CENSUS 2006: Habits, real estate set Michigan apart
Home values Loans put owners in a dangerous situation
BY MARISOL BELLO and JOHN WISELY
FREE PRESS STAFF WRITERS
October 3, 2006
Census data released for publication today show that while growth in median home values in Michigan lag that in the rest of the nation, homeowners here have kept pace with the national trend toward getting second mortgages and home-equity loans, taking advantage of low interest rates and using their stake in their homes for ready cash.
But that may prove a dangerous strategy at a time when the state's economy continues to falter and job losses have reached record highs. The pressure of additional payments could help fuel a skyrocketing number of home foreclosures and loan defaults.
Economists say such an availability of cash has actually propped up the Michigan economy in recent years by giving residents the means to continue spending. But long-term, it's draining wealth from homeowners.
"There's a widespread trend for people to tap into their equity nationally," said Dana Johnson, chief economist for Comerica. "Obviously, here there's less equity to tap as elsewhere. ... It puts borrowers in a more precarious position."
The census data show that 556,000 Michigan homes -- representing 19% of all the owner-occupied homes in the state -- have some kind of second loan on them.
The data also show that the median value of owner-occupied homes in Michigan has increased 19% in the last five years, when adjusted for inflation -- well below the national average of 32%.
In metro Detroit, 24% of the homes in Oakland County have a second loan on them, while the median property value has increased 16% in the last five years. In Macomb County, 21% of homes have a second loan on them, while the median value has gone up 11%. In Wayne County, 17% of homes have second loans, and the median value has increased 25%.
The information comes from the yearly American Community Survey, which the Census Bureau plans to use to replace the decennial census. The 2005 survey includes municipalities with a population of 65,000 people or more, which in Michigan, included 21 cities and 28 counties.
How the money's being spent
Talking to homeowners, it becomes clear that not all of these loans are being used for traditional purposes, such as home repair. Some are using the loans to pay for everything from college tuition to grocery and utility bills.
The loans typically charge far less interest than credit cards, so using one to pay off the other can help cut costs. And many people have taken out second mortgages to avoid paying expensive mortgage insurance.
During their daughter's first year at Grand Valley State University in 2001, Larry and Diane Janes took out a $7,500 home-equity loan on their Livonia home. Now, with two kids in college, the Janes are up to $40,000 in home-equity loans.
"Unfortunately, we weren't eligible for any other type of assistance," Larry Janes said Friday. "A home-equity loan is tax deductible and has lower interest rates. It was something we started tapping small and use as needed."
Of the 21 Michigan cities and townships included in the census estimates, Rochester Hills (29%), Canton (28%) and Waterford (27%) had the highest percentages of homeowners carrying a second loan.
Between 2000 and 2005, census figures suggest Michiganders increasingly turned to second loans, though they are not an exact comparison. The 2000 data did not include multifamily units, such as condominiums, which are counted in the 2005 estimates.
But comparisons can be made. For instance, in Dearborn, with its predominance of single-family homes, 17% of homes had a second loan, compared with 12% in 2000. But median home values in Dearborn increased only 9% during that time when adjusted for inflation, from $146,571 to $160,200, according to census estimates.
In Rochester Hills, also made up predominantly of residential homes, the number was up from 21% five years ago. Meanwhile, median home values increased 12% during that span, from $243,831 to $272,300.
The slow growth shown by the census numbers is underscored by recent figures that found that home values in metro Detroit dropped by 8% during the second quarter this year, compared with the same period last year. The National Association of Realtors found that metro Detroit's drop was the second highest of 151 metropolitan areas nationwide.
And that puts more homeowners at risk of defaulting on their loans or losing their homes in foreclosures.
In the first eight months of last year, lenders filed for foreclosure on 21,076 homes, according to RealtyTrac, an online market for foreclosed properties. During the same period this year, the number of filings shot up to 50,863.
Meanwhile, 6.7% of mortgages in Michigan were past due by the second quarter of this year, according to a delinquency survey conducted by the Mortgage Bankers Association of America. Only hurricane-ravaged Mississippi and Louisiana had higher delinquency rates.
"The question is, how far down that well do you want to go and how many times can you tap it before it runs dry?" said Diane Swonk, a Livonia native and chief economist at Mesirow Financial in Chicago.
