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.

On the Economic Front

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

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.

The Millennial Effect

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.

The Supply of Homes For Sale

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.

Will it be a Buyer’s or a Seller’s Market?

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.

What Happens to Sales Prices?

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.

Affordability is Positive

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.

What Does All This Mean?

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.

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.

Consumer Confidence is Up

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.

The Local Economy is Strong

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.

Mortgage Financing is Available

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.

Home Ownership is Still Affordable

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.

Housing Market Predictions for 2019

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.

While the forecast for the nation’s economy is expected to take a dip, the Lansing area is poised to continue its post-recession comeback.
As 2018 is coming to a close, one of the most-studied forecasts is the economic outlook for the upcoming year. According to a CNBC article published at the end of summer, the Congressional Budget Office projected the U.S. economy to accelerate before slowing in 2019. The growth rate is expected to be well below the Trump administration’s 3 percent target.

President and CEO of Lansing Economic Area Partnership (LEAP) Bob Trezise said Lansing’s economy is “as hot as it gets,” even in comparison to Detroit’s comeback and Grand Rapids’ thriving arts scene.”

“Our region has elevated from No. 98 to No. 21 in the country for gross domestic product (GDP) growth of our high-tech industry,” Trezise said. “We led all of western Michigan in 2017 in GDP growth as a local regional economy, and Lansing was one of only two major cities in the U.S. Census Bureau population growth in 2017 – the other being Grand Rapids.”

As president and CEO of Lansing Regional Chamber of Commerce, Tim Daman works closely with the local business community, leaders, public policy, advocacy efforts, infrastructure, talent and meeting the needs of the chamber’s 1,100 members.

“When I access our economy, I look at the number of projects that are in the pipeline,” Daman said. “Right now, when we add up all the development projects throughout our region here, we’re close to – if not over – $3 billion. When I think about the growing and changing economy for our region, I continue to see great optimism.”

Michigan’s second-largest sector is agriculture, and with the new $500 million-plus twin ag-tech complex in St. Johns, Daman believes the future looks good.

“I look at a half a billion dollar investment in the energy area from the Board of Water and Light as they continue to move toward being coal-free by 2025,” Daman said. “Those are significant projects that are going to take place over the next 36-48 months that are going to continue to drive our economy.”

These long-term construction processes, like the developments going in downtown East Lansing, will not only change the skyline of the city, but also influences the economy for decades to come, according to Daman.

“While we’re making decisions and planning projects today, we’re really impacting and affecting the next 20 years of this local economy,” Daman explained.

“It’s very optimistic, with where we’ve come – not only in the past 12 months, but I’d really look at the past 10 years,” Daman said. “We have advanced, we’re growing and we’re seeing population growth in the city of Lansing. Young professionals are looking for that urban type of living environment, and we’ve been able to bring some of those residential units. I think the grocery store that Gillespie Group is doing is going to be significant to continuing those amenities that need to be there for downtown.”

Although some cities cling to a certain industry and profit from one sector, Lansing is a wide-ranging economy, embracing and benefiting from many different avenues.

According to Daman, Lansing is unique in the fact that it is equipped with a variety of sectors, many of which are growing in unique, developing districts. Old Town, REO Town, downtown Lansing and East Lansing all have separate identities, but bringing them together is what will bring even more growth.

“As a region, the importance of bringing communities closer together is so critically important to our economic success,” Daman said. “I think some of the developments you’re seeing in downtown East Lansing and in the corridor are going to be instrumental.

“What’s happening in East Lansing right now is so significant,” he added. “You have a community there that has struggled to really change who they are in their identity. We have some of the largest cranes in the sky this region has seen in the last 30 years, and that’s something to be really celebrated.”

On top of a changing area skyline, McLaren’s hospital and cancer center and urban Meijer grocery store, the city of Lansing also recently announced a new sports opportunity.

“Lansing Mayor Schor announced that Lansing is joining the likes of Toronto and Orlando in landing a new professional soccer team that will play downtown in the Cooley Law School Stadium,” Trezise said.

“We are home to perhaps the world’s largest orthopedic manufacturing sector, and we have a huge, growing aerospace industry. And there are additional industrial plants going up around the region, downtown developments everywhere and more,” Trezise said. “The bottom line is that I believe the Lansing region may contain the state’s single-most diverse economy, and one that is booming.”

Article written by Sarah Spohn for the Greater Lansing Business Monthly

Mortgage rates have been averaging 4.62% just prior to the Christmas holiday. The Federal Reserves decision to raise the  short-term key interest rate hasn’t had much on an effect on mortgage rates. The Fed’s key rate is not directly tied to mortgage rates, but does often influence it.

Good news for Buyers and Sellers
Moderate mortgage rates are being felt in the housing market.  After the Lansing area’s  seasonal sales decline beginning in mid-August, existing home sales rose through mid-October to mid-December and are essentially at the same level as in past years. This late fall rebound in sales indicates that home buyers are sensitive to mortgage rate changes.  Should mortgage rates remain stable in the first quarter or 2019 you can expect to see buyer enthusiasm translate to a steady volume of home sales.