Real Estate Corner with Rick Seese: February Edition

This month Rick throws in his two cents and shares area market statistics.

My Two Cents

As a prelude to my monthly statistics, I feel the need to speak up about a current trend that began several years ago. The home purchase affordability concerns are resurfacing within our industry.  We have had huge increases in real estate prices over the past several years, and there is no sign of a slow-down in most real estate markets.  Also, Interest rates will certainly be on the rise to help combat the recent rise with inflation.  Increases with mortgage interest rates have already begun, as it appears the early projections of slow increases throughout 2022 may now be accelerated.  We have learned from previous bouts with inflation and economic downturns that interest rates are the fine-tuning mechanism to economic heating and cooling.  The fine-tuning dial is about to be turned upward a bit quicker than previously anticipated.  As we look at affordability levels, which are affected by many factors, but mostly rising prices, interest rates and employment income, it appears that the First-Time Homebuyer will be affected the most.  Inflation by itself can affect normal housing affordability, as other non-housing expenses can chip away into a family budget.  However, there is more to housing expenses than merely a mortgage payment, property taxes, and insurance.  Utility costs are on the rise, as well as the cost of home maintenance and repairs.

First-Time Homebuyers are the lifeblood of our housing system. They allow current homeowners to sell and move to a new location, a new job, a retirement community, or a bigger house down the street. Because of their critical role in creating and sustaining a strong housing market, First-Time Homebuyers have long been an import focus of housing policy.

Historically (prior to 2006) First-Time Homebuyer sales represented around 40 percent of the market annually, according to the NAR (National Association of Realtors).  That 40% is widely regarded as the healthy First-Time Homebuyer share. There was a temporary spike in 2009 and 2010 to 47 and 50 percent, respectively, which coincided with a well-used Federal First-Time Homebuyer tax credit program, as the country maneuvered out of the foreclosure era.  After 2006, the percentage began to shrink.  In 2014 the First-time Homebuyer share had plummeted to 33 percent.  I believe that some of the decline was based on young Millennials thinking that renting may be safer than buying, since we were just recovering from property values decreasing for the first time in housing history.

In 2021, First-Time Homebuyers made up 31 percent of all home buyers, the same as in 2020.  Going forward, how will affordability be affected by historically low interest rates suddenly increasing, along with continued double-digit housing appreciation?  It’s obvious that First-time Homebuyer participation is not only important to the total housing market, but it has been a signature American Dream for young families for many generations.

2022 Statistics Year-To-Date

Average Sale Prices
Year-To-Date Through January 2022

School District Average Sale Price YTD    /    Final 2021
Rockford $514,577  / $389,329
Forest Hills $475,144  / $503,893
Caledonia $347,851  / $393,991
Lowell $333,251  / $348,377            
Entire MLS $265,438  / $268,982
Saranac $207,057  / $254,552
Lakewood $206,133  / $203,636
Belding $202,927  / $212,680
*MLS is Multiple Listing Service.  Coverage area includes all of Kent and Ionia Counties, northern Barry County (inclusive of Gun Lake) and southeastern Ottawa County. Statistics courtesy of GRAR (Greater Regional Alliance of Realtors).

This table shows the 2022 Year-to-Date compared to the Average Sale price for the entire year of 2021.  It’s early in the year, so the averages can get a bit skewed with a smaller sampling of sales.  Rockford School District gets the early award for a few large sales in a smaller sampling.  The number of units sold in January this year are slightly less in every school district compared to what was reported in January 2021.  It could be due to a snowier month this year than last year, or it could be slightly less demand from Pending Sales in December.  We will watch these numbers closely as we enter the early months of the upcoming spring market.

Average Sale Prices by Surrounding Township
Year-to-Date January 31, 2022

Location/School District Average Sale Price YTD
Ada Township $724,025
Vergennes Township $492,300
Grattan Township $490,000
Bowne Township $423,000
Cascade Township $335,973
Lowell Township $315,087
Boston Township $281,171
Entire MLS $265,119
Keene Township $132,478
Statistics courtesy of GRAR (Greater Regional Alliance of Realtors)

Here are the first month of Average Sale Prices for 2022 for each of our surrounding Townships. The Lowell School District takes up a portion of each of these townships, except Vergennes and Lowell Townships, where the entire townships are encompassed by the Lowell School District.  Again, it is very early for Year-to Date Averages, as the number of units are small.

