As someone looking for your next rental property, it helps to know the landscape of the real estate market and what to expect. If you have your eyes on Michigan, you've come to the right place to get some of the most essential insights on what home sales look like, the state of housing inventory, and more!
Michigan Housing Market Trends of Note
Even outside of the Michigan real estate market, it's good to familiarize yourself with these elements and what the stats look like for them. Doing so helps you to understand if you're dealing with a balanced market, if rising prices are at play, etc.
Michigan saw a fall in median home prices by 0.39% in September 2022 when compared to last year.
There's a nationwide decline in the number of home sales. In January 2022, the figure stood at 6.49 million, falling to 5.1 million by September.
Mortgage Applications and Interest Rates
Year on year, 2022 saw mortgage applications fall by 41%. The same period saw the mortgage interest rates increase by 3.2 points, with the national average fixed rate standing at 6.1%.
While September 2022 saw a 9% decline in foreclosure initiations from August at 21,869, this was still an increase of 113% from 2021.
The supply of unsold homes in inventory stands at a pretty low 3.2 months.
What Kind of Factors Affect the Housing Market in Michigan?
There are quite a few moving forces that lead to the results you see on the housing market in Michigan, which are as follows.
You can group buyers based on a series of attributes including age, race, income, gender, and more. Whenever any of these groupings see a major change, you'll find that it can have lasting impacts on the market.
For example, millennials will now have more buyers finally getting to the prime buying years.
Demand and supply in Michigan will also be influenced by what government subsidies, deductions, and tax credits look like and how favorable they seem.
The significant impact of the state of mortgage rates goes without saying. Demand will increase when the cost of getting a mortgage falls. Unfortunately, the current state of things means that even some above-average home buyers have been priced right out of the market.
The Economic State
Employment statistics, manufacturing, GDP, inflation, and more will play into the market as well. For example, if people find that their overall buying power is reduced, then the funding available to buy a home or the ability to secure a mortgage will be adversely affected.
Is the Michigan Housing Market Going to Crash?
This is a legitimate concern based on a few concerning states of affairs in the Michigan real estate market. However, while some level of slowing down is expected, it's unlikely that there will be an outright crash.
First, these days you find that many homeowners have more substantial equity in their homes. This means they are in a much better position than owners 15 years ago, and the looming threat of a foreclosure crisis is non-existent.
Next, lending standards are much higher than they used to be, which means that those who do land mortgages tend to be on the side of great credit.
There are also definitely a lot more potential buyers on the market. This holds true across several key demographics, meaning that a low inventory was all but guaranteed.
Of course, there's also the matter of the housing supply not being impacted positively by the building of new homes.
Important Housing Market Statistics to Think About
According to the Zillow Home Value Index, over a decade since September 2012, the standard home value in Michigan has appreciated by almost 137%.
The year 2022 saw a value increase of 13%, with the two-year figure being 32%.
Michigan home prices have increased by double digits since 2020, and thanks to consecutive years of declining inventory, there were record lows of available homes.
Using information from the Zillow forecast for various metro areas in Michigan, you'll see that no price decline is expected. For example, in Grand Rapids, the July 2022 to July 2023 period is expected to see a 3.3% rise in home values. Detroit, Ann Arbor, and Lansing are expected to see increases of 2.1%, 0.5%, and 2.2%, respectively.
Looking at July 2022, average home sales prices in Michigan climbed 11.85% over what they were the previous year.
This likely contributed to the year-over-year 12.67% decline in sales. Some experts say that rising prices are indicative of the Michigan real estate market being healthy.
What Are the Predictions for the Housing Market?
There are several predictions of note for the Michigan housing market. First, the climbing of mortgage rates is expected to continue thanks to geopolitical tensions, inflation, and the looming threat of a recession.
As stated before, home values are expected to increase over the coming year. However, some experts believe that unaffordability will drive values down anywhere between 5% and 10%.
On the topic of unaffordability, there's also the belief that it will cause inventory to rise. Should this occur and cause supply to increase, things could be more favorable for buyers.
Bear in mind though that based on the projections for continuously climbing mortgage rates, the expectation is that there should be a 10% drop in the number of home sales occurring in the state.
There's a lot to pay attention to in the Michigan real estate market, and that extends to the national state of things too. As someone looking for an investment property, it helps to understand the extent to which the market is favorable.
With factors such as federal reserve decisions, inflation, low inventory, high mortgage rates, etc., the real estate situation is adversely affected. Hopefully, the insights provided above allowed you to understand the state of things.
Frequently Asked Questions
Will Michigan Housing Prices Fall?
Over the next year, home values in the state are expected to rise, continuing the trend that has been seen so far. However, some experts believe that a lack of affordability will mean an inventory increase, which translates to falling prices.
Should I Buy Investment Property in a Slow Market?
You can choose to do so, but you need to be smart about it. For example, if you were to consider a short-term investment, it likely wouldn't be worth it. However, for someone who's looking to have a long-term rental property, for example, it will likely be a better idea.
What Are the Most Competitive Housing Markets in Michigan?
These would be Northview, Jenison, Grandville, Wyoming, and Kentwood.