The Real Estate Corner with Rick Seese: June 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.

June 2023 Edition

-My Perspective – Fed Calls Time-Out
-The Latest Area Market Statistics
-Monthly Summary – What Does All This Mean?

My Perspective – Fed Calls Time-Out

In a timely move last Wednesday, the Federal Reserve (FED) called for a time-out on interest rate increases for the first time in eleven months. Don’t get too excited, as the FED discussions and hints left the door open to a couple more rate hikes later this year.

The good news is that the Consumer Price Index (CPI) decreased to 4.0% in May, which is a new two-year low. Core CPI, (which measures everyday consumer household inflation except food & fuel), also hit a new low of 5.3%. Yes, those numbers remain too high as the FED target is 2.0% for all inflation. However, another interesting measurement was released that tabs Core CPI without the inclusion of Housing/Shelter costs. That number was closer to 2.0% for May and an average of 2.9% over the past three months.

The economic news from May is somewhat encouraging, as the fight against inflation appears to have reached a significant milestone. Even though this marks the eleventh continuous month of CPI decreases, the battle against inflation is not over yet. The FED will continue to monitor for further progress and potential further rate hikes in the coming months. With the latest report of weakening inflation, and the FED’s decision not to add another interest rate hike this month, the economy should flow a bit more smoothly. With the Producer Price Index (PPI) (Wholesale Prices to retailers), and Consumer Price Index (CPI) slowing, we should continue to see an increase in Jobless Claims and Unemployment, and a most likely decrease in Retail Sales, as the lasting effects of an induced economic slowdown should continue to linger.

If the slowing does not continue over the next 30-60 days, the FED will continue to increase interest rates. Core Inflation is still elevated above the FED’s goal, but it’s certainly better than where we were several months ago. Some of Core Inflation’s final fight may have more to do with continuing supply chain imbalances, rather than an overly hot economy.

The current mortgage interest rates are around 6.5% for a 30-year fixed, and the 5-year Adjustable Rate.

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. The Entire MLS experienced a slight increase in the Average Sale Price of $641 from last month to $296,217. The Lowell School District had a slight increase of $1,130 from last month to $405,277. All our focus areas have increased Average Sale Prices from last month, except Belding. 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 May 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. Half of our focus area townships had increases in Average Sale Prices over the last month (Ada, Vergennes, Grattan, and Boston). The other half experienced slight declines in Average Sale Prices (Cascade, Bowne, Lowell, and Keene). The Entire MLS had a slight increase, as stated in the previous chart. 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 increased by over 1,000 units last month. On a seasonal basis, the increase should have been larger when comparing previous years, but it was a welcome increase for the overall market. All our focus area school districts had increases of Homes Currently for Sale from last month, except Caledonia, which had a slight decrease. Forest Hills, Rockford and Belding had the largest increases.

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 Caledonia declined slightly, and Lowell stayed the same. All our focus areas are now at .9 Months of Supply or higher, for the first time since March of 2021. The Entire MLS increased slightly from 1.3 months to 1.4 Months of Supply over the past month. 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, except for Saranac. The Entire MLS had a large decrease in New Listings (-1,174 units) when comparing May 2022 to May 2023. However, all our focus areas experienced increases in New Listings from last month, except Lowell declined slightly. New inventory remains problematic, as we enter 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 May from 3,612 units in 2022 to 2,665 in 2023, which is a 26% decrease. Additionally, all our focus area school districts posted decreases from the past year, except Lowell and Saranac. There were increases in Pending Sales over the past month in all areas, except Belding. 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 enter the summer market.

June 2023 Monthly Summary

What does all this mean?

Our monthly charts and data tell us that the lack of inventory of available homes continues to affect the number of homes sold. Our local focus area school districts and West Michigan real estate markets continue their resiliency over higher interest rates.

Interestingly, as stated in the opening paragraph above, the Core CPI without the inclusion of Housing/Shelter costs is showing us that the final fight endgame against inflation is at least partly due to the rising costs of Housing and Shelter. That number was closer to 2.0% for May, which is the FED’s overall inflation target. With Housing/Shelter costs, Core CPI is still above 5%. There is not much of a cure for the higher cost of renting/leasing or purchasing unless we continue to add inventory for renters and buyers.

There are far less resilient real estate markets throughout America than in West Michigan. The demand will continue where we live, because West Michigan is a highly rated market for younger buyers to raise a family, and find employment.

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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