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.

July 2023 Edition

-My Perspective – Threading the Needle
-The Latest Area Market Statistics
-Monthly Summary – What Does All This Mean?

My Perspective – Threading the Needle

The Federal Reserve (FED) has handled the inflation fighting game remarkably well, so far. Their precision maneuvering through the month of June has slowed inflation to its lowest level since 2021. As reported last week, the Consumer Price Index (CPI) decelerated to 3% from 4% in the prior month. The last time the rate was that low was in March of 2021. The core rate of inflation (omitting food and energy) also improved to 4.8% from 5.3% but remains stubbornly high when compared to the FED target of 2%.

The FED has been carefully increasing interest rates, yet carefully staying out of recession territory. They have been watching the boundaries of important economic indicators, such as consumer spending, the job market info, and the unemployment rate. The economy has slowed, but needs more slowing, as the June core CPI indicates there is more work to do. Most economists believe there may be two more .25% interest rate hikes needed by the end of this year. I don’t think that the FED’s 2% CPI inflation level target will be an easy task, but I see 2.75% by the end of this year and close to 2.5% by the end of 2024. If that happens, the FED should call that a successful journey. However, don’t look for crashing interest rates, as the FED will continue to maintain higher interest rate levels until they are convinced that inflation is under control.

On the real estate front, the elevated interest rate hikes have slowed many buyers, but multiple offers on properly priced homes have continued into the summer market. Low to mid-priced homes are in high demand. Higher priced homes seem to be in less demand and gaining inventory. Our focus area school districts continue to try and build more inventory, but the lack of new listings is still causing Months of Supply to be lower than normal balanced markets should be. This is causing prices to continue to increase, even when Pending Sales continue to decrease.

The FED has more work to do, but they need to continue threading the needle to fight the final stages of inflation but also maintain some form of economic growth at the same time. The FED’s precision and vision has guided us to where we are today. We need that same precision to continue the inflation journey. Check out the monthly statistics below. Our local housing markets continue to move forward, but at a slightly slower rate, as intended by the FED’s actions.

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. The Entire MLS Average Sale Price is up $3,465 (1.18%) over last year. The Lowell School District is up $15,347 (3.85%) over last year. All our focus area school districts experienced increases in Average Sale Prices from last month, except Caledonia and Lakewood. Our area focus area school districts continue with strong sale price appreciation, mostly due to lack of inventory.

Here are the 12-Month Rolling Average Sale Prices for our Surrounding Townships through June 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. All our focus area townships had increases in Average Sale Prices over the last month with Grattan Township posting the largest increase, mostly due to their large amount of lakefront sales. Vergennes and Boston Townships also posted double digit increases in Average Sale Prices 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 over 300 homes from last month. All our focus area school districts had decreases of Homes Currently for Sale from last month, except Forest Hills, Lakewood, and Saranac stayed about 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.

All our focus area school districts experienced increases in Months of Supply over last month, except Belding and Saranac declined slightly. Lowell increased slightly to 1.2 months. All our focus areas are now above 1.0 Months of Supply, except Belding. The Entire MLS increased from 1.4 months to 1.6 Months of Supply over the past month. Saranac is now approaching a normal balance with 3.4 Months of Supply. The demand continues in our focus area school districts despite higher interest rates, although at a slower pace.

New Listings – All our focus areas experienced decreases in New Listings when compared with the same period last year, which is contributing to increases in Months of Supply.
The Entire MLS had another large decrease in New Listings (-1,445) when comparing June 2022 to June 2023. This follows a similar decrease of -1,174 in May. However, all our focus areas experienced increases in New Listings from last month, except Belding and Saranac. New inventory continues to decrease buyer choices, as we approach the middle of the summer market.

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

Overall, the Entire MLS saw another year-over-year decrease in June from 3,591 units in 2022 to 2,569 in 2023. Additionally, all our focus area school districts posted decreases from June 2022 compared to June 2023, except Saranac. There were increases in Pending Sales over the past month in all areas, except Caledonia and Lowell posted slight decreases. Interest rates and higher sale prices continue to hinder affordability, especially for first-time homebuyers.

We will continue to watch this chart closely, as we continue through the summer market.

July 2023 Monthly Summary

What does all this mean?

Our local focus area school district housing markets may be diverse from each other, but they are all operating efficiently within the current higher interest rate environment. We could certainly use additional new listings to help build inventory and build a more balanced buyer/seller market, but I don’t see that happening soon. Baby Boomer seniors are staying in their homes longer than in pre-Covid years, which is part of the natural turnover rate of replacement homes for younger buyers with growing families.

Unfortunately, this current state of low inventory will continue for the foreseeable future and prices will continue to rise. Yes, higher prices and higher interest rates will continue to slow down first-time homebuyers, but those that can afford the higher interest rates continue to jump into the marketplace with plans to refinance when interest rates begin to come down in the future.

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.