This month Rick shares his perspective on supply, demand, and inflation, provides area statistics, and ends with a monthly summary.
My Perspective – Supply, Demand & Inflation
Let’s start with Supply. The Months of Supply within our focus area school districts in the charts below have inched upward from previous lows in the .6 to 1.0 Month of Supply range. These numbers have been consistently this low over the past couple of years. Since the increases in interest rates began over the past 60 days, the Months of Supply in our focus areas have increased to the 1.0-to-2.0-month levels. These numbers are still well below normal. A normal supply in a healthy housing market would be in the 4.0-to-6.0-month range. Anything lower would instill higher than normal housing appreciation, which is what has been causing the speedy escalation of housing prices. We have plenty of room for more supply. Buyers need more supply, and the market needs less frantic over-exuberant bidding. New listings are beginning to rise, as some homeowners are believing that this is the time to catch the market at its peak.
On the demand side, Pending Sales have been easing a bit over the past 4 to 5 months and will continue to do so. First-time Homebuyers are being squeezed from the market with higher interest rates, as well as the continued escalation of sale prices. Higher-end home sales ($700,000 and up) are slowing, as buyers are reluctant to spend their money. Higher-end buyers are most likely feeling their 20%+ losses in the stock market more than lower price home buyers. This is a typical reaction to economic slowing, which is what is needed to begin the crusade to halt inflation. Tackling the inflation problem is what this is all about – it needs to be done.
The Consumer Price Index (CPI) report last week showed us an increase from 8.6% in May to an historic level of 9.1% in June. This tells us that more interest rate increases are to be expected. In the near term, we are looking at an additional .75% to 1.0% increase, with a potential similar increase in September.
The big burning question is how much of an economic slow-down will it take to tackle inflation? How deep of an economic recession will it take to turn inflation around? We will keep a close eye on the indicators over the next 30-60 days. Hopefully, a slighter slow-down will enable supply chains to catch up. Maybe we could see labor and service costs ease. One thing is certain, we can see the beginning of a changing real estate market in the Market Inventory and Pending Sale charts below.
I always welcome your comments and questions.
2022 Statistics Year-To-Date
Average Sale Prices Year-To-Date Through June 2022
| School District | Average Sale Price YTD / Final 2021 |
| Forest Hills | $556,138 / $503,893 |
| Rockford | $447,598 / $389,329 |
| Lowell | $404,081 / $348,377 |
| Caledonia | $398,817 / $393,991 |
| Entire MLS | $282,506 / $268,982 |
| Saranac | $255,242 / $254,552 |
| Lakewood | $241,842 / $203,636 |
| Belding | $226,712 / $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).
All our focus area school districts increased their Average Sale Prices from last month, except Saranac and Belding. The Lowell School District surpassed the $400,000 level for the first time, to $404,081 and Lowell is now $55,704 over its 2021 year ending average. That is a 13.8% increase, and it is only June. In comparison, the entire MLS is $13,524 over its 2021 year ending average, which is a 4.8% increase. The increasing interest rates will begin to slow demand, but how will rising rates affect Average Sale Prices? Could there be a U turn in the road ahead?
Average Sale Prices by Surrounding Township Through June 30, 2022 (12-Month Rolling Average)
| Township | Average Sale Price YTD |
| Ada Township | $597,565 |
| Cascade Township | $562,287 |
| Vergennes Township | $422,949 |
| Lowell Township | $366,298 |
| Grattan Township | $362,307 |
| Bowne Township | $344,583 |
| Boston Township | $286,497 |
| Entire MLS | $282,506 |
| Keene Township | $259,850 |
Statistics courtesy of GRAR (Greater Regional Alliance of Realtors)
Here are the Average Sale Prices by Surrounding Townships through June 2022. 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. This table represents the first 6 months of 2022. As you can see, our surrounding townships have higher average sale prices compared to the total MLS, except Keene Township. All the townships increased their 12-month rolling average sale prices from last month.
Market Inventory As of June 30, 2022
|
School District |
Homes Currently
for Sale |
Months of Supply for June 2022 | New Listings in June
2021 vs 2022 |
| Entire MLS – GRAR* | 4,731 | 1.5 | 4,703 4,842 |
| Rockford | 86 | 1.5 | 81 94 |
| Forest Hills | 79 | 1.3 | 93 120 |
| Caledonia | 75 | 2.1 | 43 70 |
| Lowell | 35 | 1.4 | 36 48 |
| Belding | 12 | .8 | 18 25 |
| Lakewood | 12 | 1.1 | 16 18 |
| Saranac | 8 | 1.1 | 9 15 |
*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.
When we return to a normal Months of Supply, a new “normal” may range between 4 to 6 months of supply. Statisticians will be able to determine normalcy as the demand is compared to sale prices when inventory moves upward.
We are beginning to see a broad movement to a more normal market of supply, as New Listings increased Year-Over-Year within each of our focus areas, as well as the entire MLS. Home buyers are beginning to see more choices and less competition for the same home. Months of Supply edged upward in all our focus area school districts. Caledonia is the first focus area to exceed the 2-month level of inventory since 2020.
This chart will be watched closely as additional interest rate hikes should provide for further movements toward a healthier market balance of supply and demand.
Pending Sales As of June 30, 2022
|
School District |
Pending Sales
June 2021 vs June 2022 |
| Entire MLS | 3,816 3,294 |
| Forest Hills | 75 95 |
| Rockford | 75 77 |
| Caledonia | 34 40 |
| Lowell | 31 30 |
| Belding | 17 21 |
| Lakewood | 14 11 |
| Saranac | 9 11 |
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). Overall, the Entire MLS saw a year-over-year decrease in Pending Sales. However, the local demand shows an element of continued demand strength when comparing June 2021 and June 2022. I expect that Pending Sales will begin to decrease everywhere with additional increases in interest rates.
Pending sales have now decreased within the Entire MLS for the fifth consecutive month, when comparing the same time frame in 2021 vs 2022. We will watch this chart closely as additional hikes in interest rates should slow the overall demand. These numbers are important as a tool to forecast future closings and indicate recent activity.
June 2022 Monthly Summary
What does all this mean? The overall real estate markets nationally and regionally are beginning to slow. That is exactly what the Fed is attempting to do – increase interest rates to halt and lower the inflation rates. Last week’s Consumer Price Index (CPI) report of a hefty pace of 9.1% shows that the interest rate increases have not performed their intent.
Our local market has not been affected as much as most other regional markets around the U.S., mostly because of the higher demand to live in West Michigan. Most of our focus area school districts will continue to have positive demand due to their popularity and the quality education they provide.
There is no doubt that inventory will continue to rise as demand continues to lag. There is still a long way to go before we approach a normal Months of Supply of 4 to 6 months, but we are certainly headed in that direction. Keep in mind, we have NOT been in a normal healthy market over the past 2-3 years. Normal and healthy housing and rent appreciation is NOT 10% to 20% annually. Economists will be watching the same Supply and Demand charts regionally and nationally, as we fight inflation. I will be watching those same factors locally.
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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