by Ben Kono
Life has been moving really quickly since 2020. In this article we’ll pause and look back at the 2021 Jackson, Michigan real estate market in order to understand how real estate changes, and then we’ll see what’s ahead.
Watch Part I of the Market Update here.
Watch Part II here.
Let’s start with the broad brushstrokes. Why and how does the real estate market shift?
Two important market-shifting factors are inventory and interest rates. More than any others, these two factors significantly impacted the Jackson, Michigan real estate market in 2021. We’ll trace those effects, and suggest how they’ll impact the market in 2022.
We won’t examine the economy as a whole except to say it was in flux for all of 2020 and most of 2021. This impacted consumer confidence and spending patterns in massive ways.
People who saw the opportunity to buy more house with a lower monthly payment were the first to jump into the market in 2021 as interest rates hit a record low. With the influx of buyers who had increased purchasing power, houses at most price points were selling for well over asking price. This caused prices to increase across the board. Interest rates have dropped before. They have hit historic lows time and time again in the last 10 years. So why was this special?
While housing inventory was low across the United States, Jackson Michigan was held to about 1/3 the inventory needed for a balanced market. A balanced market is one in which there is an equal number of homes for sale as there are interested buyers. Throughout 2021, numbers of available homes for sale were lower than at any time in recent history.
These two factors, low interest rates and low inventory, had compounding effects, and impacted different sectors of the market in different ways and at different times. Even though all of 2021 could be described as a fast, rising market, let’s look at how price ranges, or home buyer phases, were affected by the confluence of low interest rates and low inventory.
Phase 1 the First-Time Home Buyer (typically less than $150,000)
The first-time home buyer is most negatively impacted by rising prices because they don’t have a house to sell which can generate down payment dollars.
Phase 2 the Move-Up Buyer (between $150,000 and $300,000)
This person has normally started a family and they are looking for a change. More land, more house, better location. They have a house to sell, which is a huge asset in a rising market, but can also prove difficult in terms of timing because they often need to sell in order to buy.
Phase 3 the Luxury Buyer ($300,000+)
The luxury buyer has hit their stride financially. They are in peak earning years and looking for the biggest and best. That can be a home in a premier neighborhood or just the quality house on land they have always wanted.
Phase 4 the Downsizing Buyer (typically less than $300,000)
The kids are out of the house, and this person’s daily living needs have changed. Often looking for a ranch with a lot of living space, this buyer ends up competing with first-time home buyers and often doesn’t need to sell before they purchase.
Price ranges performed differently at different times. Let’s look at how houses sold in 2021 on a quarterly basis. This will be a generalization, but will help frame the trends of 2021 and inform what we see coming in 2022.
The breakdown below is full of example scenarios. If you just want to know the numbers, skip to the chart below.
1st Quarter (January, February, March)
In Jackson, Michigan, many investors owned homes in the sub-$150,000 price range. They had just gone through the toughest year in recent history to be a landlord. With eviction moratoriums, court closures, and a long line of landlords ahead of them to complete the eviction process, many landlords saw the possibility of a rising market and decided it was the right time to sell and cash out their investment. Because of this, the first-time home buyer market was the first to open up. But the competition was fierce. Every quality home under $150,000 received 3-10 or more offers within its first day or two on the market.
This happened both because interest rates were very low but also, many people who had been renting were ready to buy. Some had received their government stimulus and didn’t spend it eating out or on a new car, but put it in savings and used it for their down payment. While many people were able to get their first house, the move-up buyers weren’t ready to list the house they needed to sell before buying, because they couldn’t find anything to move into. So the middle part of the market was lacking in inventory.
The first quarter was also largely devoid of luxury listings because many people moving from this phase to downsize couldn’t find quality smaller homes.
2nd Quarter (April, May, June)
Jackson, Michigan real estate opened in stages during a rising market. In the second quarter of 2021 we saw more $150,000-$300,000 listings. The shift happened when it did (and not earlier) for several different reasons. First, the move-up buyer didn’t have a house to move into, so many decided to delay listing their current home until later in the spring or summer when more homes became available.
Another reason for the delay was rising home prices. Many home owners under-valued their own home and didn’t think they could afford to move. Maybe that’s where you are now. Did you know that if you bought your Jackson County house 5 years ago for $150,000 you likely could sell for close to $200,000 today?
So, because of these two barriers, many home owners didn’t get ready to list until the second quarter, but when they did - their house SOLD. Fast and high. Homes below $150,000 continued to sell very quickly throughout the entire second quarter while the luxury market had little activity until late summer.
3rd Quarter (July, August, September)
Homes in all price ranges were selling. But there were very few new listings. And those listings that did hit the market saw far less interest than in the earlier part of the year. The annual back-to-school market slow-down was amplified in 2021. Homes priced below $300,000 saw a fraction of the showings and very few offers in the months leading up to school, all the way through the end of September. At the same time, high-dollar homes came onto the market as their owners downsized.
4th Quarter (October, November, December)
While most of 2022 was an amplification of a typical market -- when it was slow, it was very slow and when it was fast, it was very fast -- the fourth quarter brought some level of sanity and was as close to balanced as Jackson, Michigan had seen the entire year. A fair number of $150,000 listings hit the market and, although almost every house sold, we did not see the frenzy of earlier in the year.
