The Michigan Housing Market is SINKING! – MiHomesByAndrew

The Michigan Housing Market is SINKING!

The Michigan Housing Market is SINKING. Over the last couple months, headline after headline shows frustration, discouragement and most importantly raises the question, what is going to happen? Well, stick around because I’m going to touch on just that.

In today’s blog post, we are going to chat about this sinking feeling in the Michigan housing market right now. I also did a video a couple weeks ago pertaining to the bidding war situation, so be sure to add that video to your queue, which I’ll link.


Just simply typing in Michigan Housing market 2022 in Google, the headlines don’t exactly give off a good feeling. Home prices are still skyrocketing, will prices go down? Don’t expect prices to go down, and a bunch of forecasts filled with statistics that are completely off the charts.

Michigan home prices have continued to hit highs over the last few months, despite the drastic mortgage rate increase, and housing inventory is still extremely low, even though the most popular time to list a home is during the summer. Yes, there has been a slight increase, but if we take a look at the monthly supply chart for the entire multiple listing service in Michigan. It shows it would take 1.5 months for the housing inventory to deplete. Whereas, 5 years ago during the off season in January 2017, housing inventory was at 3.8 months. On top of that, survey after survey shows the majority of Americans think 1) it’s not a good time to buy a home and 2) 81% of surveyors say this economy is definitely going in the wrong direction. Just to further the perspective on the Michigan housing market, there has been a little uptick in the search term “Michigan housing crash” on Google recently that shows the statewide concern.


It’s not surprising in the slightest as mortgage rates increased at quite an alarming rate, considering i’ve had clients like in a 2.3-2.5% interest rate just last August, and now they are floating just over 6% and some sources predict mortgage rates to be over 7% at the end of 2023. A recent survey done by the New York Federal Reserve showed that there’s no doubt the rates could be as high as 8.2% in 2025.


What is causing this “sinking” feeling in the Michigan housing market and overall economy though? That’s quite a loaded question, but for starters, Inflation. On June 15th, the fed raised the interest rate by three quarters of a percentage point, and just like Jeff Sommer says in this New York Times article, “it’s nasty out there.” Gas is expensive, groceries are expensive, houses are expensive, cars are definitely expensive and the list goes on and on. Unfortunately, the media has been doing a fantastic job of twisting the words and intentions to add so much unnecessary stress to your lives. As Jeff Sommer puts it, Start by whispering “higher interest rates and a soft landing in the economy” and, before you know it, this message, transmitted from person to person, has become totally different, and words like “recession” and phrases like “it’s 2008/2009 all over again” hit you in the face flipping through your morning paper, it’s no wonder why people want to lock themselves in a dark closet and curl up in a little ball until it’s all over.


With the expiration of the eviction moratorium late last year, there’s been a large prediction pertaining to an influx of foreclosed homes hitting the market, and for those of you that predicted that, you’re kinda right.

An article from the Motley Fool in March this year stated foreclosures are up 700%, which makes sense as most homeowners were protected by the eviction moratorium. Yes it is much higher, but it’s still not as high as it was compared to pre-pandemic levels. I know most people look at foreclosures as a great deal in a hot housing market, but let’s talk about why there’s harm in the broader economy. It affects consumer spending overall, which is a major driver in job loss and unemployment, which is most definitely no good for the economy.

Taking a look at Michigan’s unemployment rate, it might raise the question, “okay, why hasn’t the unemployment rate spiked yet then?” and that’s a great question, but as states, Consumer Spending Remains Resilient Despite Inflation. So let’s just say, don’t neglect your spending habits.

Speaking of neglect, there’s something else that’s getting a whole lot of neglect lately, and that’s the like button. So be sure to to smash that thumbs up button, I promise it won’t cost you anything.


Anyway, to give a better perspective about the housing market, it seems fitting to jump back to 2008-2009 briefly to show why the market won’t have that same outcome. During those times, lenders looked over their lending standards to extend credit to people who were less than qualified, giving out loans to essentially anyone with a pulse. The 2015 movie The Big Short, displayed this situation perfectly. Then banks repackaged these mortgages and sold them to investors on a secondary market. Home values continued to increase and the subprime mortgages did the same. Homeowners built up so much equity that if they couldn’t afford the payments, they could sell and use that equity to cover their losses. The stock market crash stemmed from that situation alone, and I can tell you from my experience, lending isn’t as flexible as it once was. So before you complain about the endless paperwork, background checks, etc. be grateful they do even if it doesn’t result in the greatest outcome for you. The housing market fell so hard that there were homes in Detroit that sold for as little as $1,250. I bet you’re kicking yourself now for not buying up a few of those. Don’t worry my 13 year old self was thinking the same thing.


With so much negativity in the media saying the bubble will burst, the market will crash and everything in between. There hasn’t been great advice to consumers on how they can come out on top in a housing market like this, instead, it just leaves you asking “okay now what?”. So Let me throw a few options your way so you don’t find yourself hitting a wall in the future.


Number one, If you’re planning to purchase a home in the near future or purchased one recently, consider staying in the home for 7-10 years. The reality of home values is, they only truly matter when you’re wanting to sell in the short term. By holding onto the home for longer, you can push through all the market fluctuations, and then you’ll be able to focus on profitability. A lot of sources state that you can expect your home to nearly double in value over the course of 10 years, depending on location, local economy, etc.


Number two, if you’re not planning to stay in the home that long, then consider investing in a home that needs a little more work, because if you simply purchase a move in ready home in a housing market where the home prices are fairly peaked, you can’t exactly add too much value to that home in order to make a good profit, and if you could add something, it would be fairly extravagant I bet. Buying a fixer upper allows you to spruce up the home in a manageable way, cosmetically, knocking out a wall, new appliances, new floors, new kitchen cabinets. The options are endless for you when you choose that route.


Number three, this goes without saying, and i know it may come across as pretty obvious, but I have seen, more times than i’d like to admit, people completely blow their budget out of the water. They get tunnel vision on a pretty house and HAVE to have it no matter what. They’re dipping into their retirement funds, along with asking friends and family for gift money. A good rule of thumb is to never spend more than 35% of your income on housing or else you’re stretching yourself very thin. This creates a safe spot for you in case your income goes down for any reason, you lose your job for a brief moment, or the market decides to have a downturn. Whatever the situation may be, paying less will always be better than paying more.


I know all these points raise the question, should you buy a house now or wait? And truthfully, no one including myself can answer that for you, because at the end of the day it’s truly situational. If you keep in mind the three points I mentioned to you without worry, holding onto the home for 7-10 years, investing into a fixer upper, and staying within your budget, that’s truly all you can ask for. Based on the longevity itself, the chance of you losing money is pretty slim. Making sure all your ducks are in a row, budgeting, allocation of funds, etc. When all your accounts, funds and budgeting tactics are prioritized, you won’t have to feel like you need to time this real estate market, and honestly, that’s very hard to do even for someone who lives and breathes economical data everyday of their life.

So what do you think will happen to Michigan’s housing market? Throw your thoughts in the comments below.


Andrew McManamon is a licensed Real Estate Professional in the great state of Michigan. His philosophy to put people first has paved the way to his extraordinary real estate career. Born and raised in Brighton, MI, Andrew acquired a bachelors degree in business management and marketing from Cleary University in Howell, MI. The combination of his experience and education allows him to take a strategic approach towards every transaction and help his clients make more informed and confident decisions.

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