Home Sales Report for Summer 2023

With the summer quarter in the books, let’s look at how the housing market fared in Petoskey and Harbor Springs for July, August and September.

Cash Sales Rise While Home Sales Fall

Cash proved it was still king of the market for summer 2023 by increasing its share of home sales to 59%.

While the number of cash sales remained constant, their +6% share increase is more noticeable due to the drop in overall sales from a year ago.

On the other hand, while financed sales continue to make up a minority of the market, the number of non-cash sales saw a massive -22% drop from last summer’s quarter.

The situation didn’t get much better for the overall market, either. For the third quarter, it experienced a big -11% decline in total home sales year-over-year (YoY).

There were just 154 residential sales this summer compared to 173 from summer 2022 in the Petoskey and Harbor Springs school districts.

Home Sale Prices in Decline

The sold price of homes in Petoskey and Harbor Springs dipped in this year’s summer quarter compared to summer 2022.

Home Sale Prices for Petoskey & Harbor Springs
Metrics Q3 2022 Q3 2023
Median Sold Price $475,000 $470,000
Avg Sold Price per Sqft $291.38 $284.39
©2023 Harbor Prime

While at first glance the decline appears only to be a nominal decrease, both the median selling price (-1%) and the average selling price per square foot (-2.4%) dropped.

It’s too early to tell if this trend will continue. But is there more to this story? Continue below to read our analysis.

The Perils of Pricing Too High

The data shows a consistent, if not alarming, trend concerning the asking price of homes: Set the price too high and you’ll be certain to lose money and time.

In all of Petoskey and Harbor Springs, less than half of the homes sold in the past two summers did so below their asking price. But there was a dramatic change when their asking price was too high.

When a home experienced a price reduction, almost all sold for below their original and even their revised asking price!

This occurred 100% of the time last summer and still 94% of the time this summer.

A natural question at this point might be “how much below asking did they sell for?” Fortunately, we have the answer.

Homes Sold Price vs Asking/Revised Price
Metrics Q3 2022 Q3 2023
All Sales +0.48% -0.01%
Reduced Price Sales -4.43% -6.47%
©2023 Harbor Prime

The table above illustrates that on average, when a home had its asking price lowered this summer, the eventual sale resulted in -6.5% less (-5% less in 2022) than the rest of the market.

That situation didn’t get much better after examining how much time it took to find buyers for these homes.

For all the homes that had their asking price lowered (and yet still sold for less), it took two to three times longer to find a buyer!

For the whole market this past quarter, it only took about 41/2 weeks to find a buyer. Last year it took 31/2 weeks. But when homes had their asking price reduced, it took almost 13 weeks and 8 weeks respectively to sign a contract.

Importantly, this isn’t an isolated problem. These numbers represent 22% of our market in summer 2023 and 18% in 2022.

Sales Shift Toward Petoskey

The final bit of news shows that a big 10% shift in home sales occurred between Petoskey and Harbor Springs compared to last year’s summer quarter.

Petoskey’s share of home sales rose to 64% while Harbor’s shrunk to 36% from the same time last year.

While Petoskey has a greater number of housing units than that of neighboring Harbor Springs, this is still a significant change in market share Y0Y.

Key Takeaways and Looking Ahead

While many factors influence the outcome of home sales, perhaps the two most import in our current market include the effects of inflation and mortgage rates.

Let’s take a closer look at each of these separately and see what we can find.

The Compounding Negative Effects of Inflation

On the surface, it might appear there was only a slight drop in prices this summer. While that’s definitey not good, it gets much worse once we remember the very real eroding effects of inflation on the purchasing power of our money.

“Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.” – Sam Ewing

The inflation rate, represented by CPI (the consumer price index), from September 2022 to September 2023 was 3.7%. After adjusting for this, the per square foot sales price of $291.38 from Q3 2022 is now equivalent to $302.16 for Q3 2023.

This adjustment results in a more realistic and sobering decline of -5.9% in home sales prices for the third quarter YoY.

