A Quick Look at 2023 Home Selling Prices
Let’s start things off by reviewing what happened with home sales prices in Petoskey and Harbor Springs this past year.
The charts above compare 2023 to 2022 in terms of median selling price and square foot selling price of all homes sold.
While not a significant increase, both metrics rose and home prices appear to have remained strong. But as always, there’s more to this story than meets the eye. Keep reading to find out what’s really going on in our market.
How Many Homes Sold Above and Below Asking Price?
While the selling prices of homes seem to have remained steady, cracks begin to appear when we compare final selling prices to the prices sellers were asking.
These next two charts show the proportion of total homes sold above (green) and below (red) their asking price.
It’s quite notable how much the red portion has grown and the green portion has shrunk since 2022. Remember, we’re supposedly still in a seller’s market.
Nearly half of the homes that sold in 2023 did so for below their asking price, marking a significant 10% change from the prior year.
What’s even more telling is that this change came directly at the expense of homes selling for above their asking price, which saw a -10% drop in 2023. That’s a 20% swing.
If you’re a buyer, this could appear to be good news and a potential sign that your bargaining power may be rising. But there’s always two sides to every coin.
When home sales volume drops, as it has, sellers can benefit from the reduced competition so long as there are able buyers in the market.
Number of Homes Sold Drops
As highlighted in the previous section, there’s been a notable drop in the number of homes sold this past year. But does a trend appear when we add more data from two years ago? Let’s take a look.
Starting in the second quarter (April-June) of 2022, the number of sales has dropped at an average of -17.2% quarter-over-quarter. This marks seven straight quarters of a slowing market here in our corner of Northern Michigan.
To put this into better context, the chart below tracks the total annual sales volume from each of the past five years in Petoskey and Harbor Springs.
Even when going back to the good old days of 2019 as a baseline for normalcy, the past two years have fallen sharply off that mark for the number of homes sold.
Did Home Sales Prices Really Go Up?
At the beginning of this report, we saw that both median price (+3.9%) and average square foot price (+6.5%) for homes sold were up in 2023.
However, what do these apparent gains look like after accounting for inflation?
The challenge this question presents is identifying the most accurate inflation rate to use. So to preempt any potential disputes, the following charts present a wide range of rates for you to choose from.
- 3.4% is the official CPI (consumer price index) for 2023 from the BLS (bureau of labor statistics).
- 5% is what the State of Michigan used for property tax assessments (read my article about assessments here).
- 6.2% is what the BLS calls the Shelter CPI.
- 11.5% is a consensus arrived at by some “enlightened“ people in my personal network.
After adjusting for inflation, it appears that home prices – and consequently home values – may be flat or declining year-over-year. That is unless you have very high confidence in government statistics.
Example: The 2023 median home sale price was $450,000, which was $17,000 more than 2022’s median (in nominal terms).
But after adjusting for inflation, even when using the CPI rate of just 3.4%, we’re left with $435,203 and a “real” gain of only $2,203.
How Is Inflation Influencing You? Inflation affects different people in different ways – and this is certainly the case when it comes to real estate. Send me an email using the form on this page to tell me what’s most influencing your home buying, selling or holding plans.
What’s In Store for 2024?
While the Petoskey and Harbor Springs housing market has slowed, the scales are still slightly tilted in the seller’s favor. This is especially true for well situated waterfront properties (call me if you have one!).
However, the data naturally piques curiosity about what lies on the horizon.
So let’s conclude this report by addressing some hot topics and trends that could be expected to carry on into this new year.
Inventory: The word around town is that we need more inventory of homes to sell in order for the market to improve (or vice versa). But I’m not entirely convinced.
Yes, when there are more homes to sell, the market certainly improves – for brokerages and agents like me. After all, you can’t make much money in sales if there’s nothing to sell!
However, increased inventory does lead to more choices for buyers, and it also (likely) leads to lower home prices. But the consequences also can include lower valuations, tighter lending, and unhappy or unwilling sellers.
As of right now, prices have already cooled in real terms. If there were more inventory, more homes coming on the market, I’m not sure this would be welcomed news to owners.
Inflation and Mortgage Rates: In my summer 2023 report, I suggested that inflation would stick around and mortgage rates would level off – and this is what happened.
However, it’s been my experience that mortgage rates have had far less of an impact on real estate here than has inflation.
Since the cost of living is so much noticeably higher now, I think it would take a fairly large drop in rates to have any meaningful impact on real estate. In my view, it is inflation that is most impacting the market (and sorry to say that I don’t see this changing any time soon).
Macro Events: There sure seems to be a lot “going on” in the world, but will this translate negatively or positively for Northern Michigan? Remember, during the last big problem of 2020-2021, our real estate market went through the roof.
If one thing is for certain it’s that the year ahead will be an interesting one. As always, I will be keeping a close eye on everything having to do with real estate here in our special place Up North. I look forward to working with you soon.
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Finally, to all of those who have sent in comments and questions, your feedback was very helpful in creating this latest market update – keep them coming!
Data Sources: All data insights and analyses presented in this report were derived using Harbor Prime’s independently developed and proprietary formulas and models. Raw home sales data was extracted from our Northern Michigan MLS; CPI data verified through the St. Louis Fed’s Consumer Price Index for All Urban Consumers: All Items in U.S. City Average and the U.S. Bureau of Labor Statistics; and Mortgage rate data was sourced from Freddie Mac’s Primary Mortgage Market Survey.
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