$34 million in lost property taxes forces cuts in county services

Foreclosures drain cash from counties

BY STEVE NEAVLING • FREE PRESS STAFF WRITER • October 16, 2008

The growing mortgage crisis is costing Wayne, Oakland and Macomb counties a combined $34 million next year in tax revenue and forcing officials to trim money for police officers, firefighters, libraries, parks, health agencies and services for seniors and lower-income families.

Next year's estimated 5% drop in property values across metro Detroit -- the largest in decades -- also is likely to eat away more than $9 million in revenue for Wayne, Oakland and Macomb's three community colleges and $2 million for the SMART suburban bus system.

Foreclosures and sluggish home sales are dragging down real estate values, and hence, the property taxes that are governments' core source of revenue.

Add to that high fuel and health care costs, rising unemployment rates, cuts in state funding and the abrupt collapse of financial markets, and local governments are facing one of their worst crises in decades.

"We're getting killed on the revenue stream, and there's almost nothing we can do about it," said Macomb County Commissioner Andrey Duzyj, D-Warren. "It's a huge problem."

Macomb County is facing its worst fiscal hardship in at least four decades, as officials grapple with a projected record $34-million deficit next year and a $44 million shortfall in 2010. The main culprit is a combined projected $14-million loss in property taxes during the next two years.

To shrink the budget hole, the county is releasing jail inmates early, and this year, slashed recreation programs, removed books at its library and increased service fees. Officials are expected to resort to massive layoffs, cuts in sheriff's deputies and a reduction in salaries and benefits for county employees by next month.

In Wayne County, up to 160 sheriff's deputies received layoff notices this month to help offset a projected $15-million loss. All departments also were forced to cut 10% from their budgets.

Property values in Oakland County are to drop for the first time in 40 years next year, forcing officials to eliminate 152 jobs through early retirement and to close a sheriff's boot camp for nonviolent offenders.

"When property values are bottoming out like they are now, it makes it very difficult to balance a budget," said Tom Hickson, director of legislative affairs for the Michigan Association of Counties. "With the lack of revenue coming in, we are getting to the point where counties may have to cut services that are mandated by the state."

Sliding property values also are cutting sharply into revenues for cities and townships. In Warren, for example, officials expect a $4-million loss in tax revenues next year. That may mean fewer police and firefighters, and a more difficult time serving the growing senior population, city officials said.

"Property values are going to continue to decrease as the economy spirals out of control," Warren Mayor Jim Fouts said. "It's going to be a very, very difficult time for governments."

And on the state level, officials expect to lose tens of millions of dollars in property tax revenue next year to fund schools.

Budget planners fear the mortgage crisis will continue for several years until the economy rebounds and foreclosures decline.

Officials in Oakland and Macomb counties are bracing for record foreclosures this year, with a combined 18,000 families expected to lose their homes. Wayne County couldn't provide an estimate, but officials said foreclosures could easily exceed 20,000.

"When you have a glut of houses that no one is buying, prices go down," Deputy Oakland County Executive Robert Daddow said. "It's hurting everyone."

Metro home sales up, but prices plunge

Foreclosures fuel trend

BY GRETA GUEST • FREE PRESS BUSINESS WRITER • October 14, 2008

Driven down by sales of foreclosed homes, median sale prices fell 34% in metro Detroit in September compared with a year ago, dipping below $10,000 in the city of Detroit.

The median price on a house or condo sold in Detroit last month plummeted 57%, to $9,250, from $21,250 a year ago, according to figures released Monday by Realcomp, a multiple listing service based in Farmington Hills.

Foreclosures represented two-thirds of sales in Detroit in September, and they boosted sales by 81% as buyers laid claim to 1,019 homes.

For the wider metro area, the median sale price was down 34%, from $129,000 a year ago to $85,000 last month.

"There's tons of properties out there that investors are snapping up and that skews the numbers," said Joy Santiago, a Southfield-based real estate broker. "You can't say in the city of Detroit that the values are down, because many areas are strong, like Indian Village and Palmer Woods. They are a little bit more stable."

Sales are picking up, she said.

"People have to start realizing there are awesome deals out there, and it is just the time to purchase," Santiago said. "September for me, in the past 10 years, has been slow, but it was my best September ever."

Dan Elsea, president of brokerage services for Real Estate One in Southfield, said the prices are evidence of heavy investor activity in Detroit.

"We are seeing that low end of the market sell quicker. If you have a $75,000 house in the city of Detroit, there are not a lot of buyers for it," Elsea said. "But if you have an $8,500 house, it sells very quickly."

He said that if investor activity is factored out, the true price depreciation in metro Detroit, excluding the city, is at a rate of 1% a month since last September.

Realcomp reported that 5,818 sales of houses and condos in the metro area were concluded during September, up 57% from 3,703 sales in the same month a year ago. The figures consist of closed sales reported by Realtors who subscribe to the service.

More than 37% of the September sales in the metro area were foreclosures, according to Karen Kage, Realcomp president.

But have we hit bottom yet?

"It is near impossible for me to say we are near done," Kage said.

Wayne County sales were up 73%, to 2,278, from 1,320 in September 2007; Oakland County sales rose 51%, from 941 to 1,422; Macomb County sales were up 58%, from 478 to 754, and Livingston County sales were up 45%, from 138 to 200.

And pending sales in September were up 75%, to 7,832 from 4,472 in September 2007. Pending sales are those with signed purchase agreements that have not closed.

With the credit crunch and falling prices, more pending deals are falling apart at the closing table. In September, 1,265 properties went back on the market that were either pending or withdrawn from the market. That compares with 732 properties put back on the market in September 2007, Kage said.

"It's not the best news ever," Kage said of the falling sales prices. "We have said all along that until we weed out some of the inventory, we will not see prices rise."

Realcomp also reported that housing inventory in metro Detroit dropped 16%, to 63,453 homes and condominiums on the market, as compared with 75,932 listings in September 2007. That's a 10.9-month supply at the current sales pace, far above a normal market of a three- to six-month supply.

Foreclosed and forgotten

Buyers, beware: Bargain home could bring big repair bills

BY GRETA GUEST • FREE PRESS BUSINESS WRITER • October 12, 2008

Kelly Phillips was in the market for a house this spring and she figured a foreclosed home would make the best buy.

Phillips, 29, a second-grade teacher, and her husband, Scott, were expecting their first child and wanted to be close to her parents in Macomb Township. They found what they thought was the perfect house right in the same subdivision.

The price was right at $135,000 and the bank accepted the couple's offer. But in the weeks between the offer and closing, an unchecked leak in the basement spread toxic black mold throughout the entire lower floor.

Because of the damage, the Phillipses were able to get out of the deal.

"The houses were in such disarray. We went through some houses that looked like people left in the middle of the night," Kelly Phillips said. "One house had kids' toys. Another had ketchup and mustard sprayed all over the walls."

After looking at nearly 40 foreclosed homes in Macomb County, she decided she didn't want a deal that bad. The Phillipses ended up buying a house for $155,000 in Clinton Township from a couple that had moved out of state for work.

"With me being pregnant, I couldn't emotionally take it anymore. The banks just weren't taking care of them," she said.

While searching for a great deal on a foreclosed home sounds like a good idea to many potential home buyers, the reality might surprise them.

