Michigan misses out on soaring home values

[Charles Brown <cbrown@xxxxxxxxxxxxxxxxx>]

Michigan misses out on soaring home values

There's no talk of a housing bubble as median prices dip below the national
average.

By R.J. King and Nick Bunkley / The Detroit News


David Coates / The Detroit News

Dwight Labadie, left, facing weak interest in his Grosse Pointe Woods house,
has had broker Dennis Andrus lower the list price.

Buy or bail?

Plagued by a dismal economy, southeast Michigan is missing out
<http://www.detnews.com/2005/realestate/0506/06/A01-205250.htm>  on a
historic housing boom that's creating billions of dollars in wealth for U.S.
homeowners. What action would you consider if area home values continue to
drop?

         Stay the course
         Get what you can and relocate
         Relocate and rent your house until values rise
         Invest in more properties while the buyer's market lasts



Brett Schavey adjusts a sign outside his Troy house as Shamrock trots by.
Schavey says he is dispirited by his home's valuation, which has barely
budged since an appraisal three years ago.

>

Home prices may be shooting through the roof across much of the nation, but
the value of Brett Schavey's four-bedroom house in Troy has barely budged
since he had an appraisal three years ago.

What's worse, Schavey put his home up for sale a few weeks ago to prepare
for a move to Denver and has yet to receive a single inquiry. "I thought it
was a seller's market," Schavey said. "It's brutal."

Plagued by a dismal economy, southeast Michigan is missing out on a historic
housing boom that's creating billions of dollars in wealth for U.S.
homeowners.

While sellers in most cities are juggling multiple offers and raking in big
profits, many Metro Detroit homeowners have little choice but to lower their
asking price after months of mowing around the "for sale" signs in their
yards.

Five years ago, the median price for a home in Metro Detroit was $11,000
above the national average; today, it's about $16,000 below average.

"It sounds like we live in a different world," said E'toile Libbett, an
agent at Real Estate One in Southfield. "We're leveling off ... and in some
cases even decreasing."

Median home prices in Metro Detroit increased just 0.5 percent to $151,000
from the first quarter of 2004 to the first quarter of 2005.

Nationwide, home prices rose 9.7 percent during the same period and heated
up to 15.1 percent in April, according to the National Association of
Realtors.

In some markets, including Sarasota, Fla.; Las Vegas; and San Bernardino,
Calif., population explosions and job growth have helped fuel year-over-year
price gains of up to 45 percent. Even cities such as Baltimore and Gary,
Ind., which have struggled with urban decay and weak real estate values, are
seeing solid gains.

The surges are raising fears that the hottest markets are on the verge of
collapsing.

It's a scenario far from the minds of Realtors here.

Homes for sale in Metro Detroit are staying on the market longer, and some
sellers say they are losing confidence in the market's traditional ability
to provide solid price gains that can support the purchase of a larger home
and help fill retirement portfolios.

That can be particularly troublesome for the growing number of families with
interest-only mortgages, a heavily marketed option in recent years. Because
their minimum payments don't include any principal, these homeowners often
count on growth in their property's value to build equity. In a depressed
market, they can end up owing more than their home is worth when they want
to sell.

S. Lawrence Yun, senior economist for the National Association of Realtors,
said Metro Detroit's housing market likely won't rebound until the economy
improves. The state's unemployment rate of 7.0 percent leads the nation, and
more than 230,000 manufacturing jobs have been lost to foreign competition
and rising productivity over the last four years.

"Metro Detroit has not shown any consistent job creation in recent years,"
Yun said. "The region is going through a sizable downturn with General
Motors Corp. <javascript:companybox('GM')>  and Ford Motor
<javascript:companybox('F')>  Co. struggling. It's difficult to say where
things are headed in the housing market until we see some job creation."

In other areas of the country, especially in the warmer climates of Florida,
Arizona and California, many local markets are experiencing housing
shortages as builders rush to meet demand from empty-nesters, recent
retirees and immigrants. In some areas, homes receive multiple offers even
before being listed.

Dwight Labadie recently bought and resold a condominium near West Palm
Beach, Fla., for a 30 percent profit. Meanwhile, his large family home in
Grosse Pointe Woods has been on the market for six months.

Labadie isn't giving up on selling his four-bedroom colonial despite a
recent $15,000 price reduction and more than $30,000 in improvements. "My
wife and I raised three kids here, but they've all moved out, and the house
is too big," he said.

Homes typically sell within 60 days of being listed, but more Metro Detroit
home sellers see waits of 90 days or longer to find a buyer even as low
rates provide the ability to borrow more money. That hasn't stopped some
agents from staying optimistic.

"I'd be kidding if I said the home market in Metro Detroit was as robust as
the rest of the country," said Dennis Andrus, broker and owner of Andrus
Realty Group in Grosse Pointe Farms, which is listing Labadie's home. "But I
think we've turned the corner because we see more people out looking at
homes and making serious offers."

Some say the market isn't as bleak as it appears because historically low
interest rates, now hovering at about 5.3 percent for a 30-year, fixed-rate
mortgage, have encouraged so many renters to take the plunge and buy a
starter home.

"It's a buyer's market, no question," said David Reault, broker and owner of
Century 21 Row in Livonia. "Home prices are going up, but the low interest
rates have pulled so many first-time buyers into the market that it's
pulling down the median sales price. It's a good time to buy."

And while prices have been flat, sales of single-family homes and
condominiums were up 20.3 percent in Metro Detroit in the first quarter,
according to Realcomp II Ltd. in Farmington Hills.

"It's a very patchy market," said Susan Carter, associate broker for
Woodwardside GMAC Real Estate in Royal Oak.

"The clean, sharp homes are selling fairly well, but the average homes take
a while."

Realtors say owners really need to make their home stand out to attract a
buyer.

"The lawn has got to be perfectly maintained, and the interior has got to be
spotless for every showing," said Diane Baker, an agent with RE/MAX Classic
in Canton Township.

But that's tough to do month after month, said Chuck Collins, a client of
Baker's, whose 2,572-square-foot colonial with a master bathroom Jacuzzi and
a view of the woods has been listed for three months. Collins and his wife
grew tired of constantly urging their 9- and 12-year-olds to clean up their
bedrooms.

"There was no one coming by," Collins said, "so what's the point?"

After no one showed up at an open house, the couple reduced their asking
price by $5,000 in early May. They knocked off another five grand last week,
to $329,900.

"We've got a little bit of equity in the house," Collins said, "but it's
going fast."

Another phenomenon affecting home sales is the recent advent of the dual
housing market, where aging baby boomers are selling their large family home
and buying two smaller condominiums -- typically one near where they live
and one in the South or Southwest to escape cold winters.

"There is very strong demand for two homes these days, and you are seeing
more builders offer people condos in the northern and southern parts of the
country," said Dominic J. Moceri, an Auburn Hills-based residential
developer and president of the Building Association of Southeastern Michigan
in Farmington Hills.

Moceri said robust sales of new homes -- area builders posted their best
year on record last year by filing for 26,550 permits valued at $4 billion
-- will likely continue as several national builders have entered the Metro
Detroit market in recent years.

If there is a bright side to the stagnant Michigan home market, it's that
the glut of unsold homes make for a buyer's paradise. Sellers of older
homes, though, face a tough road.

"It is discouraging," said Sharon Young-Maliszewski, whose four-bedroom home
in Sterling Heights has been listed since Labor Day. "You've got a beautiful
house -- and you know that you have a beautiful house -- but people aren't
buying."

( If it's so beautiful, why not keep it ? -CB)

You can reach R.J. King at (313) 222-2504 or rjking@xxxxxxxxxxxx



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