The 2022 housing market was noteworthy. The year was full of ups and downs with home values peaking in the spring before falling alongside record inflation and rapidly rising interest rates in the fall. In 2023, experts agree we may see the return to normalcy, greater stability and predictability if inflation continues to ease and mortgage rates stabilize.
Here are West Michigan’s 2022 housing market highlights as well as leading real estate experts’ predictions for 2023.
2022 Highlights
Home prices rose to an all-time high
Nationally, the typical home sold for $430,365 in May, a record high since records began in 1963 – shattering 2021’s high of $386,000. In March, the national median sale price rose 16.8% year over year, the largest percentage increase over the last five years.
In Ottawa County, the median sales price hit a high of $355,000 in both March and May. The median sales price rose a staggering 18.7% in May compared to 2021. In Kent County, the median sales price hovered around $310,000 in April through August. And despite rising interest rates and market uncertainty, prices still ended in December higher than the previous year.
Home inventory levels are low but growing
In 2022, there was a 16.4% increase in the number of homes listed in Ottawa County and 11.8% increase in Kent County compared to the previous year. This additional housing supply helped alleviate the staggering shortages we’ve been experiencing over the last couple of years, but supply levels still remain extremely low. For perspective, the average number of listings per month in Ottawa County was 794 homes in 2019. In 2022, the average was only 380 homes!
Q4 results may suggest 2023 market conditions
With both a growing supply of houses and the overall demand for housing coming down due to higher interest rates, the market looks to be slowing down to something resembling a normal market compared to the frenzy we experienced in 2021 and early 2022.
The sold to list ratio is a strong measure of buyer demand. It’s the average ratio of sale price to original list price, in percentage. Numbers below 100% indicate that, on average, properties sold for less than their original list prices. And numbers above 100% sold for more. In April, the sold to list ratio hit an annual high of 104.5% in Ottawa County and 107.7% in Kent County. It started to dip below 100% in the last four months of the year. This could be due to a couple factors – overpricing homes and/or decline in buyer demand.
We also started seeing an increase in the number of days a home is on the market which indicates a return to more normal market conditions.
2023 Outlook
The 2023 forecast from the National Association of Realtors (NAR) says:
“While 2022 may be remembered as a year of housing volatility, 2023 likely will become a year of long-lost normalcy returning to the market, . . . mortgage rates are expected to stabilize while home sales and prices moderate after recent highs, . . .”
Danielle Hale, Chief Economist at Realtor.com, adds:
“. . . buyers will not face the extreme competition that was commonplace over the past few years.”
Lawrence Yun, Chief Economist at NAR, explains home prices will vary by local area, but will net neutral nationwide as the market continues to adjust:
“After a big boom over the past two years, there will essentially be no change nationally . . . Half of the country may experience small price gains, while the other half may see slight price declines.”
Mark Fleming, Chief Economist at First American, says:
“The housing market, once adjusted to the new normal of higher mortgage rates, will benefit from continued strong demographic-driven demand relative to an overall, long-run shortage of supply.”
What does this mean for buyers?
If you can afford to buy now, it’s a great moment to avoid competition that’ll likely enter the market when mortgage rates drop again. If you can’t, you should spend this time working on your finances by saving for your down payment or updating your property so you’ll get top dollar when you sell.
What do lower prices mean for sellers?
Though prices have come down in recent months, home values are still high in comparison to last January. If you bought your home more than five years ago, you’ve likely accrued a record amount of equity. Listing your home now and cashing in before values drop further might be advantageous depending on your circumstances.