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.

October 2023 Edition

-My Perspective – Circling the Busy Airport
-The Latest Area Market Statistics
-Monthly Summary – What Does All This Mean?

My Perspective – Circling the Busy Airport

Let’s clarify the recent ambiguous economic reports and the present state of the local real estate market. While there are clear signs of stability in inflation, some numbers suggest that inflation is persisting. The local real estate market in West Michigan is gradually accumulating inventory, but not uniformly across all sub-market areas. Additionally, we’re consistently witnessing a decrease in pending home sales each month, primarily due to the influence of higher interest rates, particularly affecting first-time homebuyers.

As I examined the data released this past week, it felt like a busy airport with many flights changing. However, after sorting appropriate information, this became the most significant news: The September Producer Price Index (PPI) showed robust results, and the September Consumer Price Index (CPI) report indicated that while inflation isn’t worsening, progress is slower than desired.

Overall, it wasn’t necessarily negative news, but the economic plane is still circling the airport, awaiting a safe landing. As we await the Federal Reserve’s (FED) decisions, the economy doesn’t seem to be running out of steam, with the latest job report showing stability and job growth, and only a slight uptick in the unemployment rate to 3.8%.

It’s likely that the FED would prefer to see a continued downward trend in our active economy, but there’s also a sense that global factors may influence their decision regarding another interest rate hike. As we approach the year’s end, we’re probably in for another “wait and see” approach. The airport is still quite busy, so keep your seatbelts fastened.

For those intrigued by statistics, take a closer look at the statistical trends in our focus area school districts’ real estate markets below, where the impact of higher interest rates is becoming more apparent.

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 $7,665 (2.6%) over last year. The Lowell School District is up $16,997 (4.3%) 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 Belding and Lakewood decreased, and Caledonia staying the same. Our focus area school districts are now showing an overall declining demand, but higher sale prices continue to be supported due to a continued lack of inventory.

Here are the 12-Month Rolling Average Sale Prices for our Surrounding Townships through September 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.

All the surrounding townships had increases from last month including the Entire MLS, except Ada Township decreased slightly, and Lowell Township stayed the same. 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 777 homes from last month. All our focus area school districts also experienced increases from last month, except Lowell and Lakewood decreased, and Saranac staying about the same. The seasonality of less New Listings 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 increases in Months of Supply from last month, except Belding and Saranac. The Entire MLS increased from 1.9 to 2.4 from last month, the highest level since May 2020 (Beginning of COVID-19). Lowell is now at 2.5 Months of Supply, its highest level since October 2019. The movement of additional supply continues to increase as higher interest rates continue to slow demand.

We are moving toward a more balanced market, possibly a bit quicker than expected. The above chart shows the history of Months of Supply comparing the Entire MLS with the Lowell School District.

New Listings – We are beginning 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 Lowell, Lakewood, and Saranac. Moreover, looking at the Entire MLS, there has been another decline from September 2022, with the figure dropping from 3,630 to 2,374. Notably, Lowell experienced a slight increase, going from 20 to 26 Year Over Year.

Remarkably, nearly all the school districts within our focus area have seen a decrease in New Listings compared to last month, except Saranac stayed about the same. It’s worth noting that the Entire MLS has seen a substantial decrease of nearly 1500 New Listings compared to last month.

As stated earlier, we are entering the late fall and early winter season where New Listings normally decrease. However, this sizable drop throughout West Michigan could indicate the effects of high interest rates causing less willingness to move, along with seasonality. We will closely monitor these numbers as we progress further toward the winter season.

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

The Entire MLS witnessed another substantial year-over-year decline in Pending Sales during September, as we compare 2022 to 2023 (2,897 to 1,307). 1,307 is the lowest number of monthly Pending Sales reported by the Entire MLS since April 2020 (COVID-19). Moreover, every school district within our focus area registered decreases when comparing September 2022 to September 2023, except Belding and Lakewood stayed the same. The comparison from last month also showed a decrease in Pending Sales in all our focus areas, except Belding, which stayed the same.

As we move further into the late fall market and early winter markets, our attention remains fixed on this chart.

October 2023 Monthly Summary

What does all this mean?

As we approach another Federal Reserve (FED) decision on interest rates, a multitude of data influences these critical choices. Moreover, additional factors are emerging, blending into the decision-making process. One such factor is wage inflation, driven by increased demands for higher wages as unions assert their influence. Also, additional workers and unions are contemplating raising their wage demands.

Additionally, global events are impacting consumer sentiment, as unexpected occurrences can influence spending. The FED desires consumer spending, but it’s a delicate balance, as they don’t want it to come to a complete halt. Furthermore, economic challenges in other countries can have a ripple effect on the U.S. economy.

In my estimation, unless we encounter another worrisome set of inflation figures next month, the FED will likely maintain a watchful, wait-and-see approach, rather than risk excessive intervention. We are all hopeful that the economy has been tamed enough to experience a further reduction in inflation without further rate hikes. While we may not achieve the desired 2% inflation rate that the FED seeks, I believe we are heading in that direction, slowly, but surely.

As the economic plane continues to circle the airport, let’s remain composed, understand the reasons for the delay in landing, and acknowledge that lowering the landing gear may still be a few months away.

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.