In this edition, Rick shares the latest area market statistics and answers the question “Will foreclosure forbearance expirations disrupt the market?”.

2021 Statistics Year-To-Date

Average Sale Prices – Year-To-Date Through August 2021

School District	Average Sale Price
Forest Hills	$479,828
Caledonia	$382,258
Rockford	$372,242
Lowell	$335,529
Saranac	$235,969
Belding	$200,027
Lakewood	$197,413

Statistics courtesy of GRAR (Greater Regional Alliance of Realtors)

The entire MLS (Multiple Listing Service) Average Sale Price grew 1.1% in August from $258,759 to $261,678.  The Average Sale Price in the Lowell School District grew 2.5% in August from $327,397 to $335,529.  All our focus area school districts had Average Sale Price increases in August. The overall demand remains strong in most areas of West Michigan.  The Lowell School District has experienced higher than normal Average Sale Price increases for two consecutive months, as Lowell continues to be a desirable destination for younger families and a strategic location for rural settings with easy access to toward Lansing and most portions of Grand Rapids.

Average Sale Prices by Municipality – As of August 31, 2021

Location/School District	Average Sale Price
Ada Township	$541,905
Cascade Township	$474,171
Vergennes Township	$385,715
Lowell Township	$341,854
Bowne Township	$331,643
City of Lowell	$314,880
Grattan Township	$314,153
Boston Township	$271,413
Keene Township	$261,194

Statistics courtesy of GRAR (Greater Regional Alliance of Realtors)

All the above surrounding municipalities experienced increases in Average Sale Prices in August, except Boston Township and Keene Township, which are located in Ionia County.  Ada Township and Cascade Township have elevated Average Sale Prices because the effect of Forest Hills Schools.  Bowne Township contains a large area of Lowell Schools but is also affected by the Average Sale Prices in the Caledonia School District.  Grattan has a portion of Lowell Schools, but also has a large area of Belding Schools. There is at least a portion of each of the above municipalities that contains Lowell School District boundaries, but Vergennes Township, Lowell Township and the City of Lowell are entirely contained within the Lowell School District boundary lines.

                                                 Market Inventory – As of August 31, 2021

Location/School District	Homes Currently for Sale	Months of Supply
Entire MLS – GRAR*	4,147	1.3
Rockford	77	1.1
Forest Hills	70	1.0
Caledonia	39	1.1
Lowell	25	.9
Lakewood	11	.9
Belding	11	.7
Saranac	8	1.2

*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 months’ supply tends to push prices up more rapidly.

All our focus area school districts had less or the same number of homes for sale at the end of August compared to the end of July, including the entire MLS.  Months of Supply in our focus areas continue to be less than the entire MLS.  The lack of inventory continues to fuel an extraordinary seller’s market and Average Sale Price increases.

Average Price Per Square Foot – As of August 31, 2021

Location/School District	Average Price Per Sq. Ft.
Forest Hills	$162
Rockford	$159
Caledonia	$153
Lowell	$149
Entire MLS	$135
Saranac	$127
Belding	$122
Lakewood	$117

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. 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 August 31, 2021

Location/School District	Pending Sales
Entire MLS	3,625
Rockford	94
Forest Hills	76
Caledonia	40
Lowell	28
Belding	16
Lakewood	14
Saranac	7

Statistics courtesy of GRAR (Greater Regional Alliance of Realtors)

Pending Sales are sales under contract with an accepted offer, but the sales have not finalized yet (closed).  Some of the above numbers could change daily, as some sales will fall apart, but new sales will be added.  Pending sales will continue to rise, if enough homes continue to be available for purchase, as the demand continues to be strong.  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.

Will Foreclosure Forbearance Expirations Disrupt the Market?

There has been much discussion regarding the recent mortgage forbearance expirations for those homeowners that sought protection during Covid-19.  There were various government and private sector Covid-19 mortgage programs available that were offered to those mortgagees that were affected financially and had trouble maintaining their mortgage payments. There are still 1.6 million borrowers that are still in those programs and their protections are expiring.  Therefore, there has been some fear of seeing a flood of foreclosures hitting the market.  When the historic foreclosure period began in 2007 and 2008, the extra housing supply at lower sale prices caused values to plummet throughout the country.  The processes continued through 2010 and 2011, causing deeper reductions in value, which exposed additional over mortgaged properties, causing additional foreclosures.

The process kept feeding itself like a snowball rolling down a hill and the snowball kept getting larger and larger; and the hill kept getting longer and steeper. No one seemed to know how to stop the snowball, especially all the mortgage companies, who continued to feed their own problems.

It became a double-edged sword for the mortgage companies.  As they held delinquent mortgages, their Profit & Loss Statements would show total value of the loan as an Account Receivable, which didn’t directly affect their stock price.  However, the lack of mortgage payment revenue, along with extra foreclosure costs, maintenance costs, legal fees, and property deteriorations, did eventually begin to affect their stock price.  So, they just kept feeding the “fire sales” to stop the expenses and recoup what they could.

The difference today is that about 98% of all those troubled borrowers have at least 10% equity.  The recent 5 years of rapid annual double-digit appreciation has become a safe haven for those borrowers, as they still have a saleable asset, rather than being underwater.  Even if 10% of all those borrowers end up falling to foreclosure, there shouldn’t be a glut of lower priced homes dragging down the normal market, as the demand for homes is certainly still peaking.  Afterall, extra homes on the market, especially medium-priced homes, could be a welcome offering for first-time homebuyers who have been struggling to find a selection of affordable homes.

Another reason that a glut of more homes probably will not happen, is that there are less homes being abandoned, as homeowners believe they can sell their home at any time, for more than what they probably can.  Additionally, mortgage companies have most likely learned from their previous mistakes and will find alternatives to foreclosure, such as a partial re-finance, mortgage modifications and restructuring, or offer a juggling of their delinquency by sending some of it to the end of the mortgage, for those that qualify.

The current housing market machine will continue to roll, with barely a small bump in the road.  We have already seen a handful of foreclosures and short sales in our focus areas, and they’ve been gobbled up by buyers, as just another normal sale.

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.