To say the last few years have been historic and unique for the real estate industry is a massive understatement. And here in Ann Arbor, we’ve experienced much of what the rest of the country has felt — including record-low interest rates, relatively low inventory, and an increase in housing prices, which produced an ultra-competitive market for buyers.
And during the first half of 2022, we have begun another dramatic shift for the real estate market. Now that we’re more than halfway through the year, let’s zero in on some of the major trends affecting Ann Arbor real estate. Spoiler Alert: The news is more promising than you might think!
Rising Interest Rates
In the wake of record-low interest rates, the Fed announced they would raise interest rates several times throughout the year — and that they did. In early June 2022, they announced their most aggressive hike since 1994: a three-quarters of a percentage point increase. In April 2022, the average interest rate on a 30-year mortgage reached 5 percent, which is the highest rate since 2011.
So how do rising interest rates affect both buyers and sellers? In short, they cut directly into the prices buyers can afford to pay. And as a result, having fewer qualified buyers decreases demand for each property, giving sellers fewer offers to choose from. Plus, most sellers are also buyers, as they are trying to secure their next home. Rising interest rates affect everyone involved! However, although they feel astronomical compared to 2020-2021 numbers, we are returning to historically “normal” rates.
A small increase in interest rates affects purchasing power just as much as a large jump in price. And many buyers care more about the monthly mortgage payments than the upfront costs associated with buying a home, such as the down payment, closing costs, etc. So let’s take a look at how various interest rates affect that monthly payment.
In May 2022, Washtenaw County had an average sales price of about $440,000. With a 30-year mortgage and a 20% down payment, the principle and interest would be:
$1,484 with a 3% interest rate
$1,681 with a 4% interest rate
$1,890 with a 5% interest rate
$2,110 with a 6% interest rate
While rising rates may force many buyers to reduce their budget, there are still plenty of motivated buyers who see the value in locking in the current rate.
Largely due to rising interest rates, we’re seeing a slightly cooled off market that is expected to continue to calm down through the rest of the year. In Washtenaw County, year-to-date sales are down just 4%, which means numbers are still relatively high since 2021 was such a historic and unique year.
Demand still remains relatively high, but buyers don’t have to make as many sacrifices during the buying process. They can take a little more time looking at houses, make a reasonable offer, and not have to compete against dozens of eager and motivated buyers. This new shift to a slightly cooled off market makes life slightly easier for buyers!
Washtenaw County + Ann Arbor Real Estate Market by the Numbers
Let’s take a look at the actual data for both Washtenaw County and Ann Arbor, including the number of available homes, average sales price, and more, for single-family homes in May 2022. To see the full report, which includes even more data, click here.
Washtenaw County May 2022 Single-Family Homes:
Available Homes: 254 (+12% from April 2022)
New Pendings: 295 (+7% from April 2022)
YTD Closed Sales: 896 (-13% from Last Year)
YTD Average Sales Price: $443,000 (+12% from Last Year)
YTD Price Per Square Foot: $224 (+18% from Last Year)
And in Ann Arbor, we’re seeing a similar trend, with a significantly higher average sales price and some more extreme increases across the board.
Ann Arbor May 2022 Single-Family Homes:
Available Homes: 57 (+33% from Last Month)
New Pendings: 85 (+49% from Last Month)
YTD Closed Sales: 215 (-10% from Last Year)
YTD Average Sales Price: $576,000 (+18% from Last Year)
YTD Price Per Square Foot: $297 (+13% from Last Year)
Real Estate Market on a National Level
Realtor.com recently released their mid-year report, which included revisions to their 2022 national forecast now that we are more than halfway through the year.
Most notably, they changed their existing median sales price appreciation percentage to 6.6% instead of the originally forecasted 2.9%. This means home values are expected to increase even more throughout the remainder of the year! On the other hand, they changed their existing home sales percentage to “down 6.7%” instead of the original “up 6.6%.” However, this year’s numbers are compared to the record-breaking year for home sales in 2021.
Inventory has taken a surprising turn as well, as Realtor.com changed their existing home for sale inventory to “up 15%” instead of the originally forecasted “up 0.3%.” This is exciting news for buyers who are looking for more homes to choose from!
Should I Buy Now or Wait?
Aahh, the age-old question: should I buy now or wait it out? Let’s assume you choose to buy a home now and explore a few different scenarios and the possible outcomes involved with each.
If interest rates continue to go up (as they are expected to), you should celebrate the fact that you were able to secure a lower rate than if you had waited. And if home prices go up, you are able to build equity! With either scenario, you timed that just right.
If interest rates instead go down, you now have the option to refinance to secure that lower rate! And if home prices go down, don’t fret — the short-term effects are not nearly as important as the long-term gains. In real estate, most properties see a long-term appreciation over the course of several years. This means you made a wise investment that you can reap the benefits of in 5-10 years.
In all four scenarios, you will be thankful you made the decision to buy a home in 2022. And in Ann Arbor’s hot real estate market, the potential for growth is even more pronounced!
Need More Help?
Since 1971, Reinhart Realtors has been the leading full-service real estate firm in the Ann Arbor region. So we know a thing or two about the local market! Contact us to be connected with one of our agents, who can help you through every step of the buying or selling process.
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