The Real Estate Corner with Rick Seese: August 2023 Edition

Rick Seese has more than 40 years experience working in real estate market, and each month, he shares the latest news and outlook for Lowell-area housing market.

August 2023 Edition

-My Perspective – The Mixed Bag Numbers Debate?
-The Latest Area Market Statistics
-Monthly Summary – What Does All This Mean?

My Perspective – The Mixed Bag Numbers Debate?

Do numbers truly tell the whole story, or is there more than meets the eye? The latest economic reports have ignited a spirited debate between many economists. Stakeholders like mortgage lenders, Realtors, and consumers are rallying around the claim that the Consumer Price Index (CPI) remained steady at 0.2% for the month, with a slight dip in the Year-Over-Year reading to 3.2%. A similar tune is sung about Core CPI, which also held at 0.2% for the month, with a minor Year-Over-Year decrease to 4.7%. Additionally, these voices highlight a marginal uptick in Jobless Claims, prompting speculation about an impending reduction in interest rates. Right?

However, it’s not as simple as it seems. While the Federal Reserve System (FED) plan is steering the economy in a favorable direction by curbing inflation and taming an overheated economy, their work is far from complete. A CPI reading of 3.2% is a step in the right direction but doesn’t guarantee a seamless arrival to the FED’s target of 2% on its own. The same holds true for Core CPI at 4.7%. Jobless Claims, likely a momentary fluctuation, merely nudged the Unemployment Rate from 3.5% to 3.6%. Compounded by these figures is the broader inclusion of a substantial surge in the latest Retail Sales report, nearly doubling earlier projections and an expected surge in wages within the upcoming months.

It’s hardly a subject of dispute in my opinion. The FED must diligently continue their ongoing mission of reigning in inflation, ensuring that it’s well under control before declaring victory. It’s becoming increasingly evident that we aren’t on the cusp of an interest rate-induced recession. The economy remains robust and resilient, as the underlying data reinforces the notion that the flames of inflation are still rather lively.

On the local real estate front, our persistent nemesis of low inventory continues to loom, although a noticeable drop in buyer demand has also emerged. Despite this, buyer interest remains substantial enough that sellers who correctly price their properties from the outset continue to attract multiple offers. Conversely, we’re witnessing overpriced homes sit on the market until their prices are reduced to reality. This isn’t a market where sellers can price their properties sky-high and expect an avalanche of showings followed by a barrage of offers surpassing the list price. That level of demand just isn’t present. In the present landscape, buyers are fewer, and available homes are fewer still. Consequently, fewer homes change hands, yet the competition among buyers remains fierce, propping up sale prices at elevated levels.

For a closer look into these dynamics, check out our monthly statistics below, as they provide a better insight as to what is happening within our focus area school districts. The trends are evident that we are experiencing an escalation in Months of Supply and a decline in Pending Sales.

The Latest Housing Statistics

We are comparing the current 12-Month Rolling Average Sale Prices with the final 2022 Average Sale Prices within our surrounding focus area school districts. All our focus area school districts are currently above 2022 ending prices, except Forest Hills is about the same. The Entire MLS Average Sale Price is up $4,454 (1.5%) over last year. The Lowell School District is up $14,599 (3.7%) over last year. From last month to this month, Saranac, Belding, and Lakewood experienced increases in Average Sale Prices. Forest Hills, Rockford, Caledonia, and Lowell all declined a bit. Saranac has had a steady increase of higher sale prices this year, fueled by lakefront homes and a new condominium project. Our focus area school districts continue with relatively strong demand, mostly due to lack of inventory. There have been less homes sold, but higher sale prices continue.

Here are the 12-Month Rolling Average Sale Prices for our Surrounding Townships through July 2023. The Lowell School District takes up a portion of each of these townships, except Vergennes and Lowell, where the entire townships are totally encompassed by the Lowell School District. Vergennes, Bowne, and Boston Townships had Average Sale Price increases over last month, as well as the Entire MLS. All the other townships had small declines. This chart shows us a bit more of current geographic values, rather than school district values.

Homes Currently for Sale – The Entire MLS Homes Currently for Sale decreased by over 200 homes from last month. Most of our focus area school districts had decreases of Homes Currently for Sale from last month, except Caledonia, Saranac, and Belding. Lowell stayed the same.

Months of Supply – “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. The “new normal” may be closer to four to five months of supply.

Caledonia, Lowell, Saranac, and Belding experienced increases in Months of Supply over last month. Forest Hills, Rockford, and Lakewood declined. The Entire MLS increased slightly. Saranac had a larger than normal increase, due to a large number of new condominium listings. All our focus areas are now above 1.0 Months of Supply, except Belding. This is a huge change from several months ago, when all our focus areas were under 1.0. The supply of homes when compared to the overall demand continues to increase. However, the total supply is still well below normal.

New Listings – All our focus areas experienced decreases in New Listings when compared with the same period last year, which is also contributing to increases in Months of Supply.
The Entire MLS had another large decrease in New Listings (-1,141) when comparing July 2022 to July 2023. This follows similar decreases of 1,000+ in each of the past three months. New inventory continues to decrease buyer choices, which is causing fewer total sales.

Pending Sales are sales under contract with an accepted offer, but those transactions have not been finalized yet (closed).

The Entire MLS witnessed yet another substantial year-over-year decline in Pending Sales during July, as we compare 2022 to 2023. Moreover, every school district within our focus area registered decreases when comparing July 2022 to July 2023. The comparison from last month also showed a decrease in Pending Sales across all regions, with the exceptions being Forest Hills, Rockford, and Lakewood.

The persistent trend of elevated interest rates and escalating sale prices continues to exert pressure on affordability and demand, particularly for those entering the real estate market as first-time homebuyers.

As we move closer to the fall market, our attention remains fixed on this chart.

August 2023 Monthly Summary

What does all this mean?

In my view, the ongoing debate about interest rates has reached a rather clear conclusion. The Federal Reserve (FED) holds the capability to enact rate increases soon without fearing a detrimental impact on the economy’s course. Given the unexpectedly robust state of the economy, the FED has ample reason to continue an aggressive battle against inflation. While it’s certainly encouraging to see positive inflation indicators, achieving an even stronger stance is necessary to completely extinguish the lingering sparks.

Turning our attention to the local real estate scene, a scenario marked by reduced demand and constrained inventory continues. The question of “if we sell, where do we go” continues to be the status most everywhere in West Michigan. As the fall season approaches, the demand is anticipated to further decrease, especially after the seasonal back-to-school phase concludes. This shift might contribute to a slight uptick in inventory. In the Lowell School District market, stability remains, attracting fresh interest from buyers outside the area. The vibrancy of the Lowell community offers compelling reasons for young families to make Lowell their new home to raise their children.

Presently, the 30-year fixed interest rates are hovering around 7.25% and 15-year rates around 6.75%. I foresee the possibility of a minor upward interest rate adjustment this fall, and another possibly further into the winter months. This could be followed by the hope of achieving inflationary stability by next spring. However, it’s worth noting that the FED isn’t likely to initiate rate reductions until around mid-year 2024.

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 or Facebook page or call/text him at 616-437-2576.

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