The typical foreclosed home now on the market in metro Detroit is going to have some blemishes, said Deborah Ronayne, a Realtor with Keller Williams Realty in Novi.

"These houses sit, sit, sit, and no one takes care of them," she said.

Tricia Raymond, a foreclosure expert with Keller Williams Realty in Troy, said that banks had been listing foreclosures at an as-repaired price, but are now using the as-is price, a big difference.

As-repaired is usually a higher, more optimistic price, assuming the bank will make the fixes. As-is is usually lower because the buyer has to make the repairs.

"This year, many banks began pricing the homes at or below the as-is value, especially the more expensive ones," Raymond said. "I think it was because they were getting tired of having expensive houses get flooded or have a lot of damage by being vacant too long and then ending up as a moldy house that they took a bath on after paying a year or two of taxes."

Raymond said that now some foreclosed homes are seeing multiple offers and the banks are recovering more value.

Some of the more common problems Ronayne has seen in foreclosed homes include busted-up kitchens, holes punched in drywall, mold and water damage.

She said utilities are generally turned off unless there is a showing to a prospective homeowner. All it takes is a big rain to cause water damage in a basement when the power's been cut to the sump pump.

Ronayne took the Free Press on a tour last week of five homes that banks repossessed. The homes ranged from a $41,067 tear-down in Farmington Hills to an $850,000 unfinished home in an upscale Northville Township subdivision.

They all had one thing in common: They needed lots of work.

• House 1: A Farmington Hills three-bedroom, two-bath home in a nice neighborhood. The 1,596-square-foot house is a steal at $124,900 -- that is, if the buyer is willing to fix busted cabinets in the basement, replace the buckling wood parquet floor in the kitchen and remove black mold in the basement.

Someone even stuck a plug-in air freshener in the basement. "Like it's going to help," Ronayne said.

"It didn't have to be like this," Ronayne said. "This wasn't a bad place, but most people don't want to tackle what is in that basement."

• House 2: A 1,525-square-foot home near Middlebelt and 13 Mile Road in Farmington Hills priced at $41,067.

It sits on a large corner lot.

Some of the windows are boarded up, but peering inside the grimy kitchen window shows that the walls are missing and the kitchen has been stripped of its cabinetry and appliances. It has water damage.

"This just looks like a teardown," Ronayne said.

• House 3: A 2,792-square-foot home near 12 Mile and Haggerty in Farmington Hills priced at $224,900. It's part of a well-maintained, quiet neighborhood. It has four bedrooms, two baths and a large deck.

On the downside, the wood deck is deteriorating. A broken window near the front door is letting moisture in and mold is beginning to form. It has water damage in the basement, holes punched in the drywall and beat-up walls in bedrooms.

"This is just a good example of why these houses aren't moving," Ronayne said.

• House 4: A four-bedroom, two-bath home priced at $239,900. It sits on 5 acres with a horse barn and paddock in Brighton Township. The 2,000-square-foot home includes a finished walk-out basement.

The kitchen appliances are gone and there is some mold in the basement and water damage to the living room ceiling.

• House 5: A 4,800-square-foot home in the Stonewater subdivision in Northville Township priced at $850,000. It has four bedrooms and three bathrooms.

This one, however, was not finished before the builder ran out of money. It needs flooring, woodwork, doors, fixtures, lighting and landscaping. The average home in this subdivision sells in the $1.2-million range.

Ronayne notes that Stonewater was one of the first areas in metro Detroit to get hit with foreclosures. Two years ago, 31 houses, or 12% of all homes in the subdivision, were in foreclosure. She estimates that the house needs at least $100,000 to $150,000 to finish.

"It's just not going to move at that price. They don't understand -- they just need to cut their losses," she said.

Gary Marowske, president of Flame Heating, Cooling and Electrical in Warren, said some problems he finds on inspections are things the typical investor in foreclosed property may overlook.

One of the biggest problems is simple neglect. When people are behind on the mortgage, they probably are not maintaining the appliances. Because furnaces and air-conditioning systems are expensive, Marowske advises that the heating system be checked for carbon monoxide leaks.

"Get the right inspections, do your homework and make sure you know what you are buying because usually you get what you pay for," he said.

Housing Pain Gauge: Nearly 1 in 6 Owners 'Under Water'

More Defaults and Foreclosures Are Likely as Borrowers With Greater Debt Than Value in Their Homes Are Put in a Tight Spot

OCTOBER 8, 2008
By JAMES R. HAGERTY and RUTH SIMON

The relentless slide in home prices has left nearly one in six U.S. homeowners owing more on a mortgage than the home is worth, raising the possibility of a rise in defaults -- the very misfortune that touched off the credit crisis last year.

The result of homeowners being "under water" is more pressure on an economy that is already in a downturn. No longer having equity in their homes makes people feel less rich and thus less inclined to shop at the mall.

And having more homeowners under water is likely to mean more eventual foreclosures, because it is hard for borrowers in financial trouble to refinance or sell their homes and pay off their mortgage if their debt exceeds the home's value. A foreclosed home, in turn, tends to lower the value of other homes in its neighborhood.

About 75.5 million U.S. households own the homes they live in. After a housing slump that has pushed values down 30% in some areas, roughly 12 million households, or 16%, owe more than their homes are worth, according to Moody's Economy.com.

The comparable figures were roughly 4% under water in 2006 and 6% last year, says the firm's chief economist, Mark Zandi, who adds that "it is very possible that there will ultimately be more homeowners under water in this period than any time in our history."

Among people who bought within the past five years, it's worse: 29% are under water on their mortgages, according to an estimate by real-estate Web site Zillow.com.

The majority of homeowners still have equity, and even among those who don't, many continue to make their mortgage payments on time. The financial-bailout legislation could at least "keep things from getting much worse" by helping banks avoid the need to tighten credit further, says Celia Chen, director of housing economics at Economy.com. Still, she expects housing credit to remain tight and home prices to decline in much of the country for another year or so.

Prices are back to 2003 levels in the San Diego and Boston metropolitan areas, and back to 2004 levels in Las Vegas, Los Angeles, San Francisco, Fort Lauderdale, Fla., and Minneapolis, according to First American CoreLogic, a data firm in Santa Ana, Calif.

Stephanie and Jason Kirschenman thought they were being prudent when they agreed in late 2004 to buy a new four-bedroom home in Lodi, Calif., for $458,000. They put a substantial 20% down and chose a loan with a fixed interest rate for the first 10 years. Two years later, they took out a second mortgage to pay off some bills.

At the time, the home was appraised for about $550,000. But a mortgage broker recently estimated its value at well below the $380,000 the family owes on it, says Ms. Kirschenman. "We were quite shocked," she says.

The Kirschenmans, who both work for a company that makes trailer hitches, thought about sending the keys to the lender. But their financial planner, Christopher Olsen, helped persuade them to stick with the house, noting that they could still afford the payments.

Others aren't so lucky. Among mortgages on one- to four-family homes, 9.16% were a month or more overdue or were in foreclosure in the second quarter, according to the Mortgage Bankers Association. That compared with 6.52% a year before and was the highest level since the association began such surveys 39 years ago.

Falling values have contributed to a sharp pullback in mortgage lending. In the third quarter, mortgage lending fell to the lowest level in eight years -- down 44% in a year -- says the publication Inside Mortgage Finance.

