What is the truth about Michigan home prices, are home prices dropping in Michigan? This seems to be the million dollar question, and in this video, I am going to answer why that is, along with the factors that affect the home prices in Michigan. Stick around, I'm sure you’ll be surprised with the response.
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Are house prices dropping in Michigan? This seems to be the million dollar question, and in this video, I am going to answer it. Stick around, I'm sure you’ll be surprised with the response
The Detroit Free Press came out with an article in the middle of last month about the Metro Detroit housing market cooling down, and that headline alone triggered endless searches on Google asking a thousand versions of the question, are home prices dropping in Michigan? Short answer no, but the long answer is yes, let me explain.
It’s no secret that the Michigan real estate market is becoming more and more expensive, as buyers are fighting tooth and nail for the same properties, driving prices higher, all while waiving their due diligence, selling a body part, and giving away a first born child (short answer). All jokes aside, people are putting their money where their mouth is in this housing market.
Just to prove my point, statewide data that covers all the 42 regional listing boards in Michigan came to the conclusion that the average sale price increased 13.71 percent from late 2020. In terms of dollar signs, that’s a leap from $226,875 to $257,986. With that in mind, believe it or not, the residential home sales in Michigan declined 10.1% year-over-year. If home prices are so high, why aren’t there more homes for sale? And just like I’ve said before and you can see with your eyes, you’re selling high just to buy high. On top of that, the pandemic put a lot of sellers on the fence which is very understandable.
Despite the time of year, the latest trends have shown the Michigan real estate market to be increasingly competitive, and bidding wars being a common practice in real estate transactions, which I too, can attest to. What’s interesting though and maybe something you didn’t notice is where the most competitive housing markets are in Michigan. Jenison, Walker, Kentwood, Wyoming, Cutlerville. All areas in Michigan you probably never heard of. All these areas are places on the outskirts of Grand Rapids. If you’ve ever been to Grand Rapids, it’s safe to say it’s a desirable area, full of dining and entertainment options, great schools, and was honestly considered Michigan’s best kept secret. Someone spilled the beans and the housing demand is unlike any other on the west side of the mitten. What about the other areas? Detroit saw price gains of over 44%, Wayne county saw over 14% and Lapeer county saw upwards of 20% price gain.
All this information just to tell you that the answer to the million dollar question is hard to answer with a simple yes or no. There’s so many factors that affect the direction at which the housing market turns. Just like the stock market which follows suit, after seeing a top CEO talking gibberish on a podcast, the company's stock takes a dive, as it gives shareholders an uneasy feeling.
With the Omicron variant making its way around the world, and Jerome Powell’s renomination as Chair of the Federal Reserve, which would most likely cause interest rates to increase, after saying on a recent video conference, “this is a strong economy, one in which it's appropriate for interest rate hikes.” Even with the announcement of the Federal Reserve wanting to accelerate its bond tapering and stating that three rate hikes would come in 2022 caused the rates to increase.
On top of that holiday spending taking dollar signs out of potential buyers bank accounts, any chart or piece of data will tell you that home prices are increasing at a miniscule rate, because at the end of the day, the buyers in the housing market determine what they want to spend (to a certain extent).
The days on market of listings are increasing, there’s a little less competition on homes (though it’s still high), buyers can breathe a little bit and not break their second and third piggy bank just to one-up the next offer.
At the same time, the lack of inventory is still driving demand. For example, every week on my newsletter I include home listings for all the different counties I cover. In Livingston County, It was always 375-415 homes. Nowadays it’s around 215 homes, so it’s clear as day that sales have decreased because the inventory did too.
Over the last week or so, CoreLogic and ATTOM Data solutions stated that not only did rental rates triple from 2020, so did home flipping despite the shrinking profits. If you take a look at Detroit’s real estate market, it’s very safe to say it’s booming. There are more investors in that space than ever before, transforming each moldy boarded home into a move-in ready one.
When prices started to increase, investor groups were discouraged to buy up more properties, but in the grand scheme of things, they capitalized on the increasing home prices, flipped them for profit and/or became a landlord to jump in on the inflating rent prices.
In an article created by the National Association of Realtors, a group of experts predicted that the annual median home price will increase 5.7% and inflation will rise 4%. Chief Economist Lawrence Yun of the association stated ,“overall, survey participants believe we’ll see the housing market and broader economy normalize next year,” Yun said. In addition, Yun expects existing-home sales will decline to 5.9 million in 2022 and housing starts will increase modestly to 1.67 million as the pandemic’s supply chain backlogs subside.
Not only is housing affordability remains a concern, so is the future of demographics. Baby boomers will most likely age into their homes and hold tight, millennials are the largest group of potential buyers that are facing the low inventory, high prices and student debt trio. On top of that, a drop in birth rate to a 100-year low creates stagnancy in the market too. Having a child is usually a motive to sell and buy a new home.
So in summary, are house prices dropping in Michigan? The answer at a glance is no, but when you look at the factors of: the unknowingness of the omicron variant, The Federal Reserve’s plan of action, Seasonality or spending habits, and of course the demographics, it would further justify the likeness of the housing market to slowly but surely find its way back to civilization.
For those of you that are trying to stay on top of the headlines, what is your thought on the housing market going forward? Drop your thoughts in the comments below.
Andrew McManamon is a Michigan REALTOR® with Signature Sotheby’s International Realty and provides real estate services to Buyers, Sellers and Investors throughout SE Michigan including Livingston County, Oakland County, Washtenaw County, Genesee County & beyond. Andrew has become one of the rising stars of Michigan real estate agents. Prior to his real estate career Andrew was responsible for managing a senior living facility in Brighton, Michigan as a dining supervisor and an activities assistant. Andrew’s passion to help people is unlike any other, and he continues to strive to be best resource he can be. Andrew graduated from Cleary University in Howell, Michigan with a double major and currently resides in White Lake, Michigan.