Re: Michigan misses out on soaring home values

["David B. Shemano" <dshemano@xxxxxxxxxx>]

I think what the article ignores is that the Detroit suburbs is experiencing a new-home construction boom that is like another planet to a Los Angeleno like me.  My sister lived in Clawson, an older community at 13 Mile.  She owned a small old 3BR home which she paid around $110k a couple of years, and took a small loss when she just sold to buy a sizable new 4BR home in Macomb for around $300k, around 20 Mile.  Macomb is flipping farmland into new housing like crazy.  Because all of the new home construction in a new community with new schools, Home Depots, etc., why would anybody buy a small house in an old neighborhood?  The increased supply of housing stock may keep the price of existing housing from increasing, but why is that a bad thing when you look at the entire picture?  Is the LA situation better, where a major cause of price inflation is the inability to increase the housing stock within commutable LA?

David Shemano

--- Original Message---
 To: PEN-L@xxxxxxxxxxxxxxxx
 From: Charles Brown <cbrown@xxxxxxxxxxxxxxxxx>
 Sent:  6/06/2005 10:56AM
 Subject: [PEN-L] Michigan misses out on soaring home values

>> 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
>>
>>
>>
>> Image
>> <http://www.detnews.com/pix/2005/06/06/biz/homevaluesub_gfx_060605.jpg>
>>
>>
>>
>>
>>