HOLLAND — After two years of the hottest housing market in recent memory, local real estate agents suspect a cool-down is coming.
But that doesn’t mean prices will plummet, as many homeowners fear. Despite rumors of a recession, and evidence some markets are severely overvalued, economists and experts don’t expect decreases to happen overnight.
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A recent analysis from Moody’s found that swatches of communities in lower Michigan have meaningfully overvalued housing prices. Muskegon was found to be overvalued by a whopping 59 percent — ranking third in the country. Grand Rapids, meanwhile, was overvalued by 42 percent.
The median nationwide price for an existing home hit an all-time high in April at $391,200, up 15 percent from 2021. But since then, sales have slowed, as mortgage interest rates continue to rise. Inflation, too, is causing headaches for first-time homebuyers, forcing them to spend more on groceries and gas.
“I think we’re going to enter a much more balanced market,” said Rachel Gallegos, a lakeshore native and real estate agent. “I think it’ll still be a seller’s market for the foreseeable future, but we’re already starting to see buyers who have fatigue or who have been priced out.”
Gallegos thinks overvalued properties in Muskegon and Grand Rapids don’t necessarily reflect values in Ottawa County.
“I think anytime you get into a larger city, the market is generally going to be a little bit warmer than what you’re going to see in more rural counties,” she said. “We’ve seen that across the board. Of course, none of us really have a crystal ball, but we do have lots of economists that review this data and history for a living.”
That said, Gallegos expects a cool-down this summer, with four or five offers on homes instead of dozens.
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“The past six months have been the craziest we’ve seen,” she said. “I don’t think you’re going to see values or prices go down, necessarily, unless a seller has unrealistic expectations and needs to have a price reduction. But they’ll increase more slowly.”
Knowing the true value of a home, Gallegos said, is a tricky thing.
“A home is worth whatever someone is able and willing to pay for it,” she said. “Who determines the value? The community or the buyer? Ultimately, it’s the buyer.
“Going forward, I think buyers are still going to be willing to pay top dollar, but I don’t think we’re going to see $30,000 over list price. We might see $5,000 or even paying list price.”
Gallegos encourages struggling buyers to keep trying.
“Buyer fatigue is very real and very hard,” she said. “But I’ve always believed the house that’s meant for you, you’re going to get. And holding off, at this point, could end up costing buying power. If our values continue to increase, even at a slower rate, and interest rates continue to increase, buyers will have less money to work with.”
The difference between plummeting prices and a cool-down, Gallegos said, is critical.
“I think that’s where the general population gets confused,” she said. “The market coming down doesn’t mean values are going to come down. It just means things are going to slow down — and that’s we want. We want some stability in the housing market.”
— Contact reporter Cassandra Lybrink at cassandra.lybrink@hollandsentinel.com. Follow her on Instagram @BizHolland.
