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.
March 2023 Edition
-My Perspective – Powell on the Prowl
-The Latest Area Market Statistics
-Monthly Summary – What Does All This Mean?
My Perspective – Powell on the Prowl
The Federal Reserve (FED) Chair, Jerome Powell has been the focus of many economists over the past few weeks. He recently stated that the rate of inflation continues to be too high and that there will be additional interest rate hikes coming. The real market appears to be poised for another rate hike, but the financial markets appear to be a bit nervous about a longer than anticipated interest rate-raising program than previously thought. All we know for certain is that inflation needs further taming and there is only one method to do so: Continue increasing interest rates to cool down the economy.
Yes, continued rate hikes may spook the financial markets further and will continue to affect several industries, some more than others. Yes, real estate sales would be one of those industries, as higher interest rates keep many buyers from affording to move or wanting to move. Additionally, the intent is to slow consumer spending, which causes less sales of products and services, which will ultimately cause lay-offs and higher unemployment. Mr. Powell’s plan seems to be working, but the results are slower than what he believes it should be. The FED wants to get inflation down to their long-standing earmark of no more than 2%. We are still well above that pace, inching our way toward that goal.
Most economists believe we are in for additional interest rate increases well into 2023. Some economists believe additional interest rate hikes will give us additional reason to believe there will be an upcoming recession. Some believe there are locations and industries that are already in a measurable recession. West Michigan remains strong economically, but further rate increases could affect our area with increased unemployment. Our February charts below are beginning to indicate such slowing. We will see where the upcoming spring market takes us.
The Latest Housing Statistics
We are comparing the current 12-month rolling average sale prices with the final 2022 average sale prices. Most of our focus area school districts are up a bit, except for Saranac, Lakewood, and Belding. So far in 2023, the Lowell School District has averaged 30 days on the market for single family homes, as compared to 37 days for Forest Hills, 46 days for Rockford and 48 days for Caledonia. The Lowell School District also has experienced the highest percentage of asking/list price to closed/sale price in 2023 at 99.0%.
It is still very early in the year to find any trends, especially during the most typical slowest winter months. The next 2-3 months should begin to provide better insight regarding our local real estate markets.
Here are the 12-Month Rolling Average Sale Prices for our Surrounding Townships through February 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 have higher average sale prices than the end of the year 2022. It’s still too early in the new year to see any area trends. The next 2-3 months should begin to provide a better picture.
“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 added over 1,000 Homes Currently for Sale during the month of February 2023 in comparison to the month of February 2022. Most of our focus area school districts added more Homes Currently for Sale compared to the same period last month. 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 typical higher demand spring market usually causes more sales, and more buyer selection.
Months of Supply – Most of our focus areas had decreases in Months of Supply compared to last month. The Entire MLS decreased from 1.3 months to 1.1 Months of Supply. Lowell remained the same at .8 from last month. The demand continues in our focus area school districts despite higher interest rates, although at a slower pace. However, the Months of Supply continues to be too low everywhere. The spring market typically provides for more homes for sale, as the demand increases.
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 slightly less New Listings, and Caledonia had more New Listings. The Entire MLS had a 400-home decrease in New Listings when comparing February 2022 to February 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 February 2022 to February 2023. Caledonia, Forest Hills, and Rockford experienced an increase in Pending Sales and Lowell remained about the same. Pending Sales continue to decrease within the Entire MLS, but more popular markets continue to increase or remain stable.
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.
March 2023 Monthly Summary
What does all this mean? The latest jobless claims and unemployment reports support a slowing economy. The unemployment rate increased slightly from 3.4% to 3.6%. A deeper dive shows that there will be a higher expectation of higher unemployment next month. The Consumer Price Index (CPI) last week rose .4% for the month of February, which is a stubbornly high pace of 5% per year.
Additionally, February Retail Sales fell for the third time in the past four months and New Housing Starts were a bit lower than expected.
All of this solidifies the expectation of further interest rate adjustments over the near future to continue the economic slowing to combat inflation. The challenge facing the Federal Reserve (FED) will be the decision to continue raising interest rates to tame high price pressures, while at the same time risking additional stresses in our financial sector.
The current mortgage rates are now hovering around 6.5% for a 30-year fixed rate or 5.75% for a 5-year adjustable rate.
In the real estate world, it will be interesting to watch the forces of continued increasing interest rates collide with the forces of the spring housing market. The West Michigan real estate market remains stronger than most markets in Michigan and the Midwest, but we will see where the FED takes us. I’m guessing another .25% increase coming soon.
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.