Download the July Data PDF

Video Transcript (auto generated)

 Hey, I'm Steve Volkers and this is our monthly real estate market data update. It is July. We are talking about June data and beyond. July is just, we're just starting in July, right? Well, it's the 11th already. Holy cow. The month is going by fast. So, market monthly data. Obviously, we throw these up, you can see them on our website or YouTube. If you'd like to. And also, I think we throw it on our socials for sure. But, each month Kevin and I sort of ring through this. Kevin takes the data from the, association, plays with it, puts it in the fancy book, so it creates all these graphs for us, which is awesome. And we get to see trends and stuff. And so today I really want to talk about. What Kevin and I just talked said was maybe the new normal, right? The new normal. because the graphs are starting to look similar, at least over the last three months. The trends are very, very similar. Right. And so I'm actually gonna take this in a little bit of a different direction. A lot of times we spend a lot of time on each of these graphs and what they mean and percentages up and percentages down. But I think with a three-month trend line looking similar of being down, right, all of the things are down. That doesn't mean prices are down. It means that sales are down the amount of units. That we're selling, then the amount of volume is down, those kind of things. in reference to just the productivity of how many transactions are happening. So we are down averaging seems like 17 to 20% across the board, and most of these spreadsheets, and graphs, it's showing that we are down in sales. Units per time over a five-year trend. You name the graph and please look at it. 

Why that's happening is what I want to spend time on. And I got all these other data points that Kevin didn't put together. I actually have my own scribbles. Kev, like old-school data dude, right here. So we are gonna talk a little bit about the process of the first-time home buyer. And then the first-time seller, right? And then they're what they're buying, right? So those three sort of groups of people, First-time buyer, first-time seller, and then second-time buyer are, are a big bulk of the market, right? Obviously then people will buy maybe multiple homes as they grow into different spaces. But in West Michigan we've seen for the last quite a bit like you got your starter house and then you would, you moved to your mid-size house, that mid-size house. Or larger house might be in West Michigan, your home for a long period of time. You might raise kids there, have family, those kinda things.

Sometimes you'll move to a third bigger house. Not always though. and then traditionally from then you're doing a cottage or you're doing something different. Or then you're downsizing. So it's not unusual to only have three moves in West Michigan, maybe four. it's not like other markets where you're, where you're moving around a little bit more.

And also we don't, most people don't. It's, it's a smaller community, right. So we don't have it where you're moving from this community to that community as often. Right. You're, it's, it's small enough that you generally are moving within the same area. So, What I'd like to do is just paint the picture. And so what I started with was this little map, right, which is the Creston neighborhood, which incorporates it, sort of Creston Heights, Cheshire Village.

Auburn Hills. north Northgate is a little bit north of here, but basically it's from Ann Street to three Mile Monroe to Fuller. Right? So why did I pick this one? I, I owned a home and just sold it here, right? and I've owned multiple homes in that area, but also we have a lot of first-time home buyers that say this neighborhood, in particular, is their first choice.

Or second choice Within the city of Grand Rapids, walkability, treeline, streets, parks, and accessibility to the highways are why they choose this. So painting that picture of that first-time home buyer. So I did, pricing between 250 and 350,000, which seems to be sort of the going purchase price right now in this market. And right now the average list price of that range, that a hundred thousand range is 263,000 with an average sold price of 286,000. So in this neighborhood here, We would say that on average you're paying 10% above the list price right now. Some are obviously 120, and some are obviously 103 but averages out to about 10% or more above the list price. So what does that mean? That means, let's just say a $300,000 purchase price in that neighborhood would be $2,680, about a month, and a mortgage plus insurance and taxes. Right now, that's the current interest rates on a zero-down mortgage. So I ask consumers, credit union, their zero down product is a very popular product right now. It's what I used two years ago to purchase. So sort of thinking if I'm renting and I don't have any money and I wanna buy, so I do the zero down program. My monthly cost is 2,600 a month. Okay. That's your first-time home buyer. What they're coming up against in this market is there is one house in this whole area to buy right now. Only one. Right? So this whole map area, there is one home right now that got listed. Today that you could make an offer on only one and there is 12 that are pending, all of which sold in that first three days, right? None of them. Only one lasted 10 days. Everything else sold way before or right away over that first weekend.

