GRAND RAPIDS, Mich. — GRBJ—Home prices are falling in the United States, but it still is hard as a homebuyer to secure a decent price.
U.S. home prices dropped 2.4% from June to August, and likely will continue to fall according to the S&P CoreLogic Case-Shiller Home Price Indices. Pending home sales nationwide dropped 10.2% from September to August, according to the National Association of Realtors — experts expected a 4% dip.
“As the Federal Reserve moves interest rates higher, mortgage financing becomes more expensive and housing becomes less affordable. Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to decelerate,” the NAR report stated.
There is a bright spot for Grand Rapids, however, which suggests demand could help the region weather a housing downturn better than some other U.S. cities, especially as it continues to land on lists of desirable cities and remains cheaper than alternative locales. Crain’s Detroit recently dug into the topic.
Grand Rapids remains a place franchises and chains are looking to expand with promising growth and demographics. According to real estate firm Zillow, 71.9% of homes in Grand Rapids sold for over list price through August.
According to real estate company Redfin, a median-priced home in the U.S. during September would cost 5.1% less than in June — $402,983 compared to $427,157. During September in Grand Rapids, the median home price was $270,000 during September, up 17.4% year-over-year, according to Redfin. That is a bit below the $275,000 peak in June, but a bump back up from August’s $260,000.
While homebuyers might heave a sigh of relief after the rapid ascent of home prices of the past two years, the cost of housing continues to rise as mortgage rates continue to climb. Those rates are now at 7.16%, according to Mortgage Bankers Association — the highest rate in at least 20 years. If a buyer locked in a 30-year mortgage with a 20% down payment, that same median-priced home would have a mortgage payment 10% higher than just several months prior.
“For homebuyers, the impact of higher rates was compounded by inflation running at a four-decade high, resulting in less money in their pockets and diminished budgets,” Realtor.com Senior Economist George Ratiu said in a recent report. “The sharp pullback in demand was reflected in dropping sales and decelerating home prices.
“With monthly mortgage payments 75% higher than last year, many first-time buyers are locked out of housing markets, unable to find homes with budgets that have lost $100,000 in purchasing power this year.”
Likewise, prospective homebuyers still are facing prices much higher than pre-pandemic times: Home prices are still 42.2% higher than before the pandemic hit.
A leading housing economist believes the market could continue to dip more than 20% in the next year.
“But prices have to fall substantially in order to restore equilibrium; the supply curve for housing is not flat, so the plunge in demand will drive prices down," Pantheon Macroeconomics Chief Economist Ian Shepherdson wrote in a report this month. "We expect a drop of 15-to-20% over the next year, in order to restore the pre-COVID price-to-income ratio.”
According to real estate website Redfin, Grand Rapids was the second quickest-selling market with homes on the market a median of 10 days, behind only Rochester, New York.
That’s well below cities like Chicago, which saw a median of 57 days.
Data also suggests there still are more people looking to come to West Michigan rather than leave, adding to homeowners looking to keep mortgage rates locked in from the past two decades. So, while the market might be cooling off in some ways, Grand Rapids activity appears to still be moving upward.
This report first appeared in the Grand Rapids Business Journal.
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