Market Inventory
As of January 31, 2022

Location

School District

Homes Currently

for Sale

Months of Supply for January 2022 New Listings

Jan 2021 vs Jan 2022

Entire MLS – GRAR* 3,782 .8 2,360     2,060
Rockford 55 .6            50           30
Forest Hills 50 .4            47           33
Caledonia 36 .6            31           24
Lowell 25 .5            26            8
Belding 12 .4            11            8
Lakewood 7 .4             7            13
Saranac 7 .9             9             2
*MLS is Multiple Listing Service.  Coverage area includes all of Kent and Ionia Counties, northern Barry County (inclusive of Gun Lake) and southeastern Ottawa County.  Statistics courtesy of GRAR (Greater Regional Alliance of Realtors).

“Months of Supply” refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace.  Historically, six months of supply is associated with moderate price appreciation, and a lower level of month’s supply tends to push prices up more rapidly.

January 2022 was an extremely thin month for New Listings, which resulted in the lowest readings for Months of Supply in recent memory.  The number of New Listings that hit the market were erased by a higher number of sales, which means we went backward with Supply.  Winter is typically the slow season for New Listings and Demand.  However, the Demand has continued at a steady clip, with or without a generous influx of New Listings.  Expect one more month of similar numbers, before the front end of the spring market begins.

Average Price Per Square Foot
As of January 31, 2022 (3-Month Rolling Average)

Location/School District Average Price Per Sq. Ft.
Rockford $180
Forest Hills $176
Caledonia $165
Lowell $154
Entire MLS $143
Saranac $135
Belding $130
Lakewood $125
Statistics courtesy of GRAR (Greater Regional Alliance of Realtors)

The Average Price Per Square Foot means the price per square foot in relation to the Sale Price.  We begin 2022 with Rockford School District leading the way with the highest per square foot cost.  These averages continue to increase in our focus area school districts.  These numbers are also an indication of Supply and Demand.  Average new home construction costs begin around $200+ per sq. ft. in West Michigan, but that does not necessarily include landscaping; the cost of the land or lot to build the new home; or the cost of improvements to the land, such as water/sewer hook-up, well, septic, driveway, electric, and gas.  The above averages include existing homes and some new construction.

Pending Sales
As of January 31, 2022

Location

School District

Pending Sales

Jan 2021 vs Jan 2022

Entire MLS 2,521         1,953
Forest Hills 52               40
Caledonia 27               33
Rockford 62               30
Lowell 22               15
Belding 12               13
Lakewood 7                   7
Saranac 7                   6
Statistics courtesy of GRAR (Greater Regional Alliance of Realtors)

Pending Sales are sales under contract with an accepted offer, but those transactions have not finalized yet (closed).  Some of the above numbers could change daily, as some sales will terminate for various reasons, but new sales will be added.  Winter seasonality usually causes less Pending Sales in January.  Therefore, a fair comparison is same month 2021 vs 2022.  Pending Sales decreased within the Entire MLS and within our focus area school districts when comparing January 2021 and January 2022.  Winter weather patterns within a particular month can provide for some increases and decreases from one year to the next.  These numbers are important as a tool to forecast future closings and indicate recent activity.  The above numbers are based on the one-month activity of reported Pending Sales.  Most pending sales become finalized and closed within a three-to-six-week period, from the date it became pending.

Rick Seese works with buyers and sellers of residential, commercial, and industrial real estate.  He is an Associate Broker with Greenridge Realty, Inc. and has been licensed full-time for over 40 years.  If you’re interested in reaching out to Rick for more information, or have a question for the monthly article, you can contact him via email ([email protected]), visit his website at www.rickseese.com or Facebook page at (www.facebook.com/Rick Seese), or call/text him at 616-437-2576.

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