Q2 Market Update 2023

Once in awhile, I owe it to you to present a market update so I can retain my self-proclaimed title of “most awesome agent in metro-Detroit”. I’m going to synthesize some of the recent headlines, grab some statistics and, without fail, give you my opinions on the current market.

The spring market is a time of year when buyers and sellers come out of their winter coma and realize it’s time to get a move on. We typically see the biggest inventory spikes in the second quarter of the year. Buyers want to move when it’s warm outside. Sellers want to sell when their home is amped up with landscaping and looks inviting. Parents want to transition so they can be in place before the next school year.

The major headline right now is “INVENTORY CRUNCH.” People want to buy, but there’s not much out there right now. It’s like 2021 all over again, but a little bit different.

Okay, so what’s contributing to the housing inventory crunch right now? I have identified two major contributing factors for you.

Housing Stalemate

First, the Boomers ain’t budging. If you are a Boomer right now, you likely either live in a home that is paid off or you have a nice low sub-3% interest rate because you refinanced during the refi boom. (See how I did that with the “boom”? 😉). If you want to downsize, your dream home may be more expensive than your current home and require you to finance at a 6.5%ish rate. This setup is a dealbreaker for a lot of Baby Boomers. Frankly, this same line of reasoning applies to a lot of Gen Xers and Millennials as well. They are staying put.

Second, the Geriatric Millennials and Gen Xers are working their own angle in the market. Many of them also have sub-3% mortgages on homes. When they are ready to move into their next home, they simple keep their original home and put it on the market as a rental. So, they have taken a new home from the market, but not released the old one back into the market. Rents are high enough that the property is cost neutral or cash flows with that low mortgage rate.

A crazy illustration of this inventory shortage is in Northville. I pulled the stat sheet for Northville and the “absorption” rate was 1.0. This means that if no additional listing came on the market, ALL the homes would be sold within one month (i.e. would be absorbed into the market). Usually we say a rate of 0-2.99 is a seller’s market, 3-5.99 is a neutral market and more than 6 is a buyer’s market.

Story of the Stats

Digging into the stats, I pulled this information from my MLS service (where all the real estate data hangs out) and I’m using April 2023 data for single-family homes. Wayne (-18.4%), Oakland (-26.8%) and Washtenaw (-21.5%) all saw double digit year over year declines in new listings. Wayne, for example, had 1830 homes for sale in April 2023. In April 2022, there were 2,242 homes for sale. The situation was very similar for closed sales and pending sales – all down across the board over April 2022.

Not surprisingly, the showing traffic at homes for sale also declined. The biggest overall declines appeared to be in that $300,001-450,000 range, which had a lot of buying power eroded by the rates. For example, in Wayne County, the showing traffic in this range was down -28.5% over April 2022.

Now, interestingly enough the median price data was split. In Washtenaw, the median price bumped up by 6.2% (Those crazy Ann Arborites are always skewing the data!). In Wayne (-5.7%) and Oakland (-1.5%), we saw the median price decline. Even with these small declines, the median price points remain high.

In Oakland County, the median price for a single family home in April 2023 was $339,950. It was $450,000 with Ann Arbor Township driving the trend at a median of 1,067,500 (😲) in Washtenaw. In Wayne, it was $165,000, but remember, that number is skewed a bit because Detroit is lumped in with the suburbs. For example, in Livonia, the median price was $280,000. In Plymouth Township, the median price was $570,000. In Detroit, it was $74,500.

Sellers Remain Royalty

There was some chatter over the winter that the rates were going to prompt a swing back over into a more neutral market, as opposed to a market favoring the seller. I also anticipated this situation in my Q1 update. All that chatter evaporated as the spring market began to take shape.

Yes, the rates have either reduced buyer’s purchase power or scared off buyers completely, reducing the pool of buyers available. BUT, the rates have also reduced the number of homes available so both pools shrank. As a result, the competition feels similar to how it felt last year at this same time.

Predictions

I’m going to just straight up hedge on this topic (I know, this choice is out of character for me). Every “expert” has a different opinion. Some experts predict prices will flat line. Some predict prices will decline. A few think they’ll go up. I personally think we’re due for a little correction, but it can’t happen until we see more inventory. As buyers become acclimated to the higher rates and as natural life changes occur (births, deaths, marriages, divorce, & health declines), we may see some more inventory hit the market. More inventory might drive prices a little bit lower as competition is spread out.

That being said, most seem to agree that the low inventory is what is actually propping prices up right now. The competition for limited housing is keeping prices higher than they might otherwise be with the interest rates in the 6-7% range. Unlike 2007, most homeowners have a healthy amount of skin in the game (i.e. equity in their home) so I don’t think we’ll see a huge wave of foreclosures, which typically drives down prices.

Thank you for joining me this week! If you would like to see the fact sheet for your hometown, just shoot me an email. It takes me about 3.5 minutes to pull that data for you, and I love to share it.