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.
February 2023 Edition
-My Perspective – Continuing the Inflation Fight
-The Latest Area Market Statistics
-Monthly Summary – What Does All This Mean?
My Perspective – Continuing the Inflation Fight
We are not finished with inflation, as the Federal Reserve (FED) will continue to fight any possible uprising during the current year. This past week, consumer spending was reported much stronger than expected, and inflation data was more elevated than expected.
This news will cause the Federal Reserve (FED) to reassess at their interest rate adjustment policy and become more aggressive through the first half of 2023. As I surmised last month, we will probably continue riding an economic rollercoaster for several more months, as some segments of our economy will be affected more than others with a continued escalation of interest rates. Existing Home Sales are typically our focus, but we need to keep an eye on other sectors of the economic wheel, as many future outcomes can be foreseen through a wider lens of important information.
Yes, Existing Home Sales and New Home Construction continue to slow nationally, and in many areas of the Midwest region. However, West Michigan continues to keep the real estate market reasonably positive with continued demand, and with continued low supply. Retail Sales had an unexpected rise of 3% last month and the Unemployment Rate has dropped to 3.4%, a 60-year low. Jobless claims have inched upward, but I stress the word “inched”. Inflation is headed mainly in the right direction, but these latest reports show more cause for the FED to apply more interest rate hikes to keep inflation moving downward.
I suspect that some real estate markets will continue to slow to recessionary numbers nationally and in markets of less demand state-wide. However, West Michigan remains poised to continue weathering additional interest rate increases. It may not be as strong of a spring market as in recent years, but don’t worry, the spring market of 2023 within our focus area school districts will be plenty active.
The Latest Housing Statistics
Because it is the beginning of the year, statistics tend to be skewed by the small number of units to be averaged. One or two large or small sales will affect the average greatly until there are more units factored into that average. Rockford had the most units closed for January with 20. The Entire MLS had 1,434. Lowell had 17 sales close in January, compared to 20 in January of 2022. Interestingly, of the 17 Lowell sales last month, they averaged 98.2% of their listing prices. It will take a few more months to get a feel where our focus area school district markets are headed.
Here is the first month of Average Sale Prices for our Surrounding Townships in 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. As you can see, it’s too early in the year to see a trend. In fact, there were no sales closed in Keene and Boston Townships last month. Cascade Township had the most closings with 12, followed by Lowell Township with 7.
“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 – The Entire MLS had nearly 800 more Homes Currently for Sale in January 2023 in comparison to January 2022. Most of our focus area school districts also had more Homes Currently for Sale (Column 1) compared to the same period last year. The demand continues to slow with higher interest rates and the available listings continue to grow in most market areas. The seasonality of a typical slower winter market moving into a typically higher demand spring market should cause more sales, and more buyer selection.
Months of Supply – All our focus areas had decreases in Months of Supply compared to last month. The Entire MLS decreased from 1.4 months to 1.3 months. Lowell decreased from .8 to .9 when compared to last month. The demand continues in our focus area school districts despite higher interest rates. However, the Months of Supply continues to be too low everywhere.
New Listings – Our focus areas experienced a mix of increases and decreases of New Listings when comparing the same period last year. The Lowell School District produced less New Listings, and Caledonia had more New Listings. The Entire MLS had a slight decrease when comparing January 2022 to January 2023. Again, the seasonality of the winter market will soon begin to give way to the forces of the 2023 spring market, when more homeowners will decide to sell.
Pending Sales are sales under contract with an accepted offer, but those transactions have not finalized yet (closed). Overall, the Entire MLS saw another year-over-year decrease in Pending Sales when comparing January 2022 to January 2023. Surprisingly, our focus area larger school districts experienced a bump in Pending Sales and the smaller school districts experienced a decrease. This phenomenon may be due to continued ongoing demand and available buyer choices within the larger school districts. Pending Sales have now decreased within the Entire MLS for the twelfth consecutive month.
We will continue to watch this chart closely, as additional hikes in interest rates will tell us more about our individual focus area market demand and resiliency. The current mortgage rates have dropped slightly and are now hovering around 6.5% for a 30-year fixed rate or 5.5% for a 5-year adjustable rate.
February 2023 Monthly Summary
What does all this mean? The past several months has been an inflation repair period, with interest rates doubling over the past year. The latest economic reports tell us that 2023 will continue in the same manner, as the FED needs to tackle inflation. If a couple more rounds of interest rate hikes continue to send inflation downward, the Fed will have more reason to begin backing off the interest rate increases. The biggest question will be where will the inventory come from? Buyers are lining up, but we need more available homes. Will more Baby Boomers decide that now is the time to sell the bigger home and scale down? Will Millennials continue to spur the move-up market and purchase those Baby Boomer homes? Also, the Gen Xer’s are now beginning to look toward retirement, and if you look over your shoulder, you’ll see Generation Z is now entering the age of homeownership. The American Dream appears to be alive and well. We just need more homes to go around.
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.