Rick Seese has 47 years experience working in real estate market, and each month, he shares the latest news and outlook for Lowell-area housing market.

December 2023 Edition

-My Perspective – Prepare for Landing
-The Latest Area Market Statistics
-Monthly Summary – What Does All This Mean?

My Perspective – Prepare for Landing

It seems we’re approaching the conclusion of our interest rate journey – the airport is within sight, but the landing process will unfold over the next few months. While the skies are currently clear, we might encounter some turbulence before the landing gear is deployed. The economic reports from the past week and the past couple of months strongly suggest that we are on track for a soft landing.

In November, the Consumer Price Index (CPI) saw a modest 0.1% increase, and the Producer Price Index (PPI) reported a flat zero increase for the same month. The PPI, which gauges wholesale price changes, offers the Federal Reserve (FED) insights into potential future CPI increases. Both indexes indicate a significant deceleration in inflation, prompting the FED to refrain from any upward adjustments in interest rates for the second consecutive month.

Analysts are increasingly optimistic that U.S. inflation will continue to ease towards the FED’s 2% target in the coming months. While this is positive news, the next few months will be crucial in confirming that our flight to a soft-landing stay on course.

The real estate market welcomes this positive turn, especially as a segment of buyers have been patiently waiting for affordability to return. Local prices have remained relatively stable, but first-time homebuyers still need relief with lower interest rates. Some new strategies involve seizing the current opportunity to buy with less competition, reduced chances of multiple offers, and a lower likelihood of needing to waive home inspections, and possibly negotiating a lower price. Then, when interest rates begin to decrease, the plan is to explore refinancing at a more favorable rate.

Keep in mind, once rates start to decline, demand is expected to surge, possibly reaching the frenzied levels of the past few years, potentially causing prices to escalate faster than one can save. Consider that a 5% annual increase in pricing for a $300,000 home amounts to $15,000.

Here are the most up to date statistics for our local surrounding real estate markets:

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 remain above their 2022 ending prices. The Entire MLS Average Sale Price is up $24,014 (8.2%) over last year. The Lowell School District is up $26,503 (6.7%) over their Average Sale Price from last year.

From last month to this month, all our focus area school districts experienced increases in Average Sale Prices, except Forest Hills and Lowell decreased slightly. Demand continues to decrease, but higher sale prices continue to increase, due to continued lack of inventory.

Here are the 12-Month Rolling Average Sale Prices for our Surrounding Townships through November 2023. The Lowell School District takes up a portion of each of these townships, except Vergennes and Lowell, where those entire townships are totally encompassed by the Lowell School District. There were increases in Average Sale Prices in the townships of Grattan, Lowell, Boston, and Keene. There were decreases in Ada, Cascade, Vergennes, and Bowne.

As reported in the previous chart, the Entire MLS increased from last month. 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 349 homes from last month. All our focus area school districts also experienced decreases from last month or remained about the same. The seasonality of less inventory is normal over the winter months.

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.

All our focus area school districts experienced decreases in Months of Supply from last month, except Saranac. Rockford and Caledonia remained the same. The Entire MLS decreased from 2.1 to 1.9 from last month. Lowell decreased from 1.8 Months of Supply to 1.7. The movement of less supply will continue through the winter months.

New Listings – We continue to see reductions in New Listings across most West Michigan market areas. Specifically, when compared to the same period last year, all our focus area school districts experienced less New Listings. Additionally, the Entire MLS has experienced another year-over-year decline from November 2022, compared to November 2023. Notably, Lowell experienced a decrease, from 25 to 15 year-over-year.

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

The Entire MLS witnessed another year-over-year decline in Pending Sales when comparing November 2022 with November 2023. (2,312 to 1,927). All our focus area school districts reported decreases, except Forest Hills and Caledonia. All our focus areas reported decreases from last month.

As we continue into the winter months, the expectation is for less demand and less inventory. We will watch this chart closely over the next few months, as expectations of lower interest rates become the focus of buyers.

December 2023 Monthly Summary

What does all this mean?

In the coming months, the Federal Reserve (FED) will meticulously track inflation trends, likely initiating discussions about reducing interest rates. While some minor fluctuations may occur, most observers foresee a long-term trajectory aligning with the FED’s 2% inflation target. Simultaneously, the FED is attentive to the potential need for economic stimulus to avert recessionary indicators, and thus far, their strategy has proven effective.

Anticipating the soft landing we’ve all been awaiting; I envision the Fasten Your Seat Belt lights illuminating soon as we approach the metaphorical runway. The outlook for 2024 appears promising, with indications of reduced inflation, declining interest rates contributing to increased affordability, and a sustained demand for real estate in West Michigan.

As we embark on the holiday season, I extend warm wishes for joy and merriment. May the New Year bring safety, health, and prosperity.

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