This story is a follow up to Next Michigan News' 2024 Michigan Real Estate Outlook.
As of last month, residential real estate prices in Michigan have continued to climb as more buyers vie for fewer properties. A closer look reveals that comes at a cost.
Across the state, affordability continues to be an issue for many. Despite fewer listings in Michigan, buyer demand continues to push sale prices upward.
Most reports indicate that west is best. “Everything is a little better here in West Michigan than the rest of the state,” said Rick Seese, a 47-year veteran of the industry and an associate real estate broker with Greenridge Realty in Lowell.
One example: the Grand Rapids real estate market is red hot, fueled by low supply and sky-high demand.
Even so, the state’s housing markets read like “Dr. Jekyll and Mr. Hyde.” From MLive:
“The greatest year-over-year gains occurred in the Central Michigan region, near Mount Pleasant. Average sales prices there jumped 29.74% from $172,665 to $224,020 in August 2023.”
Rounding out the top five gainers are: Manistee County, Grosse Pointe, Battle Creek and St. Clair County.
At the same time, several state markets have seen diminishing returns.
The biggest drops have come in Emmet County, Bay County and St. Joseph County.
As for what the future holds, Seese [thinks] housing prices should begin to level off. The belief is inventory should grow as pending sales decrease and that may help tamp down prices.
The upcoming presidential election is another key factor. There are sure to be shockwaves felt in the financial sector. Will they reverberate throughout the state?
A recent settlement with The National Association of Realtors in a closely-watched federal court case has rocked the residential real estate industry.
Under the proposed settlement, homeowners looking to sell will no longer have to pay buyers' agents commission, only the agent they hired to sell their property.
Plus there’s the issue of interest rates. Gene Goldman, Chief Investment Officer at Cetera Financial Group expressed earlier in May:
“I think the Fed is still going to cut [interest] rates this year. Whether it’s the summer we’ll know because we get two CPI reports and the Payroll report before the June meeting. But summer or fall, the Fed will still be cutting, because the Fed fund rate is still 2% over inflation and you [still] have to remember that takes 12 to 15 months for a rate hike to be fully felt by the economy. So we do think pull back near-term, but some really good opportunities for long-term investors.”
When asked if he saw two rate cuts this year, Goldman told:
"I don’t think [Fed Chair] Jerome Powell will hike [rates] at all. I think he’s made it known that he’s comfortable with rates where they are right now. But he’s [very] data dependent. The question is, is it two or three? I think before the June Fed meeting – I think by that time we get two CPI reports and we get a Payroll report. I’ll have a better perspective but right now if you ask me this question, as you just did I would say September because there’s a 50-50% chance. I know it’s close to the election, it’s tough but September makes sense. November 7, two days after the election and then the last one would be December. So, three rate cuts makes [pretty much] sense which is exactly what the Fed said in their summary of economic predictions.”
The New York Post reports:
The soaring cost of rent continues to [restrict] the Federal Reserve from implementing planned interest rate cuts — some analysts fear a changing dynamic in the housing market will stall Jerome Powell’s strategy to tackle sky-high inflation.
Housing inflation fell to 5.6% in March, still too high for the Fed to cut its benchmark interest rate.
Wall Street investors expected that housing costs would drop at a quicker pace — allowing the central bank to follow through on its plan to make several rate cuts this year. But stubbornly high price increases have forced the Fed to keep rates steady — with a rate cut expected no sooner than September, if at all this year.
Federal Reserve Chair Jerome Powell admitted that inflation was falling slower than expected after a key gauge exceeded analysts’ estimates.
Powell said the Fed will likely have to keep decades-high interest rates at current levels for longer than planned during the annual meeting of the Foreign Bankers’ Association in Amsterdam.
“We did not expect this to be a smooth road. But these [inflation readings] were higher than I think anybody expected. What that has told us is that we’ll need to be patient and let restrictive policy do its work.”
Stay tuned Michigan.