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Will Traverse City Real Estate Remain Insulated From Larger Forces This Time Around?

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After years of intense real estate activity, the housing market is finally showing signs of cooling.

Rising interest rates, rising real estate inventories, and fewer buyers across the country are creating a sea change in a market that until recently felt like an out-of-control freight train. But are the days of soaring prices and 12-buyer bidding wars over? Or is this slowdown just a fluke? To what extent will a market be an exception?

We asked the leaders of the top 4 real estate brokers in town to consider this and more. They are (pictured clockwise from top left): Tommy Corbett, Team Brick & Corbett, and the RE/Max Bayshore leadership team. Bert Ford, Regional Vice President, Caldwell Bunker-Schmidt. Dennis Pearsall, President, Northwest Michigan and Franchise Division, Real Estate One. Brad Pratt, Owner, Broker and Co-Founder of Century 21 Northland said:

Ticker: What will the US real estate market look like in a year from now?

Pratt: I spoke with two top agents this week and they both said the same thing. “Right now, it feels like the market is changing every day.” This is new and exciting. Some buyers have just been put on the market by higher interest rates, but they still have a lot of cash. There is also the bulk of sellers who want to sell and are concerned that they have missed or missed the phenomenal seller market. Finally, a recession is likely within the next 12 months. A reset is necessary for a variety of positive reasons.

Corbett: The days of double-digit price increases are over. The next few years will see a return to normal 4-5% price increases. Inevitably, higher interest rates will lead to fewer buyers and less purchasing power for the remaining buyers. Declining demand moderates price increases.

pearsall: We think it will be about 8-10% slower than the current home sales market. The value should be higher, but the percentage is smaller. Maybe in the 4% range for some markets and slightly lower for others. Some hot markets could see bigger gains. The South and Southwest will rise, while the Midwest and expensive West Coast will fall. The lifestyle market will continue to benefit from workers being less tied to where they work in places like Austin, Charlotte, Phoenix, Seattle and Northwest Michigan. These regions perform better than less desirable markets such as Chicago, Detroit, New York and Los Angeles.

ford: We believe the US real estate market will be very healthy in 2023. A mid-to-high single-digit increase is expected, as opposed to the 16-18% increase seen in 2020 and 2021. Interest rates fluctuate. It’s based on the inflation rate, which should be down from 9%, the highest we’ve all experienced in the past year (which is) in the last 40 years.

Ticker: What about the TC market? Are we insulated from potential crashes or headed for an impudent awakening?

Pratt: All in all, I would say that we are in isolation, as we were during the last recession. Our markets are changing, but the strong desirability of this region helps us a lot. Housing stock in the area was very high pre-COVID. In June 2020, there were about 1,600 homes on the market in this five-county area. As of June 2022, there were approximately 800 homes on the market, of which only 556 have been sold and are not pending sale. From a more historical perspective, in 2017, just five years ago, there were about 2,300 properties on the market. Looking back over ten years, there were about 3,500 on the market. So while the market is changing, inventory levels remain historically low. Until that changes, demand will remain high.

Corbett: Most economists and housing experts don’t expect a housing crash in TC or anywhere else. The 2008 housing crash is still remembered by many homebuyers and sellers, but today’s market is different. Lending standards have become stricter due to lessons learned and new regulations after the last crisis. With strong demand and low supply, we believe TC has been spared significant price volatility compared to many other parts of the country. Demand continues to be strong as people want to live here, especially retirees, young families and telecommuters. Supply struggles to keep up with demand as there isn’t enough inventory or new builds.

pearsall: Northwest Michigan is almost isolated from the big price drops. We believe there will be a reset from the record activity of 2020 and 2021, but don’t expect much if the values ​​reset. Even during the Great Recession, home prices in northwest Michigan didn’t fall like they did in other markets. Homes are less leveraged and tend to be less susceptible to financial pressure to sell, which makes them more priced. That said, due to increased interest in the region during the pandemic and the resulting decline in inventories, home sales have fallen recently and will likely continue to do so. The current pace is already more than 10% off the 2021 peak. Given the incredible record pace of the past two years, this is still good real estate activity. Some believe the market for homes priced above $1 million could cool as out-of-state demand slows.

ford: There hasn’t been a ton of sketchy mortgages written in the last decade like there was in 2008, 2009, 2010, so I don’t think a crash is coming. That is certainly not the case here.

Ticker: What is the biggest problem facing the local market? Lack of affordable housing, short-term rental problems, too many vacation homes and second homes, or not enough inventory what?

Pratt: stock. When the economy faltered in 2008, a significant portion of the construction workforce lost their jobs. Many of those people never returned. The house had not been built for many years. This is a very difficult situation to recover from and it will take us a long time to catch, if at all.

Corbett: stock. The country still suffers from a housing shortage that has reached critical proportions at a time when many millennials are reaching an age when they begin to consider owning a home. This could keep prices going up.

pearsall: stock. Demand is slowing, but the trend of lifestyles moving to northwestern Michigan continues. As a result, inventories are below demand levels, especially in the mid-to-low end market.

ford: stock. Not enough home starts to keep up with household composition. Builders are booked on order jobs, and the low-stock market is seeing prices skyrocket, along with inflation.

Ticker: If you had to name one ‘big idea’ that you think could help solve the real estate problem in the area in the long term, what would it be?

Pratt: Stay real and keep in mind the desirability factor about where we live. This is an absolute paradise for many, and has always been.For the past 30 years, the question has been, “I really want to live there, but how do I make a good living?” did. That question isn’t as relevant as it used to be. If traffic jams during the Cherry Festival make you nervous, take a break in the lovely Upper Peninsula and step back in time. Traverse City and its surrounding areas aren’t growing slower or less busy. This area will grow. period.

Corbett: Density is the answer to many of our local challenges (like real estate). We need more people to live in and around TC. A major obstacle is the lack of affordable housing. The only real solution is to enact zoning laws that encourage higher densities, such as tall buildings, more homes per acre, and ancillary housing units.

pearsall: Creative ways to facilitate affordable housing construction, reduce costs through densification, and subsidize local workers with affordable housing ownership in terms of local government regulations. find.

ford: I try to avoid using the word recession because it has negative connotations. But the real definition of a recession is a two-quarter consecutive decline in GDP. I hate to say it will happen, but everything is going in that direction. And is it the end of the world? No, it’s not the end of the world. If there is a recession, I think interest rates will come down, but I think that will bring some balance to our market.

This article is an excerpt from a long feature article in Traverse City Business News in August. To read all the features and receive your own print edition each month, subscribe here.

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