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.

January 2024 Edition

-My Perspective – Interestingly…Delayed?
-The Latest Area Market Statistics
-Monthly Summary – What Does All This Mean?

My Perspective – Interestingly…Delayed?

Economic reports from last week indicate a slight increase in the December 2023 Consumer Price Index (CPI) compared to the previous month, accompanied by a surprise -0.1% monthly decrease in the Producer Price Index (PPI). Over the past year, the CPI has shown a 3.4% increase, slightly higher than November’s 12-month jump of 3.1%, but the dip in PPI added some encouragement.

While inflation has moderated significantly from its summer peak of 9.1%, the Federal Reserve (FED) remains cautious, refraining from declaring an end to our current inflation problem. This caution suggests a potential delay in the highly anticipated interest rate reductions. As a reminder, the FED’s target is 2.0% inflation.

The FED’s first announcement of the new year is scheduled for an upcoming meeting on January 31, with expectations leaning toward maintaining the current interest rates. Some economists anticipate rate reductions starting in March, but several key economic reports on inflation and employment are due before that date. I believe that unless more convincing evidence supporting inflation control emerges, rate reductions might not begin until at least this coming summer.

Despite overall progress, a closer look reveals that the shelter category, encompassing housing costs, continues to be a significant contributor to the monthly CPI increase, accounting for more than half of the rise in December.

From a buyer’s perspective, there remains a negative sentiment towards current mortgage rates, causing less demand for home sales. Although the rates have eased slightly from the October peak of 8%, they persistently remain elevated at around 7% for the current average 30-year fixed mortgage rate, despite lower inflation. Buyers have continued to purchase homes, but demand has been affected and Pending Sales have decreased.

I still believe that variables for the year ahead include not only the trajectory of mortgage rates but also the supply of homes for sale. A potential scenario could unfold if there’s a substantial drop in mortgage rates. Current homeowners have balked at giving up their current lower interest rate for a higher rate with a sell and purchase move. Lower rates could prompt current homeowners to consider moving, which in turn would increase the number of homes on the market. Such an event could alleviate some of the upward pressure on home prices, which would be a positive outcome for everyone.

As we begin the new year, here are some 2023 year-end statistics from our focus area school districts and municipalities:

The Latest Housing Statistics

We are comparing final 2023 Average Sale Prices within our surrounding focus area school districts. All our focus area school districts exceeded their 2022 ending prices. The Entire MLS Average Sale Price ended up 5.0% over last year. The Lowell School District had an increase of 6.7% over their Average Sale Price from last year. The monthly increases throughout all our focus area school districts definitely slowed during the 4th quarter of 2023, but demand kept the increases stable and on the plus side.

Here are the 12-Month Rolling Average year ending Average Sale Prices for our Surrounding Townships. 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.

All our focus area townships had increases through 2023 except Lowell Township (-1.8%). Smaller increases were registered in Ada and Cascade Townships (+1.8% and +.8%) through 2023. Vergennes Township increased 4.7% and Bowne Township increased 2.8%. The Entire MLS increased 5.0%.

The largest increase was Grattan Township, where there are many lakefront homes and fewer units sold. Also, large increases were registered in Boston Township (22.3%) and Keene Township (10.2%), as the affordability demand reached further away from Grand Rapids. This chart shows us a bit more of current geographic values, rather than school district values.

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 December 2022 with December 2023. (1,846 to 1,740). All our focus area school districts reported decreases, except Forest Hills and Rockford, with Caledonia staying the same.

As we continue into the winter months of January to March, we should continue to experience less demand and less inventory. We will watch this chart closely over the next few months, as the hope of lower interest rates becomes the focus of buyers.

January 2024 Monthly Summary

What does all this mean?

Low inventory continues to pose challenges for potential buyers nationwide, including within our focus area school districts. According to the most recent data from the National Association of Realtors (NAR), the country is grappling with a 3.5-month supply of housing inventory.

Locally, our Entire MLS indicates an even tighter situation, with a supply of approximately 2.0 months. Both figures fall significantly short of the 5 to 6 months typically required for a balanced market. An unbalanced market puts upward pressure on home prices, as less choices creates competing offers.

Many buyers may need to consider waiting for interest rates to decrease, especially for first-time homebuyers. However, delaying may mean deferring equity building, and paying higher sale prices in the future. The market may continue to cool, providing better opportunities, and lower interest rates, but don’t forget, the American approach often involves refinancing to secure lower interest rates later.

We will keep an eye on the relevant economic news as we venture into 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 www.rickseese.com or Facebook page or call/text him at 616-437-2576.