Desperate house sellers (part 1)

Desperate house sellers (part 1)

The following article appeared on the front page of the Detroit News July 6, 2006.

Desperate house sellers

Some juggle two mortgages, others stuck with houses in tough Metro market

Dorothy Bourdet / The Detroit News

These are desperate times for Metro Detroit home sellers.

The desperation tumbles from the numbers: a 43 percent increase in homes on the market. A drop in the median selling price in every Metro Detroit county. Flat overall home sales after years of steady growth.

Desperation screams from the ubiquitous "For Sale" signs peppering Metro Detroit streets, as neighbors compete for choosy -- and scarce -- buyers. It echoes from all the empty homes for sale, left vacant by owners who couldn't wait any longer to move on and out.

And desperation is the theme that runs through sellers' stories: An unsold house has Paul Beasley living with a friend. Waiting a year for a buyer has put Karen Lamb's life on hold. Two mortgages are sapping Don Coleman and his wife's finances.

"We're sitting on the brink of financial ruin. We're using every dime, riding together when possible, cutting down on everything we can cut down on in order to stay afloat," said Coleman, 63. After buying a new home in Romulus, the offer on their Southfield home fell through. Now, the couple scrimps to make two house payments as they wait for another buyer. "We've got two people with one life preserver."

Few states have been hit as hard as Michigan in this 2006 version of the housing slump. Unprecedented turmoil in the domestic auto industry that's forcing tens of thousands of job cuts has dragged down the state's economy for the past five years, and the housing market is just the latest victim.

The supply of homes for sale has ballooned in the past few years as residents flee for job-rich states and homeowners left behind cope with shrinking paychecks and mounting household bills. Add to that rising mortgage interest rates and a dwindling pool of able home buyers.

With all that weighing down the market, don't expect the usual summer bump in sales, experts say.

"If we hold on steady, we'll be doing good. I just don't think we're going to see the bumps this year," said Howard Babcock, a Bloomfield Hills-based real estate consultant.

Dan Elsea, president of brokerage services for Real Estate One, who estimates sales are down 5 percent to 35 percent in markets across the state, figures that will likely offset the typical 20 percent increase in sales during the spring and summer months.

"To a seller, it will feel like there isn't a spring or summer market," Elsea said. "We feel like this is sort of the bottom right now. We don't expect a quick bounce up."

In May, there were nearly 14,400 more homes for sale in Wayne, Oakland, Macomb and Livingston counties than last year, and 32,500 more than five years ago, according to Realcomp II Ltd., the largest multiple listings service in the state. At the same time, sales are flat.

Slump takes its toll

The slowdown is taking its toll on many of the thousands of Metro Detroiters trying to sell their homes. They're postponing moves, giving up on new jobs, leasing houses that haven't sold and juggling two mortgages.

After a recent divorce bumped him from his Royal Oak brick bungalow, Paul Beasley tried to sell the house himself to save on real estate commissions. But after three months, he hasn't shown the house once.

Now, six months after putting his house on the market, Beasley is on his second real estate agent, shares mortgage payments with his ex-wife and lives with a friend.

"I can't reinvest in other properties while I still have this one and financially, I can't move on," he said. "It's appraised for more than it's probably going to sell for. I'll probably have to come to the table with money to get out of it."

The National Association of Realtors recently lowered its national estimate for 2006 new and existing home sales. The trade group now expects existing home sales to drop 6.8 percent to 6.60 million from last year's record 7.08 million, and new-home sales to decline 13 percent to 1.11 million from 2005's record 1.28 million.

Even though it doesn't feel like it for many home sellers, this will be the third-strongest year in home sales, the trade group said.

And the summer could bring at least a small measure of relief.

"My sense is that the summer market -- June, July and August -- is probably going to be better than most people anticipate; that doesn't mean it's going to be good," said Bob Taylor, an associate broker and real estate agent with Birmingham-based Weir, Manuel, Snyder & Ranke.

"The total number of people looking at houses is down. It's not just a supply problem, it's a demand problem."

Cutting prices doesn't help

Right now, Karen Lamb is on the wrong end of that equation.

Potential buyers have filed in and out of Lamb's 3,000-square-foot ranch in Troy for a year, leaving plenty of compliments, but no good offers. Even dropping the price $80,000 to $386,000 hasn't helped.

"We've gone through every phase you can think of to make this house appealing. The irony is that reducing the price has made no difference because if the buyers aren't there, they aren't there," she said.

Lamb and her husband, now empty nesters, are living in a house owned by a relative. "My life is on hold until I sell that house. That's where all of our investment monies are. I can't access my assets, but I can keep paying through the nose (for utilities on it)," she said.

The Lambs' house is one of hundreds that is sitting vacant, waiting for new owners.

Jan Calcaterra, a Clinton Township Realtor, said 60 percent to 70 percent of the houses she shows are empty. "There is an unbelievable amount of vacant houses when you show them."

Blame falls on auto industry

Most of the blame for the big increase in home supply and big decrease in demand falls on the domestic auto industry's well-publicized woes.

With General Motors Corp. and Ford Motor Co. planning to cut 60,000 jobs total and auto parts maker Delphi slashing 20,000 jobs, Michiganians are understandably skittish about their futures and the economy. Some are leaving the state; others are holding tight on finances, waiting for things to get better.

Announcement of the cuts last year froze the real estate market, Elsea said. "All quarter of a million employees stopped doing anything until they knew if they were going to be one of the (people laid off)," he said.

But the exodus of people from the area hasn't stopped.

The number who moved into Livingston, Macomb, Oakland and Wayne counties from other parts of the country was 47,000 in 2004, according to a Detroit News analysis of Internal Revenue Service records. About 67,000 moved out.

Not all 'doom and gloom'

While today's market clearly favors buyers, the right house at the right price can mean a quick deal even now.

When Dawn Buley put her gray Berkley bungalow up for sale two months ago, the 35-year-old admissions director was prepared to wait months for an offer.

But within 24 hours, someone had offered to buy the home at her asking price of $205,000. Though elated, Buley knows she was among the fortunate few as she watches others struggle -- a co-worker has been waiting months for an offer and is on his second real estate agent.

"I think we had a nice home at the right price," she said.

Despite the slowdown, Walt Baczkowski, a longtime Realtor, is optimistic. "It's not the worst time for home sales and home purchases. The market isn't as bad as everyone wants to say it is," said Baczkowski, CEO of the Metropolitan Consolidated Association of Realtors.

"I see incredibly attractive interest rates and incredibly attractive housing stock." Interest rates once hovered around 16 percent, he said. Now, 6.63 percent is the average rate for a 30-year fixed-rate mortgage.

But the market feels pretty bleak for people like Lamb, who has waited months to sell and is now hoping to at least break even.

"It's kind of like having three shoes or three roller skates when you've only got two feet. It's constantly juggling. I'm getting awful close to the breaking point."