The incredible deflating housing market
Region's home prices fall most, but is rebound near?
Dorothy Bourdet The Detroit News / The Detroit News
First came the sting of massive job and income cuts, making Metro Detroiters nervous about their futures. Right behind were fear and caution, which kept homebuyers on the sidelines and created an oversupply of homes that can sit months, even years, on the market.
Now, comes home price deflation, the worst in the nation, according to a survey released this week by the National Association of Realtors. The median home price in Metro Detroit sank to $154,100 in the third quarter, down 10.5 percent from $172,100 at the same time last year. It was the largest percentage drop of U.S. cities.
"The overall feeling in Michigan is everybody's knees are knocking a little bit," said Nancy Warson, a Livonia Realtor.
While prices are down, at least one top Realtor predicts the market may be ready to rebound.
"We're ready to turn around," said Pat Vredevoogd Combs, National Association of Realtors president and a Grand Rapids Realtor. "What we're seeing, we think, is that it's bottoming out."
The steep decline in home prices can be blamed on big losses in jobs and income in Metro Detroit, said Dana Johnson, chief economist at Comerica Bank.
"Overlaid on top of that fundamental is the fear and uncertainty that pervades this region," he said
Would-be homeseller Brian Kurtz knows that uncertainty well. The financial planner from Troy has dropped the price on his Sterling Heights colonial by $36,600 to $259,900 and is now paying $4,000 per month for two mortgages.
"It's like trying to sell ice cubes to Eskimos," said Kurtz, whose home has been on the market since August 2005.
Warson, with Real Estate One, said buyers are just not out there. One of Warson's clients in South Lyon, who is selling their house for about $500,000, has had only one potential buyer look at it in seven months.
Those kinds of waits are reflected in the state's slumping home sales, which are down 17.2 percent in the third quarter. Those kinds of waits also can quickly force down home prices, as sellers often drastically cut their asking prices so they can snag a buyer.
In a state where the jobless rate has soared above the national average, buyers are wary of getting into long-term financial commitments, Warson said. Current homeowners, such as empty nesters, are also reluctant to move or downsize, fearing they'll take a loss on their home.
"Some are scared about their job, some are scared (because) they don't know where the market is and they would prefer to buy at the very, very bottom, so they're holding out -- and nobody knows where the bottom is," Warson said.
Sellers have to be patient
Home prices are slipping nationally, too, though not as drastically as in Michigan. The median single-family home price in the U.S. was $224,900 in the third quarter, down 1.2 percent from last year when the median price was $227,600.
While the national decline is seen as an expected correction in housing prices that had soared out of control with five years of double-digit increases, the big drop in the Metro Detroit median home prices over the past six months has been unparalleled since 1989, the furthest back data is available.
"We're kind of an oddity out there," said Combs, the Grand Rapids Realtor.
Economists say home sellers will have to be patient as they wait for the local real estate market get upright again.
"It's going to be a while before that fear and uncertainty goes away. We're at least six months away from the time when jobs and income bottom out here in Michigan," Johnson said.
Falling home prices mean people have fewer options when they hit financial rough spots.
Wayne County had the nation's second-highest metro foreclosure rate in October, with one in every 196 households filing for foreclosure, according to RealtyTrac, an online firm that tracks foreclosures.
"When it (the median house price) drops sharply, it leaves people with no equity and when they get into trouble they have no choice but to walk away," Johnson said.
"It's an example of how the distress in the economy ripples from one sector to another."
Agents are getting creative
To jump start the housing market, real estate agents have pulled out all the stops. They've developed individual Web sites for each house, increased commissions for the buyer's agent and added other incentives for buyers.
"We've seen plasma TVs, we've seen $5,000 bonuses, we've seen cars, we've seen airline tickets. We're about as creative as we can get at this point," Warson said. "It's still not driving the market up."
In an average year, real estate broker Rob Scalici closes on about 75 to 100 home sales. Right now, he's got 30 listings and no buyers.
"It's kind of amazing. I'm back to doing things that I haven't done in a long time," said Scalici, a broker with RE/MAX Metropolitan in Utica, who is spending more and more Sundays in open houses hoping to snag a buyer.
Scalici hopes 2007 will be a better year for home sellers.
"You've gotta hope that with the New Year comes renewed spirits," he said.
Combs of the National Association of Realtors is optimistic.
Her open houses have been busier -- just this week she sold two homes in the Grand Rapids area.
"Buyers have been sitting on the sidelines watching," she said. "We're seeing them coming back into the market."