One reason is that as home values slip, growing numbers of would-be borrowers lack sufficient equity to refinance. The falling values also make mortgage lending look riskier to banks, spurring them to tighten credit standards.

Most mortgages in default were issued in 2006 and 2007, when lending standards were loosest and the housing market was peaking. Many who bought then made small down payments or none, so they had little equity in their homes from the start.

The performance of loans made earlier is getting worse, too, as price declines deplete the equity people built up. In Las Vegas, 6% of home loans made in 2004 are now 30 days or more overdue, up from 3.7% a year earlier, according to research firm LPS Applied Analytics.

In July, Congress enacted legislation designed to help borrowers who owe more than their homes are worth by allowing them to refinance into a government-backed loan, provided their mortgage company forgives part of their principal. It's not clear how many borrowers the program will help, because before reducing the principal, lenders would almost always try first to freeze or reduce borrowers' interest rate to make payments more affordable, says Tom Deutsch, deputy executive director of the American Securitization Forum, an industry group.

In contrast with the 12 million home borrowers estimated to be under water, 64 million have equity in their homes. These include 24 million households who own their homes free and clear, and 40 million whose homes remain worth more than is owed on them.

Even so, some borrowers fret that declining prices and tighter lending standards could make it hard for them to tap their equity.

Steven Schneider, a mortgage broker in Miami, bought his home at the end of 1992. When he refinanced about four years ago, he pulled out $150,000 in cash that he intended to use to build an addition. The transaction raised his total debt to about $350,000, at a time when his home had a value of about $650,000.

Recently, Mr. Schneider pulled out roughly $90,000 by tapping a home-equity line of credit. He says he put the funds in a money-market account that yields less than the 5% interest rate on the loan. "I was afraid they were going to shut down" access to the credit line, says Mr. Schneider. He figures his home, once valued at $750,000, now is worth about $600,000.

How much pain homeowners feel varies greatly from place to place. The most severe drops in home values are in parts of California, Florida, Nevada, Arizona and other areas where speculation pushed prices up and builders far overestimated demand.

Within metro areas, neighborhoods with short commutes are holding up better than others. And in many parts of Texas and North Carolina, home prices have continued to rise slowly, have leveled off or have declined only modestly.

On a national basis, home prices peaked in mid-2006 after rising 86% since January 2000, according to the First American index. Since peaking, that index has fallen 13%.

The declines have made homes more affordable, bringing prices in many areas closer to their long-term relationship to incomes. In the second quarter, the median home price of about $203,000 was 1.9 times average pretax household income, according to Economy.com. That was close to 1.87 times income for 1985 through 2000, prior to the housing boom.

Housing markets don't tend to turn around quickly. The price slump in California in the early 1990s, for instance, was a long grind. According to the S&P/Case-Shiller home-price indexes, Los Angeles prices peaked in June 1990 and didn't bottom until March 1996. They didn't get back to their 1990 peak until 2000.

Authorities declare war against mortgage fraud

Metro Detroit has been devastated by the crime, say police, FBI

BY JOHN GALLAGHER • FREE PRESS BUSINESS WRITER • October 8, 2008

Law enforcement agencies Tuesday launched an all-out war against mortgage fraud in metro Detroit, acknowledging that the crime has devastated southeast Michigan.

Acting U.S. Attorney Terrence Berg announced the formation of a task force involving federal, state and local agencies. The group will take on the financial crimes that often leave neighborhoods pockmarked by abandoned and foreclosed homes.

"We are all victims," Andrew Arena, FBI special agent in charge at the Detroit office, said Tuesday. "I think it's an understatement to say that mortgage fraud has had a profound impact on the economy of the state of Michigan."

Mortgage fraud began to flourish a few years ago in the easy-money, anything-goes mortgage market that flooded the nation with bad loans. Bad housing loans bundled into exotic securities are at the root of the economic crash that has brought down Wall Street financial houses, prompted Congress to approve a $700-billion bailout and rippled to economies worldwide.

In that inflated credit atmosphere, many varieties of mortgage fraud arose.

Some, akin to identity theft, saw criminals file a false deed to an owner's home and then sell the house. In other types, phony buyers and sellers colluded to establish an inflated sale price for a house, get a big mortgage based on that, and then walk away with the cash.

Bernard Youngblood, Wayne County's register of deeds, estimated Tuesday that perhaps 25% of the home foreclosures in metro Detroit involve mortgage fraud.

"It's huge," Youngblood said of the problem. "It's a lot easier than putting a knit hat over your head and going in and holding up a 7-Eleven."

The agencies involved in the task force include the Internal Revenue Service, the Federal Deposit Insurance Corp., the Michigan Attorney General's Office, several agencies of Wayne, Oakland and Washtenaw counties, and three major lenders -- Flagstar Bank, JP Morgan Chase Bank and Bank of America.

Concern about mortgage fraud in southeast Michigan goes back at least to 2005, when three Wayne County agencies set up their own task force. Those task force agencies -- the Register of Deeds, the Sheriff's Office and the Wayne County Prosecutor's Office -- will be in the new multiagency force.

The local task force opened nearly 700 case files on complaints, got almost 40 convictions of people who were involved in fraud, and returned about 150 homes to their rightful owners after the properties were stolen through fraud.

The new task force will enable local, state and federal agencies to coordinate their actions, share information and proceed along a common front against the criminals.

Berg said people who engage in mortgage fraud range from petty thieves, drug dealers and members of biker gangs to insiders at financial institutions who gave in to temptation in the period of easy money.

"With metro Detroit being at the top of nearly every list in terms of mortgage fraud and home foreclosures, we need a full-court press that brings all the federal, state, and local law enforcement agencies, the regulators and the major banks together to go after the big mortgage fraud players," Berg said.

But stopping mortgage fraud is not easy, Youngblood said.

"These things are extremely sophisticated, and it takes a sophisticated group of law enforcement officials to get involved with them," he said. "These are jigsaw puzzles that have to be put together."

Case-Shiller: House Prices Fall 14%

New-Home Sales Post April Increase

By DONNA KARDOS
May 27, 2008 WSJ

The S&P/Case-Shiller home-price indexes, a closely watched gauge of U.S. home prices, saw prices fall further in the first quarter amid the continued deterioration of home prices as the subprime-loan meltdown weighs on the sector.

Meanwhile, new-home sales rose in April but failed to meet expectations because the government revised lower the level of demand for the previous month.

In the first quarter, the Case-Shiller indexes showed home prices across the country fell 14% from a year earlier, representing the largest drop in the 20-year history of the indexes. From the fourth quarter, prices fell 6.7%.

"The steep downturn in residential real estate continues," David M. Blitzer, chairman of S&P's index committee, said. He added, "There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path."

According to the indexes, released by ratings firm Standard & Poor's, home prices in 10 major metropolitan areas fell 15% in March from a year earlier and 2.4% from February.

In 20 major metropolitan areas, home prices dropped 14% from a year earlier and 2.2% from February.

Charlotte and Dallas managed to avoid March-over-February drops in prices, with Charlotte eking out 0.2% growth and Dallas posting a 1.1% increase. Charlotte also reported a 0.8% rise year-over-year, as -- for the third month in a row -- it remained the only city to post annual growth.

