I hope you had a great Thanksgiving!  I always enjoy this time of year, as the pace of life seems to slow down a bit.  It’s a nice respite from the go-go-go that life often becomes, and it’s a chance to reflect on the past 11 months.

With respect to the year we’ve had in real estate, it’s the elephant in the room:  Housing affordability is in the pits.  Nationally, home prices have increased 40% in three short years, and in just the last 18 months, mortgage interest rates have more than doubled.  But like we always say in this newsletter, housing is incredibly LOCAL!

Just a quick reminder:  These articles I share here are researched and written by me!  As part of my commitment to ongoing support for my clients and partners, I write these articles to help them understand what’s really happening in the markets, beyond the headlines and soundbites.

In a newsletter earlier this year, I made this remark regarding home price growth and concern about a subsequent crash:  “While our local markets did enjoy significant price growth, they did not perform as well as the national average.  Over that same period, Macomb County saw the greatest price increases in our tri-county area, with an increase of almost 27%.  While impressive, that is far short of the national average of 40%. 

If we consider the possibility of a “correction” (read:  reduction) in property values, then it stands to reason that the markets that saw the most significant price increases will also see the most significant price decreases.  In that sense, we expect our local markets to fare better than many markets around the country.”

Link to that article

Affordability around the country and here at home

Just as our local markets did not experience the same degree of price growth as the national average, we have escaped some of the worst strains in home affordability as well.

One important measure of home affordability is the payment-to-income ratio.  This is defined as “the share of median income needed to make the monthly principal and interest payment on the purchase of the average priced home using a 20% down 30-year fixed rate mortgage at the prevailing interest rate.”

On the chart below, you’ll see just how well the Detroit-metro area housing market has fared with respect to housing affordability.  Since the 1995-2003 average of 21.8%, the payment-to-income ratio in September of 2023 has risen to 28.4%.  While that is a 30% increase, the data shows that in many metro-areas, the payment-to-income ratio has doubled!

Keep an eye out

As has been the case this entire housing cycle, mortgage interest rates will play a key role in the shape and complexion of the housing market in 2024.  If rates continue to rise, we may well see home sales activity slow, which would cause inventory to rise, which would bring more balance back to the market.  However, if mortgage rates fall, we could see a repeat of 2020-2021:  A surge of buyers entering the market – which is already struggling with inventory – which would increase competition and likely drive prices higher.

If you found this article interesting or helpful, please feel free to share it with a friend, family member, or co-worker – it’s my goal to educate and empower as many people as possible during this incredibly unique time in housing!

Here is how I can help!

  • If you are looking to purchase a new home or have questions about your mortgage, the market, getting preapproved, etc., or
  • If you are a Realtor or a Broker looking for a lender with great financing solutions to help educate your clients on the state of the market to help them feel good about their decisions,

    Please call today – I am happy to help however I can!

I am twenty-year veteran of the mortgage and real estate industry.  My experience across nearly all aspects of real estate makes me an incredibly well-rounded problem-solver.  My clients are treated to a white-glove client experience every single time.  Education, information, and communication are the cornerstones of my approach.

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