Editor’s note: This article was published in Record-Eagle’s Momentum ’22 special publication. For more stories from the Northern Michigan Economic Engine, click here To read Momentum in its entirety online.
Travel City – The law of supply and demand rules in the Traverse City housing market. Demand is high and supply is low, so prices have gone up.
“I often call it a feeding frenzy,” said Century 21 Associate Broker and real estate broker Renae Hansen.
“We have very, very low inventory. I don’t know we have more buyers than usual, but the buyers we all have are competing for very limited inventory.”
“We said inventory is low for 10 years. I finally looked it up, and it has been in steady decline for 10 years. It’s the law of supply and demand. As inventory goes down, prices go up,” she said.
“It’s a national phenomenon, not just our region.”
But potential buyers seeking housing in Traverse City may be forgiven if they think it’s a local phenomenon.
Imagine someone walks into a real estate supermarket in Traverse City and finds mostly empty shelves. They wander up and down the aisles and eventually discover something on the shelf – not exactly what they want, but it will satiate their hunger. They walk into the exit lane only to find that someone else is jostling and yelling at the employee that they will pay more than the sticker price. The first shopper swallows his pride and pulls out a credit card to pay that inflated amount. But it was too late – the teller had already sold the item to a third shopper who paid much more – cash.
“Our market currently — this year and last year — is 36 percent of cash buyers in our five counties: Grand Traverse, Leelanau, Antrim, Benzie and Kalkaska,” said Sam Flamont, realtor at eXp Realty.
to become fashionable
“I think now, what happens: Traverse City is getting very trendy nationally,” Flamont said. “It’s starting to get more national attention than ever, because of the amount of direct flights we have and the locations they come from.”
“When the city becomes trendy, as Aspen (Colorado) did, or Jackson Hole (Wyoming) did, you start to get buyers from everywhere. You start to attract people who have a lot of money who want to be there. And when people come in with money. More people come in with money. It creates many conditions. Some are issues, some are what it is. You create pressure on the market.
“It’s hard for people between $300,000 and $500,000 to buy a home,” said Flamont, a Traverse City Central High School graduate who played professional baseball before returning to Traverse City as a realtor seven years ago.
inventory shrinking
The stock of homes for sale in the area is shrinking. The pace of construction has not kept pace with demand.
Hansen recently looked at statistics from the local Realtors Association, Aspire North for Realtors. Less than a decade ago, there were usually about 1,000 homes in the Five Counties area (Anrim, Benzie, Grand Traverse, Calcasca, and Lillanao) available for purchase at any given time.
In early April of this year, there were only 235 homes in the system uncontracted, still available for purchase. Of those, 138 were in Grand Traverse County.
“This leaves fewer than 100 homes in the remaining four counties that are available,” Hansen said. “You can see why there’s such a craze for buyers.”
This frenzy results in a rush whenever a new drug appears on the market. She said a typical menu can quickly get you 25 or 30 widths, and anywhere from two to 20 widths.
“It’s great for sellers. “It can be very frustrating for buyers,” Hansen said.
“The waterfront is always popular,” Flamont said. “We’ve had more million dollars in sales than ever before, $2 million more sales than ever, and more than $3 million in sales than we’ve had – in this period.”
Waterfront properties continue to rise in price, but not as fast as typical neighborhood homes.
There has been a lot of talk in recent years about condominiums and the changing makeup of the core downtown area.
“I know people say we don’t need any apartments, but the market says differently,” Flamont said. “Our team probably gets 20 to 30 calls a week for people looking for apartments downtown.”
Nothing is available.
extra drudgery
“And buyers’ agents, too,” Hansen said. “It’s tough. You do a lot of work.
“Consider if you are making an offer to a buyer and there are about a dozen other offers on it. This means that 12 agents work with 12 potential buyers and write 12 offers, and only one of them will buy that home. So the other customers are back to square one and looking for other homes. We are doing a lot of business and running to sell homes.”
Real estate agents usually work 100 percent for a commission. So if they don’t make a deal, they don’t make any income.
And we still have expenses. We don’t generate income, but we still have office fees, board fees, MLS fees (Multiple List Service) and the like. “Each agent is like an individual company, an independent contractor,” Hansen said.
“More people are becoming real estate brokers, but this is probably the most difficult time to become a realtor – because there is nothing to sell. Since I’ve worked in this field, this has been the lowest we have in stock,” said Flamont.
Distance working
The COVID-19 pandemic, and the resulting boom in companies that allowed employees to work from home, has led to a newfound boom for workers who would rather live in a beautiful small town than a big business-centric city.
“There has been a slight uptick in people coming in from Chicago or midtown cities, because of the pandemic and the ability to work from home,” Hansen said.
“The waterfront has definitely increased in value, but at a slower rate than just regular homes people want to live in.
Most people are looking for family homes, just places to live. Rent is very expensive, and it has been for some time, with the low interest rate, buyers are trying to get into their homes. This was feeding the market.
Increase in equity
The housing market presents a challenge to potential buyers. But it’s great for landlords.
“In the past two years, we’ve seen a huge increase in equity,” Flamont said. “If you’re someone who’s been here for 20 years and is looking to retire and move in, it wouldn’t be better for you, because you get a dollar amount that you can’t imagine for your home.”
Hansen has seen bids on homes as high as $150,000 above asking price.
Property owners near downtown Traverse City have had no trouble finding buyers. People who own properties far from the city center are now joining this club.
“Previously, buyers wanted to be as close to downtown Traverse as possible,” Hansen said. “Everyone was like ‘downtown, downtown.’ Now that they can work from anywhere, they don’t have to move around, and you can get better rates in the outback, I see people more willing to look in the outdoors like Grawn and Kingsley and further in Leelanau County”.
Flamont mentioned Lake Fife, Cadillac, and Kalkaska as communities seeing increased interest.
Neither he nor Hansen envision a major change in the situation any time soon.
No change soon
Flamont remembers people who suggested back in 2015, when he became a realtor, that the Traverse City real estate market was ripe for a crash. This suggestion was wrong.
“There are homes in certain locations that used to sell for $150,000 or $180,000 that are now selling for $350,000 or $360,000,” he said.
Home prices have skyrocketed, particularly since the start of the pandemic.
“This is crazy. We can’t keep increasing the value by 20 percent every year,” Flamont said, leading some to once again worry that a crash is on the horizon.
But what suddenly happens is there’s only a 10 percent estimate, and it’s still huge — and people go, ‘Oh, it’s crashing,’ Flamont said.
“It doesn’t collapse, you can’t keep up with 20 percent. Breaking down means you lose value. It doesn’t mean you have less value increase.”
“If you bought a home a year ago at 20 percent above market value, it’s still up 10 percent, so it’s still more than what you bought it for,” Flamont said.
“Unless we have more inventory, I don’t see a slowdown in the market or a decline in competition at all,” Hansen said.
She believes that increased interest may slow the market down a bit, but it’s not enough to make much difference to sellers or buyers in the Traverse City market.
“There are a lot of buildings underway, so that will help,” she said. “But I don’t think it is rising fast enough to quickly change the market. I still think we have a couple, three years of what we have now pretty much.”
