Finding A Good Deal
in the Northern Michigan Real Estate Market
Can a good deal still be found?
If you know how to go about it. Finding a good deal requires patience, perseverance and an in-depth understanding of relevant valuation metrics, but if you actively engage in the process there will be opportunities.
A typical example would be a buyer interested in a family home:
- With 4+ bedrooms;
- Located within a 5-10 minute drive of the chairlifts or sandy beach;
- Purchase price not to exceed $2 million;
- Short term rental income offsets;
- Upside appreciation profile.
A search produces 40 results from which a shortlist of best fit properties is selected. Candidates cannot suffer from pricing defects, environmental defects or shell and core/floor plan defects. The top 25% of the results yields 10 possibilities that make the final cut.
Experience suggests that only 2 of the presented homes are likely to be of serious interest which is a small fraction of total inventory. The challenge here has to do with statistical probability: The odds that one of the two shortlisted properties is owned by one of five price realistic sellers is only 10% (2/10 x 5/10 = 10/100) making the chances of a successful acquisition both frustrating and alarmingly challenging.
So much for buyers who think they are going to get the deal of a lifetime, from sellers who are patiently willing to sell, on the one day that buyer happens to be in town looking at real estate.
Data research, shows the following to be true:
- The Northern Michigan property market is at the end of a 10-year structural correction cycle.
- Leading Indicators show inventory levels at below long term absorption averages.
- Capital markets are improving as a result of the biggest stock market run-up in modern economic history.
- The demand for high-end luxury goods is up.
- Consumer confidence and GDP performance are strengthening and a favorable FED monetary policy is in place.
- Well-priced vacation homes have been selling but buyers are still reluctant to commit.
As the fear subsides there will be an increasing appetite for yield and diversification ultimately bringing an end to the current capital preservation mentality.
All of these indicators support a "take action now" strategy with the key being to get out in front of the herd while there are still deals to be had, the worst is over, but the stampede towards freer spending has not yet begun.