This was a pretty typical scenario in every price range. A family started shopping for their new home in March and found that they had to write offers quickly and were beat out by three or four offers each time for various reasons.
After three or four months of attempts to purchase, they gave up. Finally, after several months of watching houses sell, they decided it was time to try again. The family jumped back into the home buying (often followed by home selling) world and found the market was a little slower and those people who had the strongest offers weren't competing anymore because they had already won the bidding war and moved earlier in the year.
What is going to happen in 2022?
We can never perfectly predict the future. But let’s look at the same factors as above, inventory and interest rates, and see how those factors will influence the 2022 Jackson, Michigan real estate market.
The prime lending rate, set by the Federal Reserve, “is a key lending rate used to set many variable interest rates” (Whiteman). As prime moves up or down, consumer interest rates move in the same direction. It is not necessarily the rate you will get on your home loan, but an indicator that mortgage rates are either falling or rising.
The Fed (Federal Open Market Committee) in part determines interest rates by participating in the purchase of mortgage-backed securities. As they buy more, the interest rate goes down. This is how the Fed influenced the interest rate in 2020 and 2021 to open the market to consumers who were experiencing job loss and decreased work hours and to businesses running with significantly limited capacity.
The Fed has announced that they will be pulling out of mortgage-backed securities in 2022 and as a consequence, the prime interest rate will start to rise. In anticipation of this increase, lenders are already increasing consumer interest rates.
In 2021 many people expected the real estate “bubble” to “pop”, meaning prices were increasing too quickly and were going to out-pace what the market could handle causing a massive drop in prices just like we saw in the early 2000’s. Because of this worry, and the lack of homes to buy, many people held off listing their house. They decided to wait until prices started dropping.
In 2022 the script is very different. Many have recognized that the higher price point and speed of sales are the new normal and will confidently move forward on listing their house.
What does all of this mean for the person hoping to buy or sell? Inventory will increase, causing competition to be lower and prices will NOT increase like they did in 2021.
I know what you’re thinking. Doesn’t this mean prices are going to drop? Basic supply and demand, right?
Supply and Demand
Let’s jump into the weeds and look at market demand versus supply so you can have confidence in the Jackson, Michigan real estate market this year.
According the U.S. Census Bureau, Jackson County contains 61,805 households. About 75% of those households live in owner-occupied homes. In other words, 46,353 families own the house they live in. Historically, families move once every 7 years. Do we have enough houses to satisfy 1/7 of Jackson County families moving every year? Let’s find out.
In order to facilitate one move per family every seven years we would need to sell 6,621 homes per year, or 551 homes every month. In January 2021 (the lowest) we saw 171 homes hit the market in all price ranges and every location in the county, from country home to condo unit. That wouldn’t be so bad if we had a huge spike later on in the year. At the height of activity in October, Jackson saw only 294 listings sold. If we add all the sales for 2021 together, we fall short of sales needed for a balanced market by multiple thousands!
What does this mean for the market this year? Even if we doubled the number of homes listed and sold (not likely, but let’s pretend that’s possible) we would rest somewhere in the neighborhood of 5,400 homes sold. Still 2,200 homes short of a balanced market.
So how has the home shortage affected the Jackson, Michigan real estate market? Instead of moving every 7 years, Jackson home owners are moving an average of once every 12 years. As more housing becomes available, people will move more often until we average 7 years once again.
Check out how the numbers play out in the graph below.
2022 Real Estate Forecast
In summary, what you can look forward to in Jackson County, Michigan in 2022 is interest rates rising and more homes being available for sale. But this will not cause a recession or prices to drop. Instead, we will still see a fast-moving market with a lot more options!
The start of the year is going to be the most affordable time to buy because interest rates will increase more and more as the year goes on. But as interest rates increase the speed of the market has potential to decrease. Houses will sit on the market for a few extra days and give buyers more opportunity to select the right house for them, without having to enter into a bidding war.
If you are thinking about making a purchase, be sure to use an agent who knows what’s happening in your local market. The right agent can get you the house even in a bidding war, or make sure you don’t pay $20,000 over asking when you could have offered $5,000 under and still gotten the house.
Buying or selling a home is a high-stakes undertaking. You deserve a professional, trustworthy advocate to help you across the finish line.
Doug Whiteman, “Prime Rate – Current Prime Rate, Federal Funds Rate & COFI.” Moneywise.com, https://moneywise.com/borrowing/personal-loans/what-is-the-prime-rate. Accessed Feb 9, 2022.
U.S. Census Bureau, https://www.census.gov/quickfacts/jacksoncountymichigan. Accessed Jan 17, 2022.
Lawrence Yun, “Experts Predict What the 2022 Housing Market Will Bring.” The Washington Post, https://www.washingtonpost.com/business/2022/01/10/2022-housing-market-predictions/. Accessed Jan 17, 2022.
Brian Buffini, “Brian Buffini’s Bold Predictions 2022 Real Estate Market Outlook.” Buffini & Company, https://www.buffiniandcompany.com/products/bold-predictions/bold-predictions-2022-watch.aspx. Accessed January 16, 2022.
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