When I first acquired my Michigan Real Estate Salesperson’s license back in 2002 I remember being delighted when my purchasing clients were approved for $80,000 to $100,000. Back then that amount pretty much guaranteed that they would have options in the Greater Grand Rapids area. Now,12 years later that price range has all but disapeared in West Michigan which is a rising concern for the average first time home buyer.
In fact, even a mortgage approval at $150,000 in 2018 may force a West Michigan purchaser into making some tough decisions in regards to: (Price, Location, Condition and Uniqueness). Which means that if “Price” is fixed by the lender per the max DTI ratio that they may need to make some compromises in the remaining (3) areas: Location, Condition and/or Uniqueness. So, how did this phenomenon happen so quickly?
Many economists have written articles on why this is happening throughout the country. The Wall Street Journal (among others) recently published one focused exclusively on Grand Rapids MI but at the heart of each article published is the simple principle of “Supply vs Demand”. There are more willing and capable purchasers than there are existing or new construction Homes For Sale. This fact in combination with additional economic factors have placed Grand Rapids MI atop a number of national polls in economic, employment and overall industry growth over the last several years in regards to that effect on the area’s Real Estate Market. Long story short…Price’s are up!
Interest rates seem to be following suit and are indeed now the highest that they’ve been in recent years hovering around 4.46% for most products. The upward trend in a number of national economic indicators is expected to continue throughout 2018 and could impact mortgage interest rates and land them somewhere around 5% by the start of 2019. How does this effect the average West Michigan home buyer???
What we’ve noticed in West Michigan and specifically The Greater Grand Rapids Metro Area is that in certain price ranges a purchaser may be faced with making some criteria compromises in order to accomplish their Real Estate goals within their desired monthly budget. They should also be coached and prepared for a number of multiple bid situations for homes that they are most interested in. Keeping in mind that where: Price, Location, Condition and Uniqueness exists in high levels for them, that it will likely also exist in high levels for the masses. How to best position their offers for acceptance should also be a point of emphasis for Real Estate Professionals and Mortgage Lender’s alike.
In conclusion, the best plan of attack for the average house hunter in West MI would be to do just that…attack! If a purchaser has short term Real Estate purchase goals the cost of waiting for either home prices or interest rates to go down seems to be a futile pursuit that could be very costly as both of indexes are clearly on the up swing with no end in sight. Worst case scenario is that a purchaser could be “priced out” of the market entirely in very short order.