This month Rick shares his perspective on whether the market is moving in the right direction, provides area statistics, and ends with a monthly summary.
My Perspective – Moving in the Right Direction
There was good news in the fight against inflation. First, the latest Consumer Price Index (CPI) edged downward from 8.2% to 7.7%. This doesn’t sound like much of a change, but it is the first downward trend since the Federal Reserve (Fed) began initiating the increase of interest rates. Additionally, it was a lower reading than what was forecasted. Also, this past week, the latest Producer Price Index (PPI), which measures wholesale prices, reported a similar slowing trend. We are certainly not out of the woods yet, but the Fed’s “medicine” appears to be finally working.
Yes, there have been some negative symptoms along the way, as higher interest rates have produced the expected outcome of a slowing economy. Also, as expected, there have been less existing and new home sales. No, we are not finished with the Fed increasing interest rates, but the doses could be smaller over the next few months, if inflation continues to soften.
The most recent Retail Spending report last week indicates consumers are continuing to spend despite inflation. The Jobless Claims report dropped slightly despite expectations for an increase. Combining that news with the coming holiday spending spree, we could be looking at a rising blip with inflation but we’re hoping it’s only a blip.
There have been large corporate layoffs announced, which is expected with the continuing Fed economic tightening, but those numbers are not in the equation yet. However, the economy is being stubbornly strong and resilient. It seems to me that we are headed in the right direction at this moment. Mortgage rates this past week stood at around 6.5% for a 30-year fixed rate and around 5.5% for a 5-year Adjustable-Rate Mortgage. Interest rates are NOT historically high, but average sale prices ARE historically high. To put mortgage rates in perspective, see the historic chart below. I remember the late 1970’s to the mid-1980’s when mortgage rates rose between 10% to nearly 20%. That era was also a result of very high inflation. Don’t worry, we won’t need that much “medicine” this time.
2022 Statistics Year-To-Date
Average Sale Prices Year-To-Date Through October 2022
| School District | Average Sale Price YTD / Final 2021 |
| Forest Hills | $551,834 / $503,893 |
| Rockford | $454,255 / $389,329 |
| Caledonia | $421,345 / $393,991 |
| Lowell | $399,720 / $348,377 |
| Entire MLS | $292,773 / $268,982 |
| Saranac | $266,608 / $254,552 |
| Lakewood | $241,228 / $203,636 |
| Belding | $240,735 / $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).
Forest Hills, Rockford, Caledonia and Lowell School District Average Sale Prices reduced slightly over last month. The Entire MLS, Saranac, Lakewood and Belding all increased slightly over last month. Nationally, residential home sale prices are hovering about 6% above 2021 sale prices. Our Entire MLS Average Sale Price is currently about 8% above 2021. Lakewood (15.6%), Rockford (14.3%), and Lowell (13.0%) are all well above the national sale price averages for year-over-year increases. All our remaining focus area school districts have increases ranging between 4.5% and 11.7%.
Average Sale Prices by Surrounding Township Through October 31, 2022 (12-Month Rolling Average)
| Township | Average Sale Price YTD |
| Ada Township | $617,992 |
| Cascade Township | $573,852 |
| Vergennes Township | $454,848 |
| Grattan Township | $383,343 |
| Lowell Township | $383,028 |
| Bowne Township | $336,508 |
| Entire MLS | $292,773 |
| Keene Township | $287,324 |
| Boston Township | $279,395 |
Statistics courtesy of GRAR (Greater Regional Alliance of Realtors)
Here are the Average Sale Prices by Surrounding Townships through September 2022. The Lowell School District takes up a portion of each of these townships, except Vergennes and Lowell, where the entire townships are encompassed by the Lowell School District. This table represents the first 10 months of 2022. As you can see, our surrounding townships have higher average sale prices compared to the total MLS, except Boston Township and Keene Township in Ionia County. All our surrounding area townships experienced 12-Month Rolling Average increases over last month, except Bowne Township and Cascade Townships. Vergennes, Lowell, Ada and Keene Townships had substantial increases from last month.
Market Inventory As of October 31, 2022
|
School District |
Homes Currently
for Sale |
Months of Supply for October 2022 | New Listings in Oct.
2021 vs 2022 |
| Entire MLS – GRAR* | 4,050 | 1.8 | 3,673 3,020 |
| Rockford | 69 | 1.3 | 66 49 |
| Forest Hills | 62 | 1.3 | 53 57 |
| Caledonia | 56 | 2.0 | 44 39 |
| Lowell | 28 | 1.1 | 24 30 |
| Belding | 16 | 1.3 | 23 19 |
| Saranac | 7 | 1.8 | 7 8 |
| Lakewood | 7 | .8 | 11 11 |
*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, five to 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.
Homes Currently for Sale decreased by 25.1% within the Entire MLS from last month. All our focus area school districts experienced similar decreases, except the Lowell School District had a slight decrease.
Months of Supply remains about the same everywhere when compared to last month, as well as the Entire MLS.
New Listings have decreased everywhere when compared to October 2021, except in Lowell and Forest Hills School Districts. The Entire MLS experienced a 17.8% drop in New Listings from last year. Inventory remains very low with a lack of new listings to help grow the number of available homes for buyers to choose from.
Pending Sales As of October 31, 2022
|
School District |
Pending Sales
Oct 2022 vs Oct 2021 |
| Entire MLS | 2,382 3,435 |
| Forest Hills | 57 64 |
| Rockford | 46 57 |
| Caledonia | 31 36 |
| Lowell | 26 19 |
| Belding | 21 14 |
| Lakewood | 8 12 |
| Saranac | 2 5 |
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 large year-over-year decrease in Pending Sales (30.7%). All our focus area school districts experienced year-over-year decreases as well, except for Lowell and Belding. Increasing interest rates continue to slow Pending Sales locally, regionally, and statewide.
Pending sales have now decreased within the Entire MLS for the ninth consecutive month. We will continue to watch this chart closely, as additional hikes in interest rates should continue slowing the overall demand. These numbers are important as a tool to forecast future closings and indicate recent activity.
November 2022 Monthly Summary
What does all this mean? The West Michigan real estate market has slowed, but the real story is the ongoing lack of inventory that continues to support high average sale prices. Demand has continued to slow, providing for less pending sales. Elevated interest rates have certainly been a factor in the decrease of First-Time Homebuyer sales. Affordability is the cause of First-Time Homebuyer sales to dip from a normal level of 35% to 40% of all annual existing home sales in America, to only 25% to 26%. We knew that rising rates would have this resulting outcome. On the other hand, Millennials currently make up 43% of all homebuyers, but most of them are now purchasing their second or third home.
Last week Friday the national Existing Home Sales report showed us sales fell 5.9% in October. Compared with October 2021, home sales were down nationally 28.4%. However, judging by the strength of our focus school district charts above, we continue to push forward as we enter into our normal seasonal slowdown. We are experiencing more demand strength in most of West Michigan than in many other markets in America.
We still need a couple more months of slowing inflation reports before we know where we are headed, but if the trend this month continues, we can begin to look forward to smaller Fed adjustments and a normalizing real estate market in the spring. If the economy remains too strong, we could remain on the same track with rising interest rates for the next several months.
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/RickSeese), or call/text him at 616-437-2576.
Leave a Reply