House Prices Rise Across Lenawee County

Home prices are going up like crazy. Buyers have to exceed the auction and often the house does not value what they are paying. This puts all buyers, especially low to middle income people and first time buyers, in dire straits.

“It’s crazy. We don’t have enough houses for the people who want to buy. And then when you have a house and you have three, four or five, six people and then they bid up just to be the winning bidder. And then sometimes he doesn’t evaluate and sometimes he does. And there’s just a lot of anxiety and tension and I feel bad for both buyers and sellers, ”Jeanee said. Gilson, president of the Lenawee County Association of Realtors.

It’s a particularly tricky situation for buyers, Gilson said.

“I wrote four offers last week and none of them were successful and they were all overbid except one. I am warning them (buyers) because if he hasn’t rated what you’re bidding on, are you really going to be comfortable paying for that house? Said Gilson. “It’s a really tough, tough market for people right now. They can buy between $ 150,000 and $ 200,000, but are they comfortable? What if you were made redundant? What if you got sick, couldn’t work, and had no pay for two weeks? How would that affect you? Are you in a position where you would not be financially devastated? “

Houses cannot be built fast enough, but with the rising costs of labor and materials, construction can seem prohibitive.

“We have under-built. We have to build. But right now, with the construction costs as they are, people are kind of stalling that, ”Gilson said. “So it’s kind of Catch-22 over there from what we see.”

Due to the slow recovery in the housing market after the Great Recession, many workers have packed their bags, according to a local builder.

“The biggest challenge is a manpower problem; trying to find skilled labor for both our subcontractors and just general construction labor. I just think that historically over the past 10 years a lot of the workforce has left the market and the region and not replaced it with new talent, ”said Mark Baker, owner of Baker Construction of Adrian.

Baker said the costs of building products are also increasing, and there is a backlog on everything from windows to cabinets.

“We find that some of our products are on hold for 12 to 14 weeks,” Baker said. “If we look back three years before COVID in 2018, 2019, our average construction cost for a typical house was around $ 140 to $ 150 per square foot and now we are seeing costs close to $ 250 per. square foot.”

Baker, who is also a real estate agent and does construction work in Adrian, Tecumseh, Raisin Township and Madison Township, said he didn’t see new construction on the horizon because Lenawee County hadn’t planned this and because of the high cost.

“In Lenawee County, there is very little development going on. So we see a problem on the horizon that there is no development, so we will not have lots to build on in the years to come, ”said Baker. “The cost of existing homes has increased dramatically and there is very little construction in the Adrian area compared to what was happening, say, 20 years ago. So we’re not seeing a lot of new construction coming into the market, which is why we’re seeing the prices of existing homes go up in the county.

Bidding wars

Dave Gano, Mortgage Manager for Union Home Mortgage, said auction wars create tough times in structuring deals.

“We are seeing an environment where people are going above the asking price. We also see evaluations that struggle to meet the values ​​these people adhere to, ”said Gano. “So sometimes you see people writing offers that have some kind of new language or relatively new language as to whether they’re going to make a gap guarantee, or if the value doesn’t go into the sale price. , they are the difference. That alone can pose challenges for a lender structuring a transaction.

While measures are in place by Freddie Mac and Fannie Mae to keep buyers from going over their heads, buyers still need to be careful.

“Usually, you don’t want to exceed 30% of your gross income just for your house payment; you really don’t want to be more than 25% of your home’s payment for a debt-to-income ratio. Then for your all-in debt-to-income ratio, which is your payment plus whatever you have for monthly debt, you really don’t want to go over 45% if you can avoid that, ”Gano said. “If they give conventional loans up to Freddie Mac or Fannie Mae, you can’t go much higher than 50% with great credit. In fact, it’s the cut-off and 45% is more like a conservative, comfortable, and maximum debt-to-income ratio. “

Still, it’s a buyer’s market in terms of interest rates, Gano said. A 30-year fixed rate mortgage is in the low range of 3%, while a 15-year fixed rate mortgage is in the mid to high range of 2% and a Federal Housing Administration loan sits at the top of 2%. or a low range of 3%.

“It’s a great buying environment right now in terms of rates. They’re low and the money is readily available in the bond market so I don’t think we’re going to see a lot of change. I think it’s going to continue in that direction as far as rates are likely to stay decent, ”Gano said. “We’re in a mortgage-friendly environment and we’ve kind of been through this crisis already, which was the first in 75 years, with 10 to 12 years of a real estate recession, and now it’s coming out and coming out strong. “

Tense rental market

Still, it’s a tough market for low- and middle-income buyers and first-time homebuyers. Even the rent is getting out of hand.

“There are not enough units. It is essential. It is a question of supply and demand. If there were more housing units, and I mean all types in all markets – affordable, at market price, high end – there wouldn’t be enough units to meet demand. Lynne Punnett, Housing Help of Lenawee board member and former executive director of the Lenawee County branch of Habitat for Humanity, said. “The same goes for rentals. It’s not just a question of home ownership. There is not enough rental housing to meet demand in all price ranges. So at all levels – rental, ownership, low income housing, high income, affordable housing – we need more units, not just in Lenawee County, but across the country. “

There is a big gap in the range of affordable housing. The only game in town may appear to be Habitat for Humanity, and they’re still stretched out. Habitat makes sure the debt-to-income ratio on its mortgage payments doesn’t exceed 30%, but on most of its homes, it takes a hit and has to eat the difference.

“There is housing assistance from Lenawee, but it’s more rent assistance. For affordable housing, it’s a bit tricky for us because we’re small. I mean, we only make one or two houses a year, and actually because of the rising prices of building materials and that, we’re only going to build one house next year, ”Wendy Knox, executive director of Habitat for Humanity in Lenawee County, said. “So that definitely affected us because Lenawee County is huge and we can only build one house. “

The owners also cash their tokens.

“There are actually a lot of homeowners who are currently working on selling properties,” said Elizabeth Salerno, executive director of Housing Help of Lenawee County.

This is especially true in areas like Morenci and Hudson and with single-family homes, Salerno said.

“So that adds to that difficulty when we are already struggling to find units when rental properties go up for sale,” she said. is no longer for rent.

The rising cost of materials and labor for repairs that homeowners make to their properties to keep them in shape is also causing landlords to increase the rent on their properties.

“The costs are definitely increasing,” said Gideon Ballou, a property owner to Adrian. “I think what I’m seeing is not so much the materials as the labor costs going up, and with that, I really wonder if we’re going to raise the rents. I never really did. rent increased, except maybe if I had turnover and a unit became open, I would adjust the rent. But I’ve never done an overall percentage increase. But we’re looking at that. “

The lack of units and the cost of rents put low-income people in a difficult position.

“They are either pushed onto the streets or pushed into overcrowding, moving in with parents – doubling – children on sofas and floors because they share space. Rather than being homeless, there’s a lot going on, ”Punnett said. “So it’s overcrowded and it’s not a good living situation for the host, who is kind enough to welcome people. It is not stable. It is certainly not a good environment, especially for the children who are supposed to go back to school. They need a bed to sleep in and a table to do their homework. And they need to know where they’re going to be at night. And when you are in this sharing situation, well it gets exhausted, right? I mean it’s gonna last a little while, but then you can’t stay here anymore and then you’re gonna move out.