Las Vegas was the weakest market, posting a 26% drop in March from the prior year, followed by 25% and 23% drops in Miami and Phoenix, respectively. Las Vegas and Miami had been the weakest markets in January and February.

Las Vegas and Miami also were the biggest decliners month-on-month, posting 4.4% and 4.5% drops, respectively.

According to a separate measure released last week by the Office of Federal Housing Enterprise Oversight, home prices fell an average of 1.7% nationwide in the first quarter from the final three months of 2007. The decline was the largest in the index's 17-year history. The index differs from the Case-Shiller index in several ways; notably, Ofheo data excludes homes with jumbo mortgages.

Earlier this month, the Commerce Department offered the latest sign that the struggling U.S. housing market may hold back economic growth for much of the year. While home construction unexpectedly jumped 2.5% in April follows months of bad weather that held back many builders, permits declined 8.9% from March to an annual rate of 1.43 million, marking the largest percentage drop since a 24% tumble in February 1990. Permits are now down 41% from their 2005 peak. Housing permits, which are down 28% from a year ago, predict the market's direction better than housing starts.

Meanwhile, the National Association of Home Builders also said earlier this month that home builders' confidence has fallen substantially, to match the lowest point in the latest economic cycle. The meltdown in subprime loans is expected to continue weighing on the sector, and high inventories will need to be worked off.

New Home Sales Increase

Sales of single-family homes increased by 3.3% last month to a seasonally adjusted annual rate of 526,000, the Commerce Department said Tuesday. Year over year, new-home sales were 42% lower than the level in April 2007. March new-home sales fell 11.0% to an annual rate to 509,000; originally, the government said March sales dropped by 8.5% to 526,000. Economists had forecast an April sales rate of 533,000.

The median price of a new home increased by 1.5% to $246,100 in April from $242,500 in April 2007. The average price climbed by 3.0% to $321,000 from $311,700 a year earlier. In March, the median price was $225,500 and the average was $291,500. The increase in prices may be positive for future sales; declining prices have been stopping consumers from buying homes as they wait for still-lower prices.

Inventories fell to an estimated 456,000 homes for sale at the end of April, down from March's 467,000. The ratio of new houses for sale to houses sold fell in April to 10.6 from 11.1 in March. Originally, the government estimated the March ratio at 11.0.

Regionally last month, new-home sales increased 5.8% in the Midwest, 41.7% in the Northeast, and 8.3% in the West. Sales fell 2.4% in the South. An estimated 47,000 homes were actually sold in April, down from 49,000 in March, based on figures not seasonally adjusted.

Home value drop hurting cities

First statewide slump since 1960s means local governments won't see usual revenue increases.

Mark Hornbeck / Detroit News Lansing Bureau
May 26, 2008

Property values dropped statewide this year for the first time in nearly five decades, signaling that Michigan could be on the verge of its next fiscal crisis: the decimation of local government budgets.

As a result of the depressed housing market, assessed values dipped 1.3 percent across the state this spring, dragged down by a 3.9 percent fall in Wayne, Oakland and Macomb counties, according to the State Tax Commission.

That means local governments that have been accustomed to annual increases of 5 percent to 6 percent in the revenue raised by property taxes will see no increase this year.

"This will be the biggest financial challenge in Michigan history," said Mark Vanderpool, city manager of Sterling Heights.

"The state is going to have to work with cities to solve this problem. Some will have to drastically cut services and quality of life will quickly erode."

Vanderpool predicted votes on millage increases across the state and "service cuts in the big three departments: police, fire and public works."

The last time property values declined statewide was in 1962, state Treasury officials said.

Generally, about 60 percent of municipalities' operating budgets are bankrolled by property taxes.

Communities know the hit is coming, and are formulating plans to cushion it.

'It'll be a huge issue'

Gary Olson, director of the Senate Fiscal Agency, an arm of the state Senate, said many municipalities have come under financial stress even when growth in property values was substantial.

"There will be major fiscal problems in local governments over the next couple years. It'll be a huge issue," Olson said.

School districts, which get a share of their funding from property taxes, also will take some hits. Downturns in the usually stable property tax mean that the state will have to pick up the slack from other sources of school aid revenue, such as sales and income tax.

But the state has money troubles of its own and is in no shape to bail out the locals. Officials learned this month that next year's state revenues will come in about $470 million short of estimates. This comes after the governor and lawmakers last year approved tax hikes totaling $1.4 billion to erase a persistent state budget deficit.

"It's one more thing to add to the school funding problem. This will make it harder for the state to provide school aid increases," said Thomas White, executive director of the Michigan Association of School Business Officials. "And some districts may have to increase millage to pay off bonds."

Preliminary figures show assessed property value, which is supposed to be 50 percent of actual market value, is down 3.6 percent in Wayne County; 3.7 percent in Oakland County; and 5 percent in Macomb and Livingston counties. Taxable value -- which is capped by state law at inflation or 5 percent a year, whichever is less -- is up by a fraction of 1 percent in Oakland, Macomb and Livingston and down by a similar amount in Wayne.

Taxable value is expected to plunge into negative territory next year and possibly even later this year after irate citizens win assessment reductions before local boards of review, county equalization officials say.

"This is the first time in modern history we'll see a loss in property values from year to year," said Dave Hieber, equalization manager for Oakland County.

"And it's likely to get worse next year, when we're anticipating residential values off in the 8 to 10 percent range."

Statewide losses in billions

Municipalities were limping from some $700 million in state cuts in revenue sharing over the past five years.

They'd hoped for a $16 million increase in revenue sharing this year, but the state Senate is poised to wipe out that proposal because of lower-than-anticipated state tax receipts.

Communities use revenue sharing to pay for public safety and other critical services.

But those reductions "will pale by comparison" to the budget-gutting that will result from the property value drop-off, said Steve Mellen, equalization director in Macomb County.

"Next year, we're looking at a decrease of over $100 million in taxes for all local units -- the county, schools, cities and townships," Mellen said.

Statewide, the losses will be in the billions of dollars, said Vanderpool of Sterling Heights.

"Our assessments will decline by almost 8 percent -- that's the largest fall-off in our history," he said. "And it will continue over the next few years."

The property value tumble is fallout from a housing market decline. The average price of a home dropped by 11 percent in Metro Detroit last year and 15 percent in January alone.

In addition, Michigan is in the top 10 states in home foreclosures.

Last month, Detroit had more foreclosure sales than regular home sales.

In Macomb, foreclosure sales totaled 40 percent of all home sales and the share was about one-third in outer Wayne County and Oakland County.

Summer Minnick, director of state affairs for the Michigan Municipal League, said cities will be affected by the decline for "many years."

"We're right at the beginning of a pretty severe decline in taxable value on property. Even when the economy turns around, it won't necessarily be much better for us because of the caps on property taxes," Minnick said.

"It's not a pretty picture."

Home construction falls to record low

Residential permits drop by 80%, but nonresidential projects show an 8% increase.

Catherine Jun / The Detroit News / May 15, 2008

Residential building in southeast Michigan fell for a third year in 2007, dropping by as much as 48 percent -- a record low in home construction since the early 1980s, according to data released by the Southeast Michigan Council of Governments this week.

And if it wasn't for nonresidential construction holding steady, the state's economy would be a lot worse, the data shows.

