The average rate on the popular 30-year fixed fell to another record low at 2.87% on July 24th. That is about a full percentage point lower than where it was one year ago causing mortgage applications to be up 13 percent over last year.
This historically low mortgage rate bonus provides home buyers with increased purchasing power, and for current homeowners looking to refinance, it might be time to start shopping rates yet again.
The March through May pandemic lockdown put the annual spring housing market on hold, but recovery is not an issue…the lack of available homes is.
Listed Today…Sold Tomorrow
Low mortgage rates have given buyers more purchasing power while an incredibly low inventory has been a bonus for sellers of move-in ready homes. Properly priced homes have been receiving multiple offers, well above the asking price, by the end of the first day of showings.
Very Low Inventory
The inventory of available homes in the greater Lansing market has never been this low. These are the statistics as of June 30th:
Lower Mortgage Rates
Mortgage rates have been all over the place since March. Falling after the coronavirus shutdowns, then rising when lenders became overwhelmed with refinance applications. For the week of June 15th rates rose to 3.21% after the most recent unemployment report showed the economy was recovering.
On June 22nd the interest rate for a 30 year fixed rate mortgage loan dropped to a new low of 3.13%. This is the base rate extended to borrowers with flawless credit, more than 20% equity or down payment, and no other additional risk factors. Rates vary depending on the borrower’s personal financial circumstances.
COVID-19 Precautions
Corona virus is still with us so sellers are expecting that buyers and their agents follow prescribed COVID-19 precautions when visiting homes. This means wearing masks and foot covers, using hand sanitizer and signing a form acknowledging that there have been no recent COVID health issues.
First quarter 2020 sales statistics show that the average sales price of Lansing area homes has increased from $168,498 for the same period in 2019 to $178,903. This is a 6.2% increase of $10,405. Average selling time is 1.5 months.
Check out our first Quarter Sales Statistics Link (below) for an update of sales activity by community. (Please note that pending sales, properties under contract that have not yet closed, are not factored into these statistics.)
First Quarter 2020 Sales Statistics
Entering 2020, the Greater Lansing market continues to favor Seller’s with only 1087 available homes currently for sale. A balanced market, favoring neither buyer or seller, would be at between 2800 to 3200 units.
The sales volume is 6.1% higher but the number of available homes for 2020 is nearly identical to 2019. Low housing inventory has been the standard for the past six years.
Housing is not to blame for the COVID-19 recession, and in fact it will play a part in pulling the economy out of this recession. We expect a recovery in late summer, with pent-up demand creating a spring-like market in late summer and fall.
The coronavirus pandemic has reduced homebuying and selling activity. While many people are choosing to delay a home purchase or sale and stay in place until the coronavirus pandemic has subsided, others are still buying and selling.
It remains a “seller’s market”, but many buyers are thinking long term as historically low interest rates have made this an opportune time to buy. Those who are actively looking tend to be serious buyers.
Low Housing Inventory
Home listing activity has dropped significantly with many sellers having decided to delay putting their homes on the market, both to continue social distancing and eliminate the need to move in the middle of a pandemic.
As of May 18th, there were 1,322 residential home for sale in the entire greater Lansing market area. This is an increase of 260 homes in the past 14 days. Still, low inventory favors sellers and drives up offers due to competitive buyers. A balanced market, not favoring either buyer or seller, would be at least 2800 units.
Mortgage Rates
Rates have been hanging around 3.26% for a 30 year conventional mortgage. This translates to $4.42 per thousand dollars of monthly mortgage loan. These rates are the lowest in recent memory.
The COVID-19 epidemic has been changing everyone’s daily routines and business activities. Schools are closed, only essential businesses are open, and most of us are locked-down in the shelter of our home.
As real estate services have been deemed non-essential in the Governor’s recent executive
order, there are now constraints on the way REALTORS® can do business with buyers and seller. Our offices are closed and not even agents are allowed access. There can be no home showings, no open houses, and agents cannot physically meet with clients.
So, what does all this mean to the housing industry and specifically to Berkshire HathawayHomeServices Tomie Raines REALTORS®. We are blessed to be in a business where our livelihood involves helping our clients with their all their housing needs. Buying and selling of real estate deals with so much more than a physical asset though. A home isn’t just where you are, it reflects who you are. The life events that drive housing needs continue today as they have prior to this health crisis. Marriages, births, deaths, relocations, job changes, divorces, retirements, etc. are a daily fact of life.
