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.
November 2023 Edition
-My Perspective – Finally Turning the Corner?
-The Latest Area Market Statistics
-Monthly Summary – What Does All This Mean?
My Perspective – Finally Turning the Corner?
This month’s economic data and reports suggest that the fight against inflation is making significant headway. The Federal Reserve’s (FED) strategy seems to be yielding positive results, with most economic reports from last week indicating progress. The Consumer Price Index (CPI) was 0% for October and dropped to a Year-Over-Year rate of 3.2%. Core CPI also hit a two-year low. In October, the Producer Price Index (PPI), measuring wholesale prices, experienced a notable 0.5% decline – the most significant monthly drop since April 2020.
This news coincided with the latest Retail Sales report, revealing a decrease in consumer spending for the first time since March of this year. The latest job reports and an increase to a 3.9% unemployment rate also indicated a slowdown. It’s worth noting that the CPI stood at a robust 9.1% in June 2022. Barring any unexpected reversals, the indicators suggest we may be on the cusp of a positive “right” turn.
FED Chair Jerome Powell maintains that interest rate hikes may not be over, given that we are still above the 2.0% CPI FED target. However, the recent positive reports might be bolstering Mr. Powell’s confidence, even without a recent rate hike. He should be at least smiling on the inside.
Before we make our turn, let’s consider the real estate affordability picture. There’s promising news on the horizon, particularly for first-time homebuyers. As inflationary pressures ease and everyday expenses become more manageable, individuals will likely have additional resources to allocate toward housing. While most everyday prices may not necessarily decrease, the trend of significant increases should slow down dramatically, potentially providing for housing costs to be more attainable.
If the FED becomes more convinced that inflation is stabilizing, we might see a gradual decline in interest rates. This would not only enhance affordability for home purchases, but it will also stimulate the refinancing market. Some buyers are already contemplating refinancing their existing mortgages to secure a lower rate. Even before finding a home, many homebuyers currently looking for a home are factoring in a future refinance. With home prices appreciating at a 5% rate, a $300,000 home could see a $15,000 increase in value over the first year of ownership. Therefore, refinancing at a lower interest rate could not only translate into savings down the road, but also begin building home equity sooner if current trends remain.
Explore the latest local real estate market statistics below. Prices continue to be supported by demand, and the persistently low inventory conditions continue.
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 remain above their 2022 ending prices. The Entire MLS Average Sale Price is up $22,286 (7.6%) over last year. The Lowell School District is up $26,503 (6.7%) over their Average Sale Price from last year.
From last month to this month, all our focus area school districts experienced increases in Average Sale Prices, except Rockford and Saranac decreased. Our focus area school districts continue to show resiliency with less demand, but higher sale prices, due to continued lack of inventory.
Here are the 12-Month Rolling Average Sale Prices for our Surrounding Townships through October 2023. 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.
There were increases in Average Sale Prices in the townships of Ada, Cascade, Lowell, and Boston. There were decreases in Vergennes, Grattan, Bownes, and Keene. As reported in the previous chart, the Entire MLS increased 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 a mere 7 homes from last month. All our focus area school districts also experienced decreases from last month, except Belding increased slightly. The seasonality of less inventory is beginning, as the late fall and early winter markets affect the final quarter of the year.
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 decreases in Months of Supply from last month, except Saranac. The Entire MLS increased from 2.4 to 2.1 from last month. Lowell decreased from 2.5 Months of Supply to 1.8. The movement of less supply will continue through the winter months. Last month, it appeared we were moving toward a more balanced market, but the seasonality of real estate demand is beginning to slow inventory.
New Listings – We continue to see dramatic reductions in New Listings across most West Michigan market areas. Specifically, when comparing to the same period last year, all our focus area school districts experienced less New Listings, except Forest Hills, and Belding. Moreover, looking at the Entire MLS, there has been another year-over-year decline from October 2022, compared to October 2023, dropping from 3,419 to 3,153. Notably, Lowell experienced a decrease, from 31 to 19 year-over-year.
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 October 2022 with October 2023. (2,612 to 2,347). Our focus area school districts reported a mixed bag, as there were increases year-over-year in Rockford, Caledonia, and Lowell and decreases in Forest Hill and Lowell. Belding and Lakewood had the same number of Pending Sales comparing last October to this October. Remarkably, all our focus area school districts recorded more Pending Sales last month compared to the previous month.
As we move further into the late fall market and early winter markets, our attention remains fixed on this chart.
November 2023 Monthly Summary
What does all this mean?
As we approach the holidays, there’s a noticeable upbeat atmosphere in both the real estate and financial markets. The grip of inflation appears to be loosening, and there’s some encouraging news on the horizon for the 2024 housing market. While an immediate plummet in interest rates isn’t likely, a gradual decline might be in the cards by mid-year. It’s important to acknowledge the likelihood of occasional spikes in inflation along the way, although not forming a sustained upward trend. This is why the Federal Reserve (FED) adopts a cautiously optimistic stance.
The FED is expected to keep a watchful eye on potential recessionary indicators, aiming to navigate the course safely and smoothly. Negative signals, such as significant drops in unemployment or substantial increases in retail sales or wholesale prices, will be closely monitored. The focus is on steering clear of any economic downturn as we progress into the next year. Let’s turn on our blinker but watch for traffic before we turn the corner.
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.