Home Sale Prices for Petoskey & Harbor Springs, Adjusted for Inflation (CPI)
Metrics Q3 2022 Q3 2023 Decline
Avg Sold Price per Sqft $302.16 $284.39 -5.88%
©2023 Harbor Prime

Unfortunately, there is one additional caveat: To anyone who has purchased anything in the past year, actual inflation is likely much (much) higher.

Mortgage Rates Influence the Cost of Money

By now, everyone knows that mortgage rates have risen to their highest levels in decades.

Combined with inflation, the impact of heightened rates have increased the cost to borrow money. This point is made clear with the falloff of financed sales in summer 2023.

First, here’s a snapshot of mortgage rates from the third quarter for the past two years.

Home Mortgage Rates
Metrics Q3 2022 Q3 2023
Rate at Period Start 5.70% 6.71%
Rate at Period End 6.70% 7.31%
Rate Average 5.63% 7.02%
©2023 Harbor Prime

There can be little doubt that the increase in rates had a material negative influence on the steep -6% decline in financed sales this summer compared to last.

What does this mean for the average Joe and Jane?
Using our handy mortgage calculator, let’s look at how the increase in rates effects a typical monthly payment.

Example $470,000 30-Year Mortgage Loan
Metrics Q3 2022 Q3 2023
Avg Rate 5.63% 7.02%
Monthly Payment $2,707.07 $3,133.24
©2023 Harbor Prime

Using summer 2023’s median home sale price for Petoskey and Harbor Springs, the monthly mortgage payment for a $470,000 loan has increased $425 from a year ago.

How increased rates effect sales price.
Finally, by comparing cash and financed sales from the past two summers, the negative effects of higher rates are easily observed.

Homes Sold Below Asking Price
Metrics Q3 2022 Q3 2023
Cash Sales 38% 40%
Financed Sales 41% 52%
©2023 Harbor Prime

In summer 2023, over half of financed home sales sold below asking price! That’s a massive 11% increase over last summer.

This means that when a home is likely to be purchased by a financed buyer, it has a substantially higher chance of selling for below asking price.

A Sneak Peek at What’s to Come

While we’re not in the business of making forecasts, considering our report and other signals we monitor, here’s what we expect going forward.

  • Pricing: Most obviously, if asking prices continue to be above fair market value (FMV), we can expect an increase in the time it takes to find a buyer and for selling prices to decrease.
  • Summer Hangover: Our winter season dynamics will compound any continued (but preventable) negative trends from the summer. For perspective, nearly 60% of homes sold below asking price in the last quarter of 2022 and there was a -5.2% drawdown in sold price per sqft.
  • Inflation: There should be no expectation that we’ll see any relief from inflation any time soon. Traditionally, home prices will rise in an inflationary environment. But stresses from inflation could force more homes onto the market, increasing the supply and pushing prices lower.
  • Macro Events: There continues to be some distortions in the broader economy and market. While this doesn’t always directly translate to Northern Michigan, certain events could make our housing market a more attractive flight to safety for some investors.
  • Rates: Mortgage rates may level out or even slightly lower in the coming months. But whether they do or not might not matter, so we expect continued stress on homes that mainly sell to financed buyers.
  • Cash Buyers: In Petoskey and Harbor Springs, we should expect cash buyers to continue paying top dollar for the most desirable homes (e.g., waterfront or water view).

Stay Informed

The next Harbor Prime Market Report will be published in January 2024. In the meantime, please enjoy other unique Insights articles found here.

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About the Author: Jeff Kazmierski leads real estate sales for Coldwell Banker in Harbor Springs. He is the founder and principal of Harbor Prime and can be reached directly at 231-580-8088.

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 CPI inflation calculator; and Mortgage rate data was sourced from Freddie Mac’s Primary Mortgage Market Survey.

All content on this website is for information purposes only. Any information contained herein is not intended to provide legal or financial advice, nor does it create an agency relationship. All information is made available without any guarantee, warranty, or representation of any kind. It is your sole responsibility to seek the services of your own legal, financial, accounting, and real estate professionals prior to any such related decisions or transactions.

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