Two years of pandemic fueled home buying made Michigan housing prices dramatically increase and inventory supply decrease, which has resulted in low home availability. However, there does seem to be a cooling effect taking place in the Michigan housing market according to real estate company Redfin. In July, there were 11,435 homes sold which is 13,133 less homes sold in comparison to July of 2021. On average, the number of homes sold was down 12.9 percent year over year. Demand has also slowed in July with 49.8 percent of homes in Michigan having sold below list price in comparison to 55.3 percent in July of 2021. 33.6 percent of homes also saw price drops, up from 23.0 percent last year.
Dan Elsea, president and broker of Real Estate One, told Bridge Michigan that this dip in housing market activity can be traced to the rise of interest rates and inflation. He and many other real estate brokers believe that Michiganders should expect; fewer multiple offers; price reductions after a few weeks or more on the market; sale prices for some homes potentially be less than list price; and value drops for other factors including condition and location, like rural communities. Moody Analytics, an economic research firm, also predicts that a cooling effect or “housing correction” is what buyers and sellers should be on the lookout for. Moody’s Analytics Deputy Chief Economist Cris deRitis has shared with mLive what he expects for homeowners, buyers and sellers.
Homeowners who bought their home in the last six months in comparison to the start of the pandemic may be more at risk of year to year fluctuation in housing prices and rates since they bought at the peak of home prices and don’t have as much of a buffer in home appreciation over time. However, if a buyer, regardless of the timeframe, did not overspend their budget he believes they should be fine. Current home buyers, deRitis thinks, can afford to wait and shop around since high prices and higher mortgage rates have slowed down the pace of how long houses stay on the market and in turn more supply. Sellers should also reset their expectations on how much selling power they might have moving forward since this potential slow down shifts the market from a seller’s market to a more balanced market or even a buyer’s market.
However, as temperatures start to decline in the coming months there are still many Michiganders who do not have access to affordable housing. So to deal with this housing crisis, the Michigan State Housing Development Authority is working alongside Governor Gretchen Whitmer as well as the Michigan Department of Housing and Urban Planning to provide millions of dollars in state and federal funding to provide low cost affordable housing for families and individuals who cannot afford to participate in the housing market.