Metro area home prices tumble 8%
Glut of Metro homes for sale leads to biggest decline in values since '89.
Dorothy Bourdet / The Detroit News
For the first time in nearly two decades, Metro Detroit families are seeing a significant decline in the value of their homes.
Median home prices in Metro Detroit dropped 8 percent -- by far the biggest decline since 1989 -- in the second quarter of this year, compared to the same period last year, according to figures released this week by the National Association of Realtors.
The region's housing market has lagged the rest of the nation for several years. But while overall home sales were falling, home values remained relatively stable -- until now.
It boils down to supply and demand: too many houses for sale, too few buyers.
"You can no longer count on the value being there when you go to sell your home," said Keith Ruloff, a Realtor with Century 21 Manuel Cole in Redford Township. "Houses are only worth what a ready, willing and able buyer is willing to pay for it."
The median sales price for a single-family home fell $13,500 to $155,700 from the second quarter of 2005 to the second quarter of 2006, ranking Metro Detroit second in the nation for the biggest decline in median home prices, topped only by Danville, Ill.
Data from multiple listing service Realcomp II Ltd. shows sagging home prices in every county in Metro Detroit, with Wayne County showing the biggest drop. Median home prices dropped 9.9 percent in Wayne in the second quarter of 2006, 5 percent in Livingston, 4.7 percent in Macomb and 4 percent in Oakland.
In all four counties, sales were down from a year ago while listings were up. And the average number of days homes for sale stayed on the market jumped from 70 to 108 from June 2005 to June 2006.
The weak housing market has put the relatively few buyers out there firmly in the driver's seat. Sellers are dropping their prices and even offering incentives such as cash toward closing costs.
The drop in home values does not come as a surprise given the prolonged economic downturn in Michigan. The state's jobless rate of 7 percent is among the nation's highest and the auto industry is in the midst of a historic downsizing.
"With so much auto-based industry and with the auto sector suffering it's difficult to say when that job turnaround will occur," said Lawrence Yun, senior economist for the Realtors association.
While Michigan has been leading the housing slowdown nationally, the rest of the country is starting to catch up. Twenty-eight states had sales declines in the second quarter, according to the Realtors association. Overall, median home prices nationwide rose 3.7 percent in the second quarter.
Falling home values cause a ripple effect that spreads to nearly every aspect of home ownership: A home gets a lower appraisal and has less equity, which limits the amount a homeowner can borrow against it. Those banking on their home for retirement see their nest egg cracking. Sellers are increasingly forced to bring money to the closing table to make up for what they still owe on the home.
Homeowners settle for less
Home seller Lesley Harding of Northville Township knows the stress well. The 39-year-old freelance video producer and her husband have been juggling three mortgages: one for their new house, one for the condo they're selling and one for the house Harding's late mother left her family.
Harding dropped the price on her Waterford condo $20,000 after it sat on the market for two years -- even then it didn't sell. She is now leasing it out.
The Farmington Hills home Harding's mother left when she died is also sitting on the market even after the family cut the price by $52,000 to $412,000.
"That's our inheritance, so you want to get as much as you can," she said.
Turnaround signs are scarce
The drops in median home prices simply reflect the slumping Michigan economy, said Furhad Waquad, a Bloomfield Hills Realtor and president-elect of the Michigan Association of Realtors.
But Waquad is optimistic that an infusion of jobs into the state could change the real estate scene for the better.
"Maybe things will turn around in six months," he said.
Right now, signs of a turnaround are scarce.
The state's unemployment rate is still among the highest in the nation. Analysts expect the jobless rate to get worse before it gets better, as autoworkers at General Motors Corp., Ford Motor Co. and Delphi Corp. who took buyouts start joining the unemployment rolls.
"This is a classic example of how expectations can affect a housing market," said Dana Johnson, chief economist for Comerica Inc. "The sharp decline in house prices is really reinforced by all the fears that there could be a fair number of people leaving the state, taking buyouts."
That could mean relief in the housing market may not be as prompt as people hope.
"It's going to be a while before the restructuring difficulties in the auto sector calm down," Johnson said.
"This will pass once things stabilize in the automotive (sector), but I think people are going to have to be a little patient."
Right selling price is key
Despite the bad news, Realtor Larry Chetcuti of RE/MAX Prestige in Dearborn Heights said homes in the $90,000 to $150,000 range are still selling fairly well.
"There's quite a few houses for sale, so they're not getting multiple offers on homes anymore," Chetcuti said. But homes that are priced right are selling.
Few houses are selling for the asking price and many buyers ask for seller concessions, such as paying closing costs, Ruloff said.
While interest rates have been rising, they still remain relatively low, Realtors note. The average interest rate for Michigan is 6.58 percent, slightly above the national average of 6.52 percent, according to Freddie Mac, a government housing agency.
Values within income range
If there is a silver lining with declining home prices, it may be that homes in the Metro Detroit market have not spiraled out of reach of area incomes, economists say.
So when jobs finally come to the state, more people will be able to afford homes.
"Because homes in Detroit -- relative to other major cities -- are affordable, any turnaround in the job market would imply that many would be able to enter into home ownership," economist Yun said.
While median home prices may have slid, there's no need for panic, said economist Johnson.
"I don't sense we're on the precipice of a steep downward spiral," he said.