Then you have what was the total here? 60 homes so far this year. So that just shows you the amount 60 homes. So you know, you would say then that double it, 120, right? A year would sell in this neighborhood right now and there is only one available to purchase, right? So we have 60 more needs with one. So that would tell you how desperate we are for this price point in these kind of neighborhoods right now. But, What you're also finding then this map is actually from the Zillows and I did the rental map. And so in that neighborhood right now there is 1, 2, 3, 4, 5, 6, 7, 8, 9 homes for rent, and they are renting for 2300 a month, 2,500 a month, 2300 a month, 1800 a month, 2300 a month. So, Rent is actually cheaper than the mortgage payment right now in that neighborhood. So if I'm thinking of, I'm not sure where I'm gonna live. I just got married. I just got my first job. You name the thing of being a first time person, I can't find a house. There's only one available. I have eight that I could rent. A lot of people are starting to think about, well, why would I not just rent then?

I can, my payment's gonna be less than purchase price and I can't find anything, or I don't have enough cash to overcome the other 60 people that are trying to buy in there. So we talked around the table this morning a little bit of. Buyer fatigue, right? This idea that buyers are getting exhausted without having any properties to buy and then losing cuz it's one to 60 right now in that neighborhood. That they are starting to say, well, we're just gonna con continue to rent then because now all of a sudden with interest rates higher, Their monthly payment is similar or less than maybe on the rent, which is a huge change. So two years ago, even a year ago, that wasn't the case. Right? That's why we saw the buying frenzy and all the activity two years ago was the interest rates were so low that it made all the market move, the big market and the small market, everybody was moving because everybody wanted to capture that lower price and establish that lower price. Right. this is also why I think we're starting to have that stability. There's not enough product to go. That's why we're down 20%. What would we do, would we have 20% more sales? For sure. Are there buyers for these? Yes. We can see it. Right. There's only one. So if we had 60 more of these houses that went on the market in the next 30 days, 60 days even, would they all sell? Yes, they would all sell. Right? but then we move to the first-time seller. What else also is stalling the market? Why is there only one right now? Well, I bought in that neighborhood for 2 years ago. My interest rate on the zero down, I did the zero down program. Was somewhere around four at that time, so it was higher than the average. Because of doing the zero down, my payment was only $1500 a month, So right now that is $1,100 more for exact same house, but that house is $50,000 more. Right. Or actually, it sold at three 30. Right. So, so you have all that, that you have to deal with. 

Okay, so if I'm selling it, And I put on the market for 300, I get 10% more. Cuz that's what we said. So I get a three 30 purchase. I have $60,000 probably of cash then at that point, right? Because you've got RVs, the R fees, and the cost of sale. So I'm sitting on $60,000 right now from selling my house. I had a $1,500 a month payment. Hopefully, you're tracking with me. It's a lot of data, right? And I want to go by in one of these two markets. This is the normal movement for someone in this Creston neighborhood to move to Forest Hills and Rockford. Those are the districts. You see that they're on the northeast side already. They move into the suburbs where they believe that the schools are, are better or just have bigger houses. Honestly, this neighborhood does not have enough big houses for people to stay there, so they're moving into the neighborhoods that have the bigger houses and those bigger houses average between $500k & $750k. What can they buy and what is the current rate? And again, in all of Rockford, between $500k & $750k, there are nine homes, only nine, all of Rockford. If you don't, if you haven't driven around Rockford, you could drive for half an hour around Rockford and still be in Rockford. It seems like half the time it's a big freaking area. And on the nine, only two have been on the market less than five days. Everything else has been on the market for 20-plus days. So really if we're really talking, if I am the seller of this home, I can get three 30 and get 60 grand. I only have two homes in Rockford right now. And in Forest Hills, I, there is 11 right now. Only one of those in Forest Hills has been on the market less than five days. All the others have been 14 or more. So the market's already said that those are either too high or need too much work. So in a way, in Forest Hills, I only have one new one this week to go look at. In all of Forest Hills School District between $500k & $750k of one house, I could look at today.

