Happy Wednesday!
Yes, it is Wednesday. After a long holiday weekend we’re here on the MLive economy desk to help you get back up to speed. This is another weekly installment of Wallet Watch, where we recap the business news you may have missed.
What’s a normal housing market nowadays?
We’re starting in the housing sector. Is the market hot? Cold? Bursting?
Well, it’s a bit hungover. The market is having a slow, sleepy start in the new year.
“I like the idea of calling it a (housing) hangover, because that really is kind of exactly what this is like. It was so crazy. We partied so hard in 2021 and 2022,” said Natalie Rowe, President of Michigan Realtors.
Home sales slowed dramatically after the Federal Reserve’s interest rate hike started pushing up mortgage rates.
Rates hit a peak in November and have slowly fizzled down with a 30-year mortgage settling at 6.33% on Jan. 12, according to Freddie Mac.
While 6.33% is historically back on pace it still feels like a sharp incline compared to the historic lows homebuyers scored during the early days of the pandemic. Even a year ago the same loan was 3.45%.
The rate hike put only serious buyers back in the ring, Rowe said. But with inventory improving and home prices leveling. buyers finally have some breathing room.
“We’re going to still see that the real estate market can go back to some version of normal,” Rowe said. “Truthfully, I think the slightly higher interest rates probably are necessary in order to do that.”
Related: The real estate rager is over. Prepare for a housing hangover.
Ope, that’s a good price
We’ve got deep dish pizza, lots of ranch and good manners here in the Midwest. We also have the most affordable housing market in the country, according to the National Realtors Association.
The association’s affordability index measures homebuyers’ income-to-payment ratio.
An affordability index of 100 means a family with the median national income has exactly enough income to qualify for a mortgage on a median-priced home.
In November 2022, the most recent month of data, the national affordability index was at 95.5, meaning a family making a median income of $90,211 is just shy of the income necessary to qualify for a conventional loan.
The Midwest’s affordability came out ahead at 130.3.
It’s the same story looking at median home prices for Michigan compared to the rest of the country.
Michigan’s median sale price was $230,000 in November 2022. This is substantially lower than the national median price, $370,700.
Nadia Evangelou, National Realtor’s Association senior economist and director of forecasting, predicts this will make our region all the more desirable as homebuyers seek affordability above all else.
“We continue to see this persistent migration trend to more affordable areas since people cannot afford to buy a home where they live,” she said.
Related: Midwest looks affordable as rising rates squeeze homebuyers
More green cars may mean less green for roads
Since we’re talking about the Midwest, let’s shift to the auto industry.
Last week, my colleague Rose White reported on what the electrification of cars will do to individual budgets — a new $7,500 tax credit is available. This week she tackled what electric vehicles will mean for the state budget.
A new group, Coalition on Electric Vehicles and Transportation Revenue, convened in Lansing to discuss the future of Michigan’s road budget.
Michigan could lose $95 million a year for road repairs as electric vehicles become more widespread, a report from East Lansing-based Anderson Economic Group found.
Gas taxes largely fund road construction, but electric vehicle drivers currently pay no state or federal gas taxes. There is a $140 electric vehicle fee in Michigan – but that doesn’t offset the lost revenue from gas.
Anderson Economic Group estimates this already created a $50 million hole in Michigan’s road budget from 2019 to 2021.
It’s important to note, though, that the state’s budget for roads, bridge repairs and public transit is a whopping $6.1 billion for 2023.
Related: Electric vehicles could put a $95M hole in Michigan’s road budget
The new coalition raised the concern because of the growing EV market.
About 5.8% of new cars purchased last year in the United States were electric vehicles, according to Cox Automotive. While not large in its overall share, that marks a 65% growth rate in one year.
Anderson Economic Group’s “conservative” projections expect Michigan electric vehicle sales to hit 15% to 25% by 2030.
“We can’t afford to have 25% of the drivers avoiding the road taxes paid by others. If we fail to make policy changes, soon we’ll be unable to maintain our roads,” Anderson said.
Want to read more about the economy? See all our inflation coverage here.
This story is part of MLive’s Wallet Watch series focused on today’s economic issues. Have a Wallet Watch suggestion? Email us at askaquestion@mlive.com.
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