Monthly Market Trends - March

In this Monthly Market Trends series, we'll continue to offer you our interpretation of current trends and provide you with balanced commentary so you can make the best investment decisions today, for the highest returns tomorrow. For March, we continue our geographic series and will turn our focus to the Midwest - a region composed of 12 states, including Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.

Real estate characteristics in the Midwest vary depending on the specific location within the region. However, there are some general trends that can be observed:

• Affordability: Compared to some other regions of the United States, the Midwest is generally considered to be more affordable in terms of housing costs. The cost of living is typically lower than in coastal cities with its relatively low housing costs, making it an attractive option for first-time homebuyers and those seeking a lower cost of living.
• Stable market: The Midwest real estate market is often considered to be stable, with less volatility compared to other regions of the country. The region's economy tends to be more diverse, with a mix of industries that are less prone to boom and bust cycles. 
• Strong demand for suburban homes: Like many other parts of the country, there is a strong demand for suburban homes in the Midwest. Many people prefer the larger lots and quieter neighborhoods that suburban living offers, and homes in these areas can be in high demand.

Groundfloor has a growing active base of loan originations in the Midwest, and specifically today we are going to be exploring this particular region and include these states: Indiana, Illinois, Missouri, Kansas & Ohio. The map below shows the active Groundfloor loan count in each of those states.

The specific MSA’s where the lion’s share active loans are active as as follows:

One factor that contributes to the stability of the Midwest real estate market is the region's generally balanced supply and demand. While certain cities or neighborhoods may experience fluctuations in inventory based on local market conditions, overall the region tends to have a fairly consistent level of available homes for sale.

In recent years, some areas of the Midwest have experienced an increase in new home construction, particularly in growing urban centers like Minneapolis, Chicago, and Indianapolis. This new construction can help to add to the overall inventory of available homes for sale, particularly in areas where demand is high.

Let’s look at the current Inventory in the selected MSA’s the sparklines represent 90 days back. 

In each of the MSA’s above, the 90-day inventory trend is down.  We would expect inventory to begin to increase as the Spring market advances. This trend is consistent with most markets in the Southeast as well, and as the below chart indicates, the Nation as a whole. Since the new year, inventory has declined.

The Market Action Index (“MAI”) for each of these MSA’s suggests a strong seller advantage.  Remember, for a market to be a “Buyer’s Market” (supply heavy), the MAI would be near or below 30. Check out the seller strength of these markets!   

Source: Altos Research

Given the documented seller advantage, we have confidence in price stability and we should also see a steady and improving median list price. The median list price is the midpoint of all the homes listed for sale in a particular area. This means that half of the homes are listed at a price higher than the median, and half are listed at a price lower than the median.

Since we see such a strong seller advantage, it does prove out the affordability of the area as we note in February the rise of the 30-year mortgage rate.   

The trend of the median days on market can vary depending on a variety of factors, such as location, seasonality, and the overall state of the economy. Generally, a shorter median days on market indicates a hot real estate market with high demand and low supply, while a longer median days on market suggests a slower market with more supply than demand.

The 90-day trend for Median Days on Market also seems to be flat or generally declining across all of these midwestern strongholds. If the market or markets were experiencing significant issues, certainly the DOM would be reflective of this. Please review; but they certainly look absolutely normal, if not excellent. 

It’s hard to argue that these metrics support anything but a positive Spring market - at least in reference to what many would have predicted at the end of last year. I look forward to watching the next few weeks unfold in the midwest and all of the markets that we actively participate in. 

In the weeks that follow, I will be doing a deeper dive into Indianapolis, IN and Tulsa, OK. If you would like to see more MSA’s reviewed, please let us know in the comments section.