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.

May 2024 Edition

-Sticky Inflation Continues
-The Latest Area Market Statistics
-Monthly Summary — What Does All This Mean?

Sticky Inflation Continues

The U.S. economy is experiencing a slowdown, but it’s far from crashing, which is a positive development. This was evident from the latest inflation data released last week. The U.S. Consumer Price Index (CPI) increased by 3.4% in the 12 months leading up to April, slightly lower than the 3.5% reported in March.

These figures indicate that while prices are still rising, the pace of increase has moderated compared to before. This is great news for consumers, considering that just 24 months ago, we were facing an annual inflation rate of 9.1%.

In April, energy, and shelter prices (home sales and rentals) saw modest increases, while food prices remained steady compared to last year and even decreased by 0.2% from March. Moreover, those in the market for a car received some relief, as prices for new and used vehicles dropped by 0.4% and 6.9%, respectively.

The “core” CPI, which excludes volatile food and energy prices, also showed a slight decrease, slowing to 3.6% in April after reaching 3.9% in January and 3.8% in February and March. Additionally, the recent jobs report showed a slowdown in hiring, signaling a cooling of the overheated labor market.

Overall, these figures are relatively positive and better than most economists expected, suggesting that economic growth is slowing down in a positive manner.

The Federal Reserve (FED) aims to balance by maintaining stable employment and ensuring price stability by managing interest rates. Lowering rates stimulates economic growth, spending, and job creation, but it can also fuel inflation. Conversely, raising rates slows down economic growth but helps curb inflation.

Although there’s optimism about the possibility of lower interest rates soon, it’s important not to get overly excited just yet. The FED will likely wait for further trends in the data over the coming months before committing to lowering rates, and even then, it will proceed cautiously, similar to testing the water temperature by dipping toes first. FED Chair Jerome Powell is inclined to continue his “wait and see” approach, as the inflation rate remains sticky. We’ve been fluctuating between a 3% to 4% inflation rate for the past year. Powell’s goal is to continue working towards the 2% level before the FED claims success in fighting inflation.

Nevertheless, it’s worth acknowledging the overall progress made so far. With inflation around 3%, it is significantly lower than before, and there are no signs of an imminent recession. The housing market continues to show resilience as sales continue and prices keep climbing. Hopefully, some relief in mortgage interest rates later this year will encourage first-time homebuyers to re-enter the market to purchase their first home.

As we await more statistics, here’s what is happening in our local real estate market:

We are comparing the current 12-Month Rolling Average Sale Prices with the final 2023 Average Sale Prices within our surrounding focus area school districts. All our focus areas have higher Average Sale Prices compared to 2023 ending prices, except Saranac and Lakewood.

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

All our focus area school districts have experienced year-over-year increases, except Caledonia and Belding had decreases. Saranac reporting the same Pending Sales as last year.

Most of our focus area school districts appear to be having a busier start to the 2024 spring market than in 2023. Strong demand continues, even with elevated interest rates.

May 2024 Monthly Summary

What does all this mean?

As we enter the bustling spring market, it’s clear that buyer activity is increasing compared to last year. With the Federal Reserve (FED) analyzing the latest economic data from last week, there’s a glimmer of hope for lower interest rates later this year. While we await further data, it appears the FED’s efforts to curb inflation are gradually easing inflationary pressures, though they have currently stalled at around 3%. Although 3% inflation is not low enough to justify reducing interest rates, ongoing data suggests we are in a stable period that could continue to bring the inflation rate down.

I firmly believe that as interest rates begin to decrease incrementally, more homeowners will feel inclined to sell, thereby boosting inventory levels. Many homeowners are eager to move, but they are hesitant to trade their current mortgage rates of 3-4% for rates exceeding 7%. Moreover, each slight reduction in rates will make homeownership more attainable for first-time buyers, prompting them to re-enter the market. Patience continues to be a virtue.

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.