So, how do we do our job in serving our client’s needs when most people are staying at home and social distancing is the word of the day? All our agents are working from home and office access is restricted but we are firing on all cylinders thanks to the technology we have available to us. While seeing our clients face to face is our preference, we have the capabilities to do business online and in the digital realm.
Our agents are using Zoom for online meetings with clients and to show homes using video chats and cell phone cameras. Listings, offers and transactions are conducted online and are using paperless remote closings. Our powerful website, BerkshireHathawayhs.tomieraines.com, offers our clients loads of information and photos, visual tours, 3D tours, and much more 24/7.
As we approach the spring market, we are prepared to assist our clients in their housing journeys professionally and safely. Warren Buffet, Chairman and CEO of Berkshire Hathaway, Inc. is quoted saying, “A home is one of the most important assets that most
people will ever buy. Homes are also where memories are made and you want to work with someone you trust.” We will work to be your trusted advisor as we navigate the new normal in real estate.
In Greater Lansing and across the nation, the housing market looks positive in 2020. Strong economic growth and low mortgage rates contribute to upward movement, while rising demand and short supply will increase competition. Let’s take a closer look at the real estate market outlook in 2020, both here in Lansing and across the nation.
A strong local economy is an essential ingredient for a strong local housing market. Certainly, the state of the national economy is also important—and all indicators on that front are very positive—but it is local employment that creates the confidence that translates into strong home sales.
The Lansing area has continued to add jobs since 2011, unemployment remains low, and the economy is very balanced. The manufacturing sector is growing, health care providers are thriving, insurers headquartered here are growing, and the tech sector is expanding. Michigan State University is a continuing engine for growth. The local economic environment is very conducive to housing growth and a positive real estate market outlook in 2020 for Greater Lansing.
Mortgage rates play an important role in the real estate market outlook in 2020. It’s predicted that interest rates will remain near historic lows, currently below 4%. There is no evidence that there will be upward pressure on rates. The latest estimates are that the 10 -year treasury note, which correlates to fixed mortgage rates, will rise only slightly over the next two years. Barring significant changes in global events related to China, Brexit or other geopolitical trauma, rates should remain relatively stable.
Millennials, the oldest of which turn 29 this coming year, are coming into the prime homebuying period. In 2020, experts predict that over 50% of mortgages taken out will be from this generation.
According to the National Association of Realtors, the median age of all first-time buyers is 32. More household formations and the birth of children in this demographic will drive demand for a variety of housing for many years to come. Millennials are also purchasing higher-priced homes, often skipping the traditional starter home, and not acting like traditional first-time buyers. They are also less willing to buy “fixer uppers” or poorly maintained property.
Not only is buyer demand by millennials increasing, but existing homeowners are staying put longer. According to recent census data, homeowners are now spending 13 years in their homes on average up from 8 years in 2010. Inventory of saleable property is expected to remain tight in 2020.
Absorption rate, the number of months required to sell all the inventory available in the market, will stabilize, but will remain under 3 months. This means a seller’s market will continue in 2020. There will be some movement toward a normalized market as the year progresses, but it will be a long way from a balanced market, which is normally a six month supply of inventory. With affordable home prices, it will be a seller’s market. The absorption rate for upper-tier properties above $500,000 is much longer and can be as long as 1-2 years, depending on the location. Consequently, buyers will be in control at the upper end of the market.
Given all the foregoing factors, the average sales price will continue to increase, though not at the +7% rate in 2019. Most experts feel average sales prices will increase in the 3-5% range during 2020.
Many coastal and tech centric markets are suffering from rapidly escalating sales prices, forcing many potential buyers to give up on home ownership. This has actually caused average selling prices to decline from astronomical highs. The Greater Lansing market remains very affordable. The average household income here would qualify for the purchase of the average priced home.
The real estate outlook for 2020 is competitive for buyers. Buyers in 2020 will need to be totally prepared to buy when they find the perfect property. They will need to be prequalified for a specific mortgage amount and realize their negotiating power is limited. For sellers, houses that are properly priced and in good condition should continue to get good market activity. Houses at the upper tier will take much longer to sell.
All in all, the Greater Lansing housing market will remain healthy, though not without challenges. The only obstacle to the volume of real estate sales in 2020 is the supply of saleable inventory. Home prices and demand will remain high as home supply lags behind and the economy continues to expand. However, buyers who are organized and prepared to buy will find that home ownership is well within reach.