"It's mostly institutions, retail, and hospitals that's keeping it going," said Janet Mocadlo, planning analyst for SEMCOG.

With another year of sputtering home construction in 2007, the region logged an 80 percent drop in new housing permits since the housing boom in 2004, which was primarily fueled by low interest rates.

The data was compiled from the seven-county region, which comprises Wayne, Oakland, Macomb, Livingston, Monroe, St. Clair, and Washtenaw.

Canton Township, once a pacesetter in the region in housing construction, with an average of 1,000 permits annually, logged only 68 last year.

"It was like somebody turned off the faucet," said Tom Yack, township supervisor.

Luckily, the construction of box stores and industrial centers on Michigan Avenue is thriving, he said.

"We've got enough in the pipeline to keep our folks busy for the next two years," he said.

While the housing market sputtered, expansions of hotels, hospitals and other commercial ventures has boosted nonresidential construction in the region, which logged an 8 percent increase in 2007 from the previous year.

Leading the area in terms of square footage was Wayne County -- with the new north terminal at the Detroit Metropolitan Airport and Detroit's refurbished casinos -- and Oakland County with the expansion at Henry Ford Health System in West Bloomfield and St. John's medical campus in Novi.

"We're still the economic engine of the state," said Maureen Krause, Oakland County's deputy director of economic development and community affairs.

The regional data also shows that for a third year, Detroit's loft development makes it the regional leader in residential building, which could echo a national migration back to urban living among younger homebuyers.

"It's going to take a long time for Detroit to turn into a Chicago or New York City, but I think people are becoming more interested in stopping sprawl and preserving green space," Mocadlo said.

A lot for less than $200,000

Updated houses in desirable neighborhoods are newly affordable

BY GRETA GUEST • FREE PRESS BUSINESS WRITER • May 4, 2008

The market for homes priced under $200,000 is full of possibilities.

Don't be surprised to find features like a finished basement, new roof, appliances, bigger lots and more square footage than would have been available three years ago, said Amanda Callahan, an agent with Keller Williams in Plymouth.

Since the market's peak in 2005, home prices have fallen about 23.2% in metro Detroit, according to the S&P/Case-Shiller home price index. Record foreclosures in the past two years have also created a drag on home values as foreclosed properties compete head-to-head with owner listings.

So, for the first time in years, buyers can find many choices in the under-$200,000 price range in communities such as Allen Park, Westland, Dearborn, Ypsilanti, Detroit, Howell, Harrison Township, Fraser, Clinton Township, Warren, Holly, Farmington Hills, Keego Harbor, Waterford, Monroe, Royal Oak and Ferndale, according to data compiled by multiple listing service Realcomp in Farmington Hills.

'Updated for the least price'

Keena Cockrell, a local fund-raiser, found a great deal in Detroit's University District. She got a 1929 brick home with 1,748 square feet, three bedrooms, two full and two half baths, a finished basement and two-car garage for $100,000, nearly $50,000 off the original asking price.

She searched for 10 months before finding the right home.

"My dream has always been to have a large brick home with plenty of room and a finished basement. What I have to me is just a blessing," Cockrell said. "I was just really determined that there was a house out there with my name on it."

Callahan, who sold Cockrell the house, said it had been on the market for more than a year before it sold. It, like many homes in the area, was in excellent condition. Those are the ones going fast.

"There's almost no comparison to the 2005 market," Callahan said. "It's been plummeting. What's selling right now is the most updated for the least price. People want to walk in and do nothing."

Even in the under-$200,000 price range, real estate agents say buyers are demanding stainless steel appliances, granite countertops and help with closing costs.

Grosse Pointe Farms for $135,000

Elyse Van Houzen, an agent with Re/Max Showcase Homes in Birmingham, sold a new 1,500-square-foot home in Ferndale recently for $199,500. Three years ago when the market was at its peak, people could get only a 1,200-square-feet bungalow for that price.

And new, infill construction has dropped under $200,000 in the past 12 months in some communities, she said.

"Between $150,000 and $200,000, you can get a very nice house that does not need any repair," Van Houzen said. "Under $150,000, it is going to need some things."

Claudia Ganem, 51, an assistant to a financial planner, had rented for years in Grosse Pointe Park before market conditions motivated her to buy a home in Grosse Pointe Farms in mid-April.

She was able to buy the 963-square-foot, two-bedroom, one-bath home for $135,000. The seller paid her closing costs. It had been listed at $149,900. It has an updated kitchen, electrical and plumbing, but might need a new roof soon.

She started looking for houses five years ago in the Pointes, but couldn't find anything in her price range until now.

"It's my first home ever, so it looks pretty good to me," Ganem said. "I want to keep playing it down that I live in Grosse Pointe Farms. My dad jokes that he never made it out of the Park. But it does feel good."

Foreclosure fiasco traps renters, too

When landlords don't pay the mortgage, the tenants often suffer.

Monday, April 14, 2008
Nathan Hurst / The Detroit News

Waiting out the mortgage market meltdown by renting instead of buying is backfiring on some Metro Detroit families.

Renters are being ejected from homes owned by landlords now caught up in the state's foreclosure fiasco.

Leases protect renters from a bevy of unfair actions by their landlords. But when a property's mortgage or taxes go unpaid, those rights can be voided. In Michigan, as long as the home loan predates the rental agreement, the foreclosing entity -- be it bank or tax collector -- isn't required to honor the lease. In many cases, they're choosing not to.

Metro Detroit has been at the epicenter of the nation's foreclosure crisis. In 2007 alone, there were 61,031 foreclosure filings in Wayne, Oakland, Macomb and Livingston counties for all types of owner-occupied and leased properties, a 75 percent increase over the number seen in 2006.

The credit crunch is rippling out to tenants in dwellings from single-family bungalows to multiunit complexes, though data on the exact number of renters affected is scarce, analysts say.

Detroiter Charlene McKnight unexpectedly found herself looking for a new home when her landlord got behind on property taxes.

The mother of three and retired municipal worker moved into a three-bedroom home on Fairfort on Detroit's east side in late 2006. She wanted a place with a little more room, and the $700 monthly rent seemed reasonable.

For a year and a half, she always paid her rent on time and has the canceled checks to prove it. Then, in February, she arrived home with her children from running errands and found a foreclosure notice on her front door.

"I had no idea what it meant," McKnight said. She became suspicious, however, when some other neighborhood properties owned by the same man had similar notices on their front doors. Her landlord was behind on property tax payments owed to Wayne County not just on her home, but on more than a dozen others. Following legal advice, McKnight stopped paying rent and eventually leased a house a few blocks away.

McKnight's family was one of just hundreds in Metro Detroit removed from their homes after property owners failed to keep up on mortgage payments or property taxes in the past year.

According to data provided to by RealtyTrac, an Irvine, Calif.-based real estate information firm, there were 477 recorded foreclosure filings involving multifamily dwellings in Wayne, Oakland, Macomb and Livingston counties between February 2007 and February 2008, the most recent time period for which figures are available. The vast majority -- 437 -- were recorded in Wayne County, primarily Detroit.

That's only a fraction of the tens of thousands of foreclosures recorded in Michigan over the past few years, but even those numbers don't fully show the depth of the foreclosure problem for people who choose to rent their homes.