It's not, it's, that's why we're sitting in this situation. But not only that, that seller being the first-time buyer buying an average of a $600,000 price point, their mortgage goes up to $4,400 a month. So they go from 1500 a month to 4,400 a month. 2,900. They, in two years, if they were to move, have to come up with 2,900 more dollars in their budget to buy the next-level house.

That's why we're stalled. That's why we're stalled. If people don't need to move, they aren't. They just aren't, that that is, aren't is not probably a good word. It doesn't sound like I'm educated at all with aren't, but it is. They just are not moving. They don't feel the three thou, one of the two people, if it's a couple, one of them wants it. The other one's like, no, I'm, I have a lot of things I can do with $3,000 a month. Like, we got lots of things. We could go buy a second home. We could take lots of vacations for $3,000 a month. Why would we, unless the space is too small. I wrote down, the reasons who is selling right now, retirees. We went to a house this morning with a dear friend of ours and walked through her house. She's considering selling. They bought a house in Florida a couple of years ago. They haven't been using the house as much. Maybe they should sell. They got an equity line on it. Okay, retirees. Next is divorce. Separation. What do we do with the house? One stays, one doesn't, or we need to liquidate it. Both need to buy different places or move to different areas. Relocation. I'm leaving the Grand Rapids market for a job in Chicago, or I'll let you name the city. I'm moving out of the area. and then the final one, which would be the reason I sold, is we've outgrown the house. I'm engaged to a lady with three, we have seven kids. Obviously not gonna fit in a small four-bedroom in the city of Grand Rapids anymore. Yeah, people back in the day did it, but we don't do that kind of stuff anymore, so doesn't fit. So that was the reason for my sales. So where do we go from here? I think you look for deals, but they're gonna be hard to find. Right? The values of homes are gonna continue to rise because there's not any, there's just not. We talked about new construction this morning and our biggest builder, Allen Edwin, in the area, can't keep up with demand, right? They're specking everything and the majority of it is selling. they're starting to not sell some of their stuff just to keep 'em as rentals. and just not letting us sell it because there's that much demand that they're selling 'em faster than I can believe. 

The rental market is gonna get busier. We're renting one of our houses because the interest rate is so low. The rental amount that we got with a two-year lease made it just make sense to keep it as a rental, which then again takes one house off the market. So that house was a traditional house, a traditional neighborhood in Byron Center, a great little house, didn't get the dollars that we thought we'd wanted for it. Two-year lease, making good money on the two-year lease. Now that house is not on the market. That's why the graphs are the graphs, right? That's why it's down. People are choosing to stay mostly, I think they're gonna start choosing to rent if they can afford it and keep it as a rental and part of their financial portfolio. and so the normal of the 15% down in transactions, the, what was it, 18% down. 17% down this month. Over last year in sales, the was the five-year average. We're down 20% over the five-year average, but the month before that, we were down 18. In the month before that, we were down 25. So what will happen in a year from now when Kevin and I do this data again, is we might only see it down. 2% or we might see up 2%. I think this is the trajectory for the next year that the percentages down are so significant because of these reasons.

Started with Covid financial policy and Covid interest rate policy to get us back stable in the economy. We're at this new middle ground normal, trying to stabilize from all the dollars in cash out during Covid. The low-interest rates to now the high-interest rates. And even if we go down, I've seen some memes lately and I don't, I don't know why, right? But the meme is like a real estate agent walking through the street and all of a sudden the interest rates go down to 5%. It says, and all the other real estate agents are jumping for joy because of all the new houses coming on the market. N No, I don't think so. I would love 5%. But what would it do? It would bring more buyers to the market. It's not gonna bring more sellers to the market. There's not enough for them…incentive for them to move. Why would they move off of 3% for 5%? It's not enough. It's, it's just not enough. So would I like a 5% interest rate? Sure. Would it help stabilize this a little bit? Yes. But would it create more buyers in the market? For sure. And do we have any product for them to buy? I have two in Rockford. I have one in Forest Hills and I got one in Creston. We're still selling homes. Call us. We need your one listing on the market and we'd love to help you. I'm Steve Volkers, that's the market update for July. Thanks guys.

Posted by Admin Volkers on
Email Send a link to post via Email

Leave A Comment

Please note that your email address is kept private upon posting.