Home values Loans put owners in a dangerous situation
BY MARISOL BELLO and JOHN WISELY
FREE PRESS STAFF WRITERS
October 3, 2006
Census data released for publication today show that while growth in median home values in Michigan lag that in the rest of the nation, homeowners here have kept pace with the national trend toward getting second mortgages and home-equity loans, taking advantage of low interest rates and using their stake in their homes for ready cash.
But that may prove a dangerous strategy at a time when the state's economy continues to falter and job losses have reached record highs. The pressure of additional payments could help fuel a skyrocketing number of home foreclosures and loan defaults.
Economists say such an availability of cash has actually propped up the Michigan economy in recent years by giving residents the means to continue spending. But long-term, it's draining wealth from homeowners.
"There's a widespread trend for people to tap into their equity nationally," said Dana Johnson, chief economist for Comerica. "Obviously, here there's less equity to tap as elsewhere. ... It puts borrowers in a more precarious position."
The census data show that 556,000 Michigan homes -- representing 19% of all the owner-occupied homes in the state -- have some kind of second loan on them.
The data also show that the median value of owner-occupied homes in Michigan has increased 19% in the last five years, when adjusted for inflation -- well below the national average of 32%.
In metro Detroit, 24% of the homes in Oakland County have a second loan on them, while the median property value has increased 16% in the last five years. In Macomb County, 21% of homes have a second loan on them, while the median value has gone up 11%. In Wayne County, 17% of homes have second loans, and the median value has increased 25%.
The information comes from the yearly American Community Survey, which the Census Bureau plans to use to replace the decennial census. The 2005 survey includes municipalities with a population of 65,000 people or more, which in Michigan, included 21 cities and 28 counties.
How the money's being spent
Talking to homeowners, it becomes clear that not all of these loans are being used for traditional purposes, such as home repair. Some are using the loans to pay for everything from college tuition to grocery and utility bills.
The loans typically charge far less interest than credit cards, so using one to pay off the other can help cut costs. And many people have taken out second mortgages to avoid paying expensive mortgage insurance.
During their daughter's first year at Grand Valley State University in 2001, Larry and Diane Janes took out a $7,500 home-equity loan on their Livonia home. Now, with two kids in college, the Janes are up to $40,000 in home-equity loans.
"Unfortunately, we weren't eligible for any other type of assistance," Larry Janes said Friday. "A home-equity loan is tax deductible and has lower interest rates. It was something we started tapping small and use as needed."
Of the 21 Michigan cities and townships included in the census estimates, Rochester Hills (29%), Canton (28%) and Waterford (27%) had the highest percentages of homeowners carrying a second loan.
Between 2000 and 2005, census figures suggest Michiganders increasingly turned to second loans, though they are not an exact comparison. The 2000 data did not include multifamily units, such as condominiums, which are counted in the 2005 estimates.
But comparisons can be made. For instance, in Dearborn, with its predominance of single-family homes, 17% of homes had a second loan, compared with 12% in 2000. But median home values in Dearborn increased only 9% during that time when adjusted for inflation, from $146,571 to $160,200, according to census estimates.
In Rochester Hills, also made up predominantly of residential homes, the number was up from 21% five years ago. Meanwhile, median home values increased 12% during that span, from $243,831 to $272,300.
The slow growth shown by the census numbers is underscored by recent figures that found that home values in metro Detroit dropped by 8% during the second quarter this year, compared with the same period last year. The National Association of Realtors found that metro Detroit's drop was the second highest of 151 metropolitan areas nationwide.
And that puts more homeowners at risk of defaulting on their loans or losing their homes in foreclosures.
In the first eight months of last year, lenders filed for foreclosure on 21,076 homes, according to RealtyTrac, an online market for foreclosed properties. During the same period this year, the number of filings shot up to 50,863.
Meanwhile, 6.7% of mortgages in Michigan were past due by the second quarter of this year, according to a delinquency survey conducted by the Mortgage Bankers Association of America. Only hurricane-ravaged Mississippi and Louisiana had higher delinquency rates.
"The question is, how far down that well do you want to go and how many times can you tap it before it runs dry?" said Diane Swonk, a Livonia native and chief economist at Mesirow Financial in Chicago.
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