Tammy Chan, a spokeswoman for RealtyTrac, said the company's numbers don't include single-family homes used as rental properties, nor do they include large apartment complexes, the sales of which are sometimes recorded as commercial property. The data also don't include multifamily properties that may have been errantly labeled as another type when the sales were recorded.

David Lagstein, a community organizer with the Association of Community Organizations for Reform Now, or ACORN, in Detroit, said his office has been receiving more calls from renters not knowing what to do when a home's owner isn't fulfilling his or her financial obligations.

"For many of them, it's a surprise," Lagstein said. "It's a very rude wake-up call for people, and there are very few options for families that find themselves in this situation."

Low-income housing advocates suggest renters check up on the landlords before they move in. Unless a landlord is particularly forthcoming, it's difficult for renters to know whether a mortgage is in foreclosure. But they can check tax records to make sure those payments are up-to-date.

Still, even a seemingly together landlord can deceive.

Jeanne Dunne moved into her three-bedroom home on Griffith in Berkley in June, thinking it could be her new permanent residence. It was just across the street from her mother-in-law's house and sported lots of floor space and a basement, perfect for visits from her stepchildren.

Dunne and her husband initially thought about buying the home, given its good location. They figured they could get a good price by waiting out the market, and they also liked the idea of trying the house out before they bought it.

But then an unwelcome surprise was affixed to her front door.

"It was a foreclosure notice," she said. "It said we had to leave."

The family's lease is up May 31, and Dunne said she's ready for a new place. She'll miss the convenience of being near family, she said, but won't miss the hassle of living in a house in foreclosure.

"We're getting tons of mail for" the landlord, Dunne said. "They just assume he lives here, even though he doesn't. I can't wait until I don't, either."

Michigan, Metro foreclosure rates still rank among highest in nation

Tuesday, April 29, 2008

Alex Veiga / Detroit News staff and wire reports

The number of U.S. homes heading toward foreclosure more than doubled in the first quarter from a year earlier, as weakening property values and tighter lending left many homeowners powerless to prevent homes from being auctioned to the highest bidder, a research firm said Tuesday.

In Michigan, foreclosure activity in the first quarter jumped 24.3 percent from a year ago, to 29,544 properties receiving at least one foreclosure-related filing. The state's first-quarter foreclosure rate of one for every 153 homes ranked it seventh-highest in the nation. States with higher rates were Nevada, California, Arizona, Florida, Colorado and Georgia, Irvine, Calif.-based RealtyTrac Inc. said Tuesday.

Nationwide, 649,917 homes received at least one foreclosure-related filing in the first three months of the year, up 112 percent from 306,722 during the same period last year, RealtyTrac said. The latest tally represents an increase of 23 percent from the fourth quarter of last year.

Other first-quarter data for Michigan and Metro Detroit:

• Michigan: The report did have a bit of good news statewide. Foreclosures in the first quarter of 2008 were 8.76 percent lower than in the previous quarter.

• Wayne County: The first-quarter foreclosure rate of one filing for every 68 households ranked sixth-highest among U.S. metro areas, even with filings declining 3.65 percent from a year ago and 22.1 percent from last quarter, to a total of 12,402 filings for the period. Metro areas ranking higher than Wayne County were Stockton, Calif., Riverside/San Bernardino, Calif.; Las Vegas; Bakersfield, Calif.; and Sacremento, Calif.

• Oakland County: There were 3,657 foreclosure filings in the period, a 45.7 percent increase from a year ago and a 1.8 percent hike from the previous quarter. The foreclosure rate was one filing for every 143 households.

• Macomb County: Filings totaled 3,023, up 26.2 percent from a year ago, and 9.41 percent from last quarter. The rate was one foreclosure filing for every 116 households.

• Livingston County: The 574 filings represented a 261 percent increase from a year ago and 29.3 percent from the fourth quarter of 2007. The rate was one foreclosure filing for every 125 households.

• Oakland-Macomb metro area: RealtyTrac combined Oakland and Macomb counties into one metro area with a foreclosure rate that ranked 29th in the nation, at one foreclosure filing for every 133 households.

RealtyTrac monitors default notices, auction sale notices and bank repossessions.

All told, one in every 194 U.S. households received a foreclosure filing during the quarter. Foreclosure filings increased in all but four states.

The most recent quarter marked the seventh consecutive quarter of rising foreclosure activity, RealtyTrac noted.

"What would normally alleviate the foreclosure situation in a normal market is people starting to buy properties again," said Rick Sharga, RealtyTrac's vice president of marketing.

However, the unavailability of loans for people without perfect credit and a significant down payment is slowing the process, he said.

"It's a cycle that's going to be difficult to break, and we're certainly not at the breaking point just yet," Sharga added.

The surge in foreclosure filings also suggests that much-touted campaigns by lawmakers and the mortgage lending industry aimed at helping at-risk homeowners aren't paying off.

Hope Now, a Bush administration-organized mortgage industry group, said nearly 503,000 homeowners had received mortgage aid in the first quarter. Most of the aid was temporary, however.

Pennsylvania was a notable standout in the latest foreclosure data. The number of homes in the state to receive a foreclosure-related filing plunged 24.4 percent from a year earlier.

Sharga credited the decline to the state's foreclosure relief measures, noting that cities such as Philadelphia put in place a moratorium on all foreclosure auctions for April and implemented other measures aimed at helping slow foreclosures.

Nearly 157,000 properties were repossessed by lenders nationwide during the quarter, according to RealtyTrac.

The flood of foreclosed properties on the market has contributed to falling or stagnating home values, yet lenders have yet to implement heavy discounts on repossessed homes, Sharga said.

Nevada posted the worst foreclosure rate in the nation, with one in every 54 households receiving a foreclosure-related notice, nearly four times the national rate. The number of properties with a filing increased 137 percent over the same quarter last year but only rose 3 percent from the fourth quarter.

California had the most properties facing foreclosure at 169,831, an increase of 213 percent from a year earlier. It also posted the second-highest foreclosure rate in the country, with one in every 78 households receiving a foreclosure-related notice.

California metro areas accounted for six of the 10 U.S. metropolitan areas with the highest foreclosure rates in the first quarter, RealtyTrac said.

Many of the areas -- including Stockton, Riverside-San Bernardino, Fresno, Sacramento and Bakersfield -- are located in inland areas of the state where many first-time buyers overextend themselves financially to buy properties that have plunged in value since the market peak.

"California still hasn't hit bottom," Sharga said. "We have a lot of California homes that are in early stages of default that may not be salvageable because either there's no market or financing available, or both."

Housing crisis yields 18.9-month supply of homes for sale

Inventory hurts owners but great news for buyers

BY GRETA GUEST • FREE PRESS BUSINESS WRITER • April 13, 2008

Metro Detroit had a staggering 18.9-month supply of homes for sale at the end of 2007, and some cities were swamped with four years or more worth of housing inventory that people are desperately trying to sell.

That's almost double the national average of 9.6 months of existing home inventory at the current sales pace, itself a sign of trouble in the U.S. housing market where a three- to six-month inventory is considered normal.

The vast oversupply of houses could depress prices further as Michigan struggles to remake its economy, said Caroline Sallee, a consultant for Anderson Economic Group in East Lansing, and others said the phenomenon is crimping retirement plans or the ability to move for jobs.