Second quarter sales statistics show that the average sales price of Lansing area homes has increased $9,895 since the same period in 2018. This is a 6% increase to $175,313 from 2018’s second quarter average of $165,418.
Check out our Second Quarter Sales Statistics Link (below) for an update sales activity by community. (Please note that pending sales, properties under contract that have not yet closed, are not factored into these statistics.)
Second Quarter 2019 Sales Statistics
The Greater Lansing housing market continues to favor seller’s with only 1365 available homes for sale as of July 24, 2019. Low housing inventory has been the standard for the past five years. A balanced market, favoring neither buyer or seller, would be at between 3000 to 3200 units.
A combination of lower mortgage rates, low housing inventory, rising income and higher consumer confidence are driving sales prices higher. This is in turn is increasing home values and quickly building equity.
Lansing area home sales prices have been rising steadily for the past eight years. Most recent statistics (March 2019) show the average sales price of Lansing area homes was $168,498, up 9% over the previous year. However, rising prices have not been discouraging homebuyers.
The result of the rise in average sales prices over the last two years translates into a huge home equity benefit for Lansing area homeowners. Those who purchased two years ago at the average sales price of $139,690 have accrued an average of $28,808 in home equity, $14,919 of which occurred over the past 12 months. That’s an average of $14,404 per year, enough to pay back their closing costs and put them almost halfway to eliminating any private mortgage insurance they may have.
Fourth quarter sales statistics show that the average sales price of Lansing area homes has increased $8,618 during 2018. This is a 5.4% increase from $159,430 at the end 2017 to $168,048 at the conclusion of 2018.
Check out our Fourth Quarter Sales Statistics Link (below) for an update sales activity by community. (Please note that pending sales, properties under contract that have not yet closed, are not factored into these statistics.)
Fourth Quarter 2018 Sales Statistics
Entering 2019, the Greater Lansing market continues to favor a seller’s market with only 1191 available homes currently for sale. Low housing inventory has been the standard for the past four years. A balanced market, favoring neither buyer or seller, would be at between 3000 to 3200 units.
Growth of the housing market in Greater Lansing continued in 2018 with sales volume and prices rising for the fourth consecutive year. The rise has been steady, but with the possibility of mortgage interest rates rising, what can we expect from the Greater Lansing housing market in 2019.
The National Association of Realtors tells us that over 8 in 10 adults see home ownership as a part of the American Dream and 86% of adults whether Millennial, GenXer, or Boomer see buying a home is a good financial decision.
Home buyers across these different generations will be looking for different things in their home, which is good news for well-rounded competition and new home construction. Many Millennials are looking for the first home and weighing their options when it comes to buying or renting. GenXers are most likely looking to move up into a larger home, either to accommodate their growing family or to fulfill their dreams. Many Boomers are looking to downsize, or sell their home in Greater Lansing to move to a warmer region. Combined, these groups together help to form a balanced home buying cycle.
A critically important ingredient for a strong housing market is the economy. The Lansing area has continually added jobs since 2011, and unemployment has continued to drop. The Lansing area economy is very balanced, with a growing manufacturing sector, thriving health care providers, solid insurance company headquarters, and a growing tech sector. Job growth has contributed to a steady population growth over the past few years.
Another factor contributing to a strong housing market is readily available mortgage financing at affordable rates. Although many expect interest rates to drift upward, borrowers can still finance at historically low rates with down payments as little as 5% even for first time buyers. This is good news particularly for Millennials, who are now the largest home buying segment of the population.
A final factor in a positive housing market is affordability. Although average selling prices have been rising, housing in the Greater Lansing area remains affordable. This means the median priced home in the area can be purchased by the median income family. The low cost of living is part of what makes Lansing one of the best places to live in Michigan, which further helps home buyers stay ahead of their payments and purchase their dream home.
So, what is the housing market predictions for 2019 in Greater Lansing?
• A positive economic outlook will continue.
• Home prices will continue to rise in the 5 to 6% range.
• The Inventory of listings will increase, but the seller’s market will continue.
• Demand for new homes will exceed home builders’ ability to handle the demand.
Housing market predictions for 2019 in Greater Lansing look bright. All the ingredients are in place for continued upward trends in 2019, though neither buyers nor sellers should expect a mirror image of 2018.