Region's home prices fall most, but is rebound near?
Dorothy Bourdet The Detroit News / The Detroit News
First came the sting of massive job and income cuts, making Metro Detroiters nervous about their futures. Right behind were fear and caution, which kept homebuyers on the sidelines and created an oversupply of homes that can sit months, even years, on the market.
Now, comes home price deflation, the worst in the nation, according to a survey released this week by the National Association of Realtors. The median home price in Metro Detroit sank to $154,100 in the third quarter, down 10.5 percent from $172,100 at the same time last year. It was the largest percentage drop of U.S. cities.
"The overall feeling in Michigan is everybody's knees are knocking a little bit," said Nancy Warson, a Livonia Realtor.
While prices are down, at least one top Realtor predicts the market may be ready to rebound.
"We're ready to turn around," said Pat Vredevoogd Combs, National Association of Realtors president and a Grand Rapids Realtor. "What we're seeing, we think, is that it's bottoming out."
The steep decline in home prices can be blamed on big losses in jobs and income in Metro Detroit, said Dana Johnson, chief economist at Comerica Bank.
"Overlaid on top of that fundamental is the fear and uncertainty that pervades this region," he said
Would-be homeseller Brian Kurtz knows that uncertainty well. The financial planner from Troy has dropped the price on his Sterling Heights colonial by $36,600 to $259,900 and is now paying $4,000 per month for two mortgages.
"It's like trying to sell ice cubes to Eskimos," said Kurtz, whose home has been on the market since August 2005.
Warson, with Real Estate One, said buyers are just not out there. One of Warson's clients in South Lyon, who is selling their house for about $500,000, has had only one potential buyer look at it in seven months.
Those kinds of waits are reflected in the state's slumping home sales, which are down 17.2 percent in the third quarter. Those kinds of waits also can quickly force down home prices, as sellers often drastically cut their asking prices so they can snag a buyer.
In a state where the jobless rate has soared above the national average, buyers are wary of getting into long-term financial commitments, Warson said. Current homeowners, such as empty nesters, are also reluctant to move or downsize, fearing they'll take a loss on their home.
"Some are scared about their job, some are scared (because) they don't know where the market is and they would prefer to buy at the very, very bottom, so they're holding out -- and nobody knows where the bottom is," Warson said.
Sellers have to be patient
Home prices are slipping nationally, too, though not as drastically as in Michigan. The median single-family home price in the U.S. was $224,900 in the third quarter, down 1.2 percent from last year when the median price was $227,600.
While the national decline is seen as an expected correction in housing prices that had soared out of control with five years of double-digit increases, the big drop in the Metro Detroit median home prices over the past six months has been unparalleled since 1989, the furthest back data is available.
"We're kind of an oddity out there," said Combs, the Grand Rapids Realtor.
Economists say home sellers will have to be patient as they wait for the local real estate market get upright again.
"It's going to be a while before that fear and uncertainty goes away. We're at least six months away from the time when jobs and income bottom out here in Michigan," Johnson said.
Falling home prices mean people have fewer options when they hit financial rough spots.
Wayne County had the nation's second-highest metro foreclosure rate in October, with one in every 196 households filing for foreclosure, according to RealtyTrac, an online firm that tracks foreclosures.
"When it (the median house price) drops sharply, it leaves people with no equity and when they get into trouble they have no choice but to walk away," Johnson said.
"It's an example of how the distress in the economy ripples from one sector to another."
Agents are getting creative
To jump start the housing market, real estate agents have pulled out all the stops. They've developed individual Web sites for each house, increased commissions for the buyer's agent and added other incentives for buyers.
"We've seen plasma TVs, we've seen $5,000 bonuses, we've seen cars, we've seen airline tickets. We're about as creative as we can get at this point," Warson said. "It's still not driving the market up."
In an average year, real estate broker Rob Scalici closes on about 75 to 100 home sales. Right now, he's got 30 listings and no buyers.
"It's kind of amazing. I'm back to doing things that I haven't done in a long time," said Scalici, a broker with RE/MAX Metropolitan in Utica, who is spending more and more Sundays in open houses hoping to snag a buyer.
Scalici hopes 2007 will be a better year for home sellers.
"You've gotta hope that with the New Year comes renewed spirits," he said.
Combs of the National Association of Realtors is optimistic.
Her open houses have been busier -- just this week she sold two homes in the Grand Rapids area.
"Buyers have been sitting on the sidelines watching," she said. "We're seeing them coming back into the market."
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