Sales prospects in many spots are grim. Huntington Woods had a 45.7-month home supply, and Oakland County had a 20.2-month inventory overall, according to listing data released last week by Real Estate One in Southfield.

Detroit had a 51.1-month inventory of homes listed.

Home sellers in some spots had better prospects, such as in Pleasant Ridge, with an 8.8-month supply on the market. But most places were well above the national average.

The 18.9-month combined inventory for Wayne, Oakland, Macomb, Washtenaw and Livingston counties marks an 11.8% rise from the end of 2006 and a 60% climb from 2005.

High unemployment and continued cutbacks for Detroit's automakers has hit Michigan's real estate market harder than most around the country. And while speculators drove prices sky-high in Florida, California and Nevada, metro Detroit did not ride the price bubble up as far.

Still, metro Detroit led the nation last year in the rate of foreclosures, pushing up inventory, and home prices have fallen 15%. Even with prices down, prospects for droves of home buyers are darkened by such factors as the state's net outmigration of 90,000 people for the 12 months ending in June 2007.

And the inability to sell a home is affecting lifestyles and the ability to seize opportunities.

Home becomes a burden

Many people can't move to take better jobs in other cities, can't downsize their housing or retire because their biggest asset -- their home -- can't be sold, said Dana Johnson, chief economist at Comerica Bank. Some who took buyouts from the auto companies are staying put because they don't want to take a beating on their home sales price, he said.

"I think it is creating less mobility for people who for career reasons or life changes may want to move. You are stuck to a greater degree than normal," Johnson said.

Don Grimes, a University of Michigan economist, said buyers are here but they are waiting for prices to hit rock-bottom before they buy. Family formation is still going on. Once they start buying, inventories will fall to normal levels, he predicted.

"From what I am able to tell, it may be getting down to the bottom in the Detroit area," Grimes said. "People need to see that prices have hit bottom so they won't be kicking themselves six months from now."

One of the biggest reasons for the oversupply is that sellers overpriced their homes, Grimes said.

That seems to be the issue in Huntington Woods, said Greg Barnas, an agent with Sine & Monaghan in Royal Oak.

"A lot of what is still out there in Huntington Woods is still overpriced. The houses that are priced well and in good condition are still showing well and selling," Barnas said.

Other agents in Huntington Woods say that sales have picked up this year.

On Friday, there were more children playing in yards and riding bicycles along the city's tree-lined streets than real estate signs. A few signs had "sold" on them while others advertised a reduced price.

Betsey Rubel isn't worried about selling her 2,086-square-foot home on LaSalle Boulevard. The four-bedroom, two-bath home has been listed since January for $299,900. The Rubels, who want to move to Bloomfield Township to be closer to their daughter's school, paid $220,000 in 2001.

"We're not in a time crunch," said Rubel, 33. "When our house is ready to sell, it will."

Rubel said she has seen houses linger on the market in the city over the past several months, but she said she believes some of them have been overpriced -- like one down the street that sat for about a year, listed at more than $800,000. The Rubel house has drawn interest, with about 10 showings.

Money matters

Charlie Lutz, a realty agent with Re/Max Acclaim in Roseville, said it's all about price. He has had a Macomb Township home listed for six months that's gotten two offers in the past three months.

But the home has been on the market for more than two years with different agents and had no offers until this year. Seller Jackie Odbert won't budge off the current price of $249,900. That's down from the original price of $329,000 for the four-bedroom, 2,600-square-foot home.

"After over 40 showings, Jackie is one of many sellers who are in shock when they understand the market controls the price, not the seller or the Realtor," Lutz said. "The buyer is the market and they don't negotiate on an overpriced property."

Odbert, 52, a nurse at St. John Macomb, built a new house in St. Clair County just before putting her home on the market in August 2005, just when the market started to slow. She's working overtime to take care of both homes.

"As we keep going down with the price, it's disappointing," Odbert said. "The people come in, and it seems they want everything for nothing. They want you to pay closing costs, they want a finished basement, a three-car garage. They don't seem to realize how much the owner put into it, and we won't get it back.

"I just might have to let it go to the next person who makes an offer of $220,000," she said. "Who knows if it's going to get better in Michigan?"

Buyer's paradise

Although sellers find anguish and frustration in the market, realty agents and builders say there won't be another buyer's market like this for a decade or more.

Herb Lawson, president of Windham Development in Bloomfield Hills and past president of the Building Industry Association of Southeastern Michigan, said pent-up demand in the area will be unleashed soon.

"At the end of 1983, they claimed there was a 12-year supply of homes. It was a matter of 36 months when they were all gone," Lawson said. "There hasn't been new development in the last two to three years. People buying today are going to say how smart they are for having bought a home or condominium."

He noted that in the new home market, the supplies are smaller. For example, when looking at single-family detached housing in the five counties, there is a four- to 10-month supply, according to Housing Consultants Inc. in Clarkston.

The Real Estate One report compiles closely guarded multiple listing services data usually available only to Realtors and is the first comprehensive look at metro Detroit's housing supply. Real Estate One started compiling the reports two years ago for its agents, but decided to issue them to the public late last year, said Dan Elsea, president of brokerage services.

The report, issued quarterly, pulls listing information from several sources including RealComp Inc., a multiple listing service in Farmington Hills.

The report predicts that as a recovery starts in early 2009, this year will be remembered as the "best buying point over the next 10 years or more."

Richard Komer, president of homebuilder Wineman & Komer Building Co. in Southfield, couldn't agree more.

"Something like this only happens once every 25 years or something. This is a real drop," Komer said. "I don't know if the buying public really understands that."

Metro Detroit takes lead on U.S. population loss rankings

By PAUL J. WEBER • Associated Press • March 27, 2008

Detroit lost more than three times as many people as any other metro area in 2006 and 2007, according to Census Bureau estimates to be released today.

Its population declined more than 27,300. Other areas losing more than 5,000 people were Pittsburgh, Cleveland, Columbus, Ga., Youngstown, Ohio, and Buffalo, N.Y.

Four Texas metropolitan areas were among the biggest population gainers as Americans continued their trend of moving to the Sun Belt.

Dallas-Fort Worth added more than 162,000 residents between July 2006 and July 2007, more than any other metro area. Three other Texas areas — Houston, Austin and San Antonio — also cracked the top 10.

Atlanta saw the second-largest population jump with just over 151,000 new residents. Phoenix was third with more than 132,000, and was followed by Houston, Riverside, Calif., Charlotte, N.C., Chicago, Austin, Las Vegas and San Antonio.

Of the 50 fastest-growing metro areas, 27 were in the South and 20 were in the West. Two were in the Midwest, one — Fayetteville, Ark. — straddles the South and Midwest and none was in the Northeast.

Experts credit much of the growth in the South to relatively strong local economies and housing prices that are among the most affordable in the U.S.

“People are running away from unaffordable housing, from the economic slowdown,” said Karl Eschbach, a state demographer in Texas. “I would expect Texas to stay at the top of a slowing game.”

According to figures compiled by Eschbach, 16% of Americans who moved to other states between July 2006 and July 2007 came to Texas, which led the nation for the second straight year in that category.

