Real Estate Corner with Rick Seese: May Edition

This month Rick shares his perspective on inflation, provides area statistics, and ends with a monthly summary.

My Perspective

Housing inflation versus the Consumer Price Index (CPI).  We all understand how detrimental inflation can be to families.  Rising food prices, energy costs, gasoline prices and the overall cost of living, can hurt the affordability for families to operate from paycheck to paycheck.  Those costs have a direct bearing on what a family can budget for a mortgage or rent payment when it comes to putting a roof over their heads.  When you add in the recent housing and rent cost increases, their housing budget is not only affecting what home price or apartment they can afford, but the increasing impact of mortgage rates are also taking their toll.  Let’s face it, the added cost of borrowing money for a home purchase is pushing some borrowers out of the market.  The group that is hurt the most are the First-Time Homebuyers.  This group of buyers historically has made up between 35% to 40% of all existing home purchases in America prior to the pandemic.  It now sits around 27%-28%.  I look at this percentage to continue to drop for over the next year or two.

How will rising prices and rising interest rates affect overall sales?  I personally believe that the existing home inventory needs to grow to somewhere near a normal 4 to 6-month level (see the Market Inventory chart below).  We have recently been in a less than a 1-month inventory environment.  More housing inventory will not only provide more choices for buyers, but the added competition will cause price increases to slow down.  More housing inventory will also cause less frantic, multiple offer situations.  Multiple offers drive prices up.  If the mortgage interest rates continue to rise to around 6%, the demand will continue to slow, and inventory will grow.

The housing market could use a slight reprieve from franticness and a healthier price appreciation pace.  We also need our supply chain problems fixed and the return to normal production levels of goods and products.  I am hopeful that the First-Time Homebuyer numbers can return for our future generations, but first we need a closer to normal market, tamed interest rates, and calmed price appreciation.  When the inventory grows, sellers will need to look at normal financing offers from First-Time Homebuyers, rather that a slew of cash offers on most homes for sale.

Of course, we also need the cost-of-living inflation rates to get back to lower normal levels for everyone’s personal affordability needs, not just regarding housing.  The American dream of homeownership cannot be realized until all the parts to affordability can be returned to normal.

2022 Statistics Year-To-Date

Average Sale Prices Year-To-Date Through April 2022

School District Average Sale Price YTD    /    Final 2021
Forest Hills $570,752 / $503,893
Rockford $434,398 / $389,329
Lowell $379,207 / $348,377            
Caledonia $376,374 / $393,991
Entire MLS $276,375 / $268,982
Saranac $256,212 / $254,552
Lakewood $244,182 / $203,636
Belding $226,059 / $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).

Our first table shows the 2022 Year-to-Date Average Sale Prices compared to the Average Sale prices for the entire year of 2021.  The first 4 months of 2022 show some hefty increases in the Forest Hills, Rockford, Lakewood and Lowell School Districts.  The average sale price within the entire MLS is up $7,393 (2.7%) and the Lowell School District is up $30,830 (8.9%).  The next couple months should contribute more sales to solidify the trends within our focus school district markets.  Through the first third of 2022, the total sales volume in the Lowell School District has increased 27% over the same period as last year.

Average Sale Prices by Surrounding Township Through April 30, 2022 (12-Month Rolling Average)

Township Average Sale Price YTD
Ada Township $591,549
Cascade Township $538,999
Vergennes Township $405,372
Grattan Township $354,749
Lowell Township $349,636
Bowne Township $332,006
Boston Township $286,245
Entire MLS $276,375
Keene Township $238,770
Statistics courtesy of GRAR (Greater Regional Alliance of Realtors)

Here are the Average Sale Prices by Surrounding Townships for 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 4 months of 2022.  There are many more sales to come, which will solidify actual trends.

Market Inventory As of April 30, 2022

 

School District

Homes Currently

for Sale

Months of Supply for April 2022 New Listings

Apr 2021 vs Apr 2022

Entire MLS – GRAR* 3,151 1.0 3,787     3,634
Rockford 79 1.4 60           86
Caledonia 42 1.2 52           51
Forest Hills 38 .6 74           85
Lowell 18 .7 38           34
Belding 8 .6 15           10
Lakewood 4 .4 10           10
Saranac 1 .1 7             3
*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.

As we enter the spring market, the inventory of available homes remains very low. However, months of supply increased or remained relatively the same in most of our focus school districts.

New Listings decreased within the entire MLS, but mostly increased or remained relatively the same within each focus area school district when compared to April 2021.

Seasonality and warmer weather should provide for more inventory in most market areas, but demand typically increases during the spring months.

Pending Sales As of April 30, 2022

 

School District

Pending Sales

Apr 2021 vs Apr 2022

Entire MLS 3,293         2,731
Forest Hills 68               74
Rockford 63               51
Caledonia 39               37
Lowell 35               36
Belding 13               11
Lakewood 10              10
Saranac 5                3
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.  I have added the comparison for the same month 2021 vs 2022.  Pending sales decreased within the Entire MLS for the third consecutive month (-17.1%), as well as in most of our focus area school districts when comparing April 2022 and April 2021.  The Lowell School District did experience an increase in the same comparison for the third consecutive month.  Low inventory may be contributing to the overall decrease, as well as rising interest rates.  These numbers are important as a tool to forecast future closings and indicate recent activity.  Most pending sales become finalized and closed within a three-to-six-week period, from the date it became pending.

May 2022 Monthly Summary

What does all this mean?  We are keeping a close eye on inflation reports.  The progress of the Fed’s increase in rates will give us an idea as to how high interest rates will need to go to begin taming inflation.  We are hoping for a slowing of inflation, an increase in housing inventory to slow the price increases, a leveling of supply chain problems, with a soft landing to stay away from an economic recession.

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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