Glut of Metro homes for sale leads to biggest decline in values since '89.
Dorothy Bourdet / The Detroit News
For the first time in nearly two decades, Metro Detroit families are seeing a significant decline in the value of their homes.
Median home prices in Metro Detroit dropped 8 percent -- by far the biggest decline since 1989 -- in the second quarter of this year, compared to the same period last year, according to figures released this week by the National Association of Realtors.
The region's housing market has lagged the rest of the nation for several years. But while overall home sales were falling, home values remained relatively stable -- until now.
It boils down to supply and demand: too many houses for sale, too few buyers.
"You can no longer count on the value being there when you go to sell your home," said Keith Ruloff, a Realtor with Century 21 Manuel Cole in Redford Township. "Houses are only worth what a ready, willing and able buyer is willing to pay for it."
The median sales price for a single-family home fell $13,500 to $155,700 from the second quarter of 2005 to the second quarter of 2006, ranking Metro Detroit second in the nation for the biggest decline in median home prices, topped only by Danville, Ill.
Data from multiple listing service Realcomp II Ltd. shows sagging home prices in every county in Metro Detroit, with Wayne County showing the biggest drop. Median home prices dropped 9.9 percent in Wayne in the second quarter of 2006, 5 percent in Livingston, 4.7 percent in Macomb and 4 percent in Oakland.
In all four counties, sales were down from a year ago while listings were up. And the average number of days homes for sale stayed on the market jumped from 70 to 108 from June 2005 to June 2006.
The weak housing market has put the relatively few buyers out there firmly in the driver's seat. Sellers are dropping their prices and even offering incentives such as cash toward closing costs.
The drop in home values does not come as a surprise given the prolonged economic downturn in Michigan. The state's jobless rate of 7 percent is among the nation's highest and the auto industry is in the midst of a historic downsizing.
"With so much auto-based industry and with the auto sector suffering it's difficult to say when that job turnaround will occur," said Lawrence Yun, senior economist for the Realtors association.
While Michigan has been leading the housing slowdown nationally, the rest of the country is starting to catch up. Twenty-eight states had sales declines in the second quarter, according to the Realtors association. Overall, median home prices nationwide rose 3.7 percent in the second quarter.
Falling home values cause a ripple effect that spreads to nearly every aspect of home ownership: A home gets a lower appraisal and has less equity, which limits the amount a homeowner can borrow against it. Those banking on their home for retirement see their nest egg cracking. Sellers are increasingly forced to bring money to the closing table to make up for what they still owe on the home.
Homeowners settle for less
Home seller Lesley Harding of Northville Township knows the stress well. The 39-year-old freelance video producer and her husband have been juggling three mortgages: one for their new house, one for the condo they're selling and one for the house Harding's late mother left her family.
Harding dropped the price on her Waterford condo $20,000 after it sat on the market for two years -- even then it didn't sell. She is now leasing it out.
The Farmington Hills home Harding's mother left when she died is also sitting on the market even after the family cut the price by $52,000 to $412,000.
"That's our inheritance, so you want to get as much as you can," she said.
Turnaround signs are scarce
The drops in median home prices simply reflect the slumping Michigan economy, said Furhad Waquad, a Bloomfield Hills Realtor and president-elect of the Michigan Association of Realtors.
But Waquad is optimistic that an infusion of jobs into the state could change the real estate scene for the better.
"Maybe things will turn around in six months," he said.
Right now, signs of a turnaround are scarce.
The state's unemployment rate is still among the highest in the nation. Analysts expect the jobless rate to get worse before it gets better, as autoworkers at General Motors Corp., Ford Motor Co. and Delphi Corp. who took buyouts start joining the unemployment rolls.
"This is a classic example of how expectations can affect a housing market," said Dana Johnson, chief economist for Comerica Inc. "The sharp decline in house prices is really reinforced by all the fears that there could be a fair number of people leaving the state, taking buyouts."
That could mean relief in the housing market may not be as prompt as people hope.
"It's going to be a while before the restructuring difficulties in the auto sector calm down," Johnson said.
"This will pass once things stabilize in the automotive (sector), but I think people are going to have to be a little patient."
Right selling price is key
Despite the bad news, Realtor Larry Chetcuti of RE/MAX Prestige in Dearborn Heights said homes in the $90,000 to $150,000 range are still selling fairly well.
"There's quite a few houses for sale, so they're not getting multiple offers on homes anymore," Chetcuti said. But homes that are priced right are selling.
Few houses are selling for the asking price and many buyers ask for seller concessions, such as paying closing costs, Ruloff said.
While interest rates have been rising, they still remain relatively low, Realtors note. The average interest rate for Michigan is 6.58 percent, slightly above the national average of 6.52 percent, according to Freddie Mac, a government housing agency.
Values within income range
If there is a silver lining with declining home prices, it may be that homes in the Metro Detroit market have not spiraled out of reach of area incomes, economists say.
So when jobs finally come to the state, more people will be able to afford homes.
"Because homes in Detroit -- relative to other major cities -- are affordable, any turnaround in the job market would imply that many would be able to enter into home ownership," economist Yun said.
While median home prices may have slid, there's no need for panic, said economist Johnson.
"I don't sense we're on the precipice of a steep downward spiral," he said.
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