Cindy Lowman, president of United Bank Mortgage Corp., said she sees large land parcels in West Michigan commanding surprisingly high prices as 2003 begins. What is even more surprising to her, however, is that people are lining up to buy them.
“What we are seeing on a fairly regular basis,” she said, “is that the upper-end homes’ marketing time is way up there, and if someone is going to invest $350,000 to $500,000 in a house, they are going to invest in a house that is exactly what they want instead of buying a used home,” she said.
That means the home-building market is taking off. She added that people are also looking for large pieces of land where they can put up a house and have a couple of acres to spare.
And with the government’s recent announcement that the construction of new homes and apartments has risen to its highest level in 16 years in January, mortgage rates continue to power the housing boom.
With interest rates being low, the buyer’s buying power is greatly maximized, and folks who are looking for this type of property have the ability to finance it. It is just a matter of finding the right piece of land and putting up the house of their dreams, she said.
“In years past we have always enjoyed 3 to 7 percent appreciation,” Lowman said. “Whereas now, the market has been driven down a bit by so many sellers and not enough buyers. What I haven’t seen go flat is land value; it has continued to appreciate because people continue to see land as irreplaceable. Once the terra firma is gone, it is gone.”
The U.S. Department of Commerce reports that work was started on 1.850 million units at a seasonally adjusted annual rate in January, up 0.2 percent from 1.847 million units in December.
The gain reflected the fact that low mortgage rates, which fueled record sales of both new and existing homes in 2002, remained at enticing levels in January.
Two years ago Lowman said a house could go on the market for $10,000 over its value and the seller would not have a problem getting that full amount. Today, she noted, it is just the opposite. A buyer now is mostly likely looking at several homes and offering a bargain rate for the one he or she chooses.
The limited number of buyers, Lowman pointed out, has to do with the amount of economic unrest. Uneasy feelings about jobs, money for a down payment, as well as changes in income and living style, have all contributed to the low sales numbers.
Persons who sell their homes now, however, often are looking for a one- to three-acre site on which to build a home.
But picking up one to three acres in Grand Rapids is hard these days, so many home builders are looking outside the city limits, specifically to Allegan County and along the I-96 corridor toward Lansing, or north of Rockford.
Lowman sees the South Beltline as potentially the next big development area.
“It is far enough out there yet that no one is going to speculate where the next movement is going to be,” she said.
When motorists start using the highway and seeing what’s out there, however, she expects some residential deals to take place.
“But I think that you are not seeing enough movement (yet) with who is getting what land and who lost it to M-DOT and where can I buy the next chunk.”
Another factor in land use, Lowman said, is the controversy surrounding farmland development rights, which could swallow up large tracts of property.
The trend in new home construction, however, boils down to one thing: economics.
“We know that this quarter and probably into second quarter we are probably going to see some good interest rates,” she said.
“This time is the time where Mr. and Mrs. Homeowner are out looking for that piece of ground because they want to dig a hole in March. We will be able to measure things better come the end of first quarter or the beginning of spring,” said Lowman.
“I believe the economy is so delicate right now the interest rates are the one thing that are keeping parts of the economy percolating. And with the prices of homes and land and the rates changing all the time, all we can do is hope for this continued upswing and increase in land purchases.”