TRAVERSE CITY — The local real estate crunch won’t ease anytime soon.
“We’re still seeing diminishing inventory,” said Traverse Area Association of Realtors CEO Kim Pontius. “That only stands to reason: You only have so much existing inventory you can shuffle around before you start feeding some new stuff in there.”
The year 2020 saw demand for housing in Traverse City and the surrounding area grow even faster than it had been in previous years.
“Even though last year was our best year ever,” Pontius said, “and I wasn’t sure that we could top it, it looks like we’re well on our way to topping last year’s record of over $1 billion in real estate transactions just in the five-county region.”
TAAR’s core region includes Antrim, Benzie, Grand Traverse, Kalkaska and Leelanau counties. But it has been adding Realtor members in surrounding counties: Charlevoix, Manistee, Missaukee and Wexford. Joni Holly of City2Shore Real Estate Northern Michigan — Cadillac was elected TAAR president in February.
TAAR is changing its name to better reflect that expanding service area. The “Aspire North Realtors” name was announced in September.
Demand for housing in the region may never have been as frantic as it is now. Buyer appetite has outstripped local construction pace for years, and the pandemic seems to have acted as an accelerant.
“I know there are people building, I know there’s stuff going up,” Pontius said, “but we could probably use, in the five-county region, 4,000 single-family homes and probably about 10,000 rental units. That’s in addition to what’s already going up right now.”
He referenced numbers from a Networks Northwest study that looked at the regional housing market.
“The new supply isn’t anywhere close to the demand that we have. That, of course, drives pricing up. Our prices — as the statistics show — just continue to climb,” he said.
Pontius predicts no swerve in that trend.
“I don’t know what could change,” he said. “The supply chain is still going to be challenged. Pricing on materials is still going to be high. I don’t look for that to come down anytime in 2021 — maybe by Q3. But right now, with the high level of demand and the kink in the supply chain, especially with products that come from China, I think prices are going to continue to escalate.”
Construction of new homes in Michigan potentially could be delayed because homes damaged elsewhere by 2020 disasters, such as wildfires in California and hurricanes in southern states, need to be rebuilt. The construction industry likely will fulfill insurance claims to rebuild those homes before it tackles new construction.
There are houses available to buy in the five-county region, Pontius said. But not every listing fits every buyer. Even so, houses have been selling more rapidly each month. And they’ve been selling for increasing prices.
In November, 350 single-family homes were sold in the five-county area, according to TAAR figures, 61 more than changed hands in November 2019. And the median home price jumped from $239,000 in November 2019 to $274,500 in November 2020.
The trend toward short supply and rising cost stretches across the nation.
The National Association of Realtors’ Chief Economist and Senior Vice President of Research Lawrence Yun four years ago said the U.S. needed to build 6.5 million housing units to fill demand.
“And we didn’t build anything, really, anything,” Pontius said. “Demand doesn’t go away. People are still looking for a place. And now you’ve got all these other factors, like migration patterns — especially from the coastal states.”
Yun recently spoke at NAR’s Real Estate Forecast Summit.
“When the pandemic began, there was a tremendous amount of uncertainty,” he said. “To our surprise, the housing market not only recovered, and then some, but it went roaring past the pre-pandemic levels.”
According to the Dec. 29 S&P CoreLogic Case-Shiller 20-city home price index, prices jumped in October by the most in more than six years. The combination of strong demand and limited supply pushed home prices up 7.9 percent compared to October 2019.
Some of the people buying houses in northern Michigan are relocating from New York, San Francisco and other large communities.
Geographically freed by the ability to work from home, they’re choosing smaller communities with recreational options.
The Aspen Daily News this week reported that residential real estate sales volume in the Aspen/Snowmass area — which in some respects resembles Traverse City — jumped 49 percent in 2020. The article attributed much of the increase to people who moved to the resort area to escape metropolitan areas ravaged by COVID-19.
“Some markets have been performing exceptionally well throughout the pandemic and they’ll likely carry that momentum well into 2021, and beyond, because of strong in-migration of new residents, faster local job market recoveries and environments conducive to work-from-home arrangements and other factors,” Yun said.
Single-family homes aren’t the only segment of the housing market that faces an availability crisis.
Pontius believes the region needs more long-term care facilities to house folks who age out of single-family home ownership.
“We are woefully unprepared for what is coming,” he said.
“We’re going to need a lot more of in-home care. When you look at markets like Leelanau County, where the age demographic is quite high, if folks there were even interested in putting their house on the market, they would have difficulty trying to find someplace to go — unless they went outside the region or outside the state.”