Home prices continue to be a big factor. A report earlier this month by Global Insight found that housing prices in the Dallas area were undervalued by as much as 30%.

Ann Sekesan, a pharmacy technician, moved her family from Pennsylvania to suburban Fort Worth last June after seeing spacious homes in Texas for under $200,000 on a television show.

“After we saw that on TV, my husband and I looked at each other and said, ’Have you ever been to Texas?” Sekesan said. “It’s amazing the size of a home you can get down here. It’s just incredible.”

Among other Census Bureau findings:

• On a percentage basis, the Palm Coast, Fla., area was the fastest-growing in the nation. Population there jumped by 7.2% to more than 536,000. The next areas experiencing the biggest surge in growth were St. George, Utah; Raleigh, N.C; Gainesville, Ga.; and Austin.

• The New Orleans area, recovering from Hurricane Katrina, grew by 4% or nearly 40,000 people, putting it 16th in terms of raw numbers but eighth for percentage growth. During the same survey last year, the population of New Orleans dropped by nearly 290,000 people.

Up north dream homes a nightmare to unload

Saturday, March 22, 2008

As economy slumps, second homes lose value as they sit unsold for months

Joel J. Smith / Special to the Detroit News

When Paul Bucci hung the "For Sale" sign on his Higgins Lake vacation home, he never dreamed he'd still be looking for a buyer 16 months later.

But in all that time Bucci, who built the house six years ago, has received only a single offer of $99,000.

That's $30,000 less than he had in mind for the three-bedroom chalet near a golf course.

"This isn't a shack. This is a beautiful year-round home," said the frustrated Bucci, a Chrysler worker from Grosse Pointe Farms. "I'm keeping the 'For Sale' sign up. I'll just sit on it if I have to. But I'm not giving it away."

Bucci, like thousands of other property owners, is learning the hard way that the fallout from a troubled economy has rippled out to the lakes, rivers and swimming pools of Michigan's venerable northern vacation home market.

Many homeowners are stuck paying the mortgage on an up north cottage they can't unload because other families, who might once have ventured into the vacation-home market, are cutting back in light of job-security fears, stricter lending standards, the high cost of gasoline burned on weekend drives north or other economic concerns.

Unfortunately for sellers, this "buyers" market has come when many second-home owners are facing layoffs, lost overtime, cuts in pay or simply want to move out of Michigan and seek work elsewhere.

They are desperate for the money they have tied up in their vacation property but can't get their hands on it -- at least not very quickly.

"There are a lot more homes for sale and they are on the market for a longer period of time," said Rick Stein, co-owner of RE/MAX Bayshore Properties in Traverse City. "In some cases the market time has doubled or tripled in just a year or two.

"There is a price that every property will sell for. It's just a matter of if you're willing to accept that price and how long you'll wait to get it."

For many, it'll be a long wait.

For example, there are 3,568 properties listed for sale with real estate agents in the Traverse City area.

Not all are cottages, of course, but competition for buyers will jump dramatically in four to six weeks as the summer selling season approaches.

"Part of the problem we're seeing is there is no sense of urgency on the part of the buyers," said Stein, who has been a real estate agent for 30 years.

"Buyers are looking, looking and looking. Everybody is waiting for the bottom of the market whenever that comes. They all want a deal."

Selling first home instead

Joyce Adams-Pranion of Grosse Pointe Park has become so frustrated with trying to sell her two-bedroom log cabin on Saddleback Lake in Oscoda County that she has torn down the real estate sign and listed her downstate residence for sale instead.

She said that if she and her husband, Doug, who is disabled, can sell their Metro Detroit home, they will move up north, where the cost of living is cheaper.

"I've had that property listed for three years," Adams-Pranion said. "People wanted to give me half of what I paid. We've cut the price from $129,000 to $104,000. But buyers are so ridiculous they want us to give it away for free."

Jeffrey Mansell built a house near Sugar Loaf ski resort in the mitten's northwest corner. He built it to sell it for profit, but his dream never materialized. For two years, as the house sits empty, Mansell has been paying $1,100 a month on that $175,000 loan, and better than $250 a month more in property taxes and maintenance costs.

"I haven't got a single offer on the property," said Mansell, a highway light engineer from Salem Township. "Right now, I'm just stuck with it. I hope with mortgage rates dropping, I'll be able to sell it. I never dreamed it would take this long."

Shoppers are savvier

Northern Michigan real estate agents say they are selling about the same number of homes as in the past, but for lower prices and after a lot more time and effort.

Daniella M. Bell is a member of the $4 million club for 2007 as an associate broker with Coldwell Banker Schmidt Realtors in Cadillac.

She said the high inventory has made it a buyers' market and buyers today are more savvy and educated than before.

"Buyers won't buy property unless they think they are getting a good deal," Bell said. "The sellers are beginning to see that they have to be more realistic in their pricing if they are going to sell their property. If a home has been on the market for some time, generally it's because it's priced too high."

She said northern Michigan long has been southeast Michigan's prime target area for vacation homes, second homes and retirement living. But Bell said that with financing tight, people who are interested in moving north to live or retire are dependent on selling their Metro Detroit property first.

"That just isn't easy to do these days," she said.

At Michaywe, a 900-unit development with a golf course in Gaylord, 65 properties are for sale. Real estate agents expect that number to climb to about 100 as the summer approaches.

"I know people who have two homes for sale -- one here and one downstate," said Fred Smith, the Coldwell Banker agent at Michaywe. "Whichever one sells first, they will move into the other one. It's tough selling a home today.

"There is nothing written in stone that thou shall make money on real estate. People have to bite the bullet sometimes and take the loss."

Bargains to be had at 2 metro home auctions

790 foreclosed Michigan properties on the block

BY GRETA GUEST • FREE PRESS BUSINESS WRITER • March 23, 2008

Residential real estate buyers will have two chances to get deals hundreds of properties at auction.

The first auction starts Tuesday and runs through Sunday. Up for auction are 790 foreclosed Michigan properties. Nearly 700 are in metro Detroit and are valued from $2,000 to $500,000 and come with title insurance. The rest are in other Michigan cities such as Jackson and Kalamazoo.

"Bank-owned foreclosure auctions are a great way for buyers to find exceptional values on homes because lenders are anxious to unload loans costing them money," said Dave Webb, principal of Hudson & Marshall, auctioneers for the property.

Metro Detroit had the highest rate of foreclosure in 2007 among the 100 largest cities, according to RealtyTrac Inc.

The auction will take place Tuesday and Wednesday at 1 p.m. at the Doubletree Hotel in Dearborn. On Thursday, there are two auctions at 1 p.m. and 7:30 p.m., also at the Doubletree. On Saturday and Sunday, the auction starts at 1 p.m. and moves to the Ford Motor Co. Conference & Event Center in Dearborn.

All homes are sold as-is and potential buyers can attend open houses today from 1 to 3 p.m. The properties are listed at www.hudsonandmarshall.comv or buyers can call 866-539-4172 for more information.

Winning bidders need to make a cash deposit of $2,500 or 5%, whichever is greater, on the day of the auction. Usually, the properties close within 30 days.

Webb said Hudson & Marshall has been conducting real estate auctions in Detroit since 1999. Back then, they would auction around 100 properties. That number has grown sevenfold.

"The best stuff will sell Saturday and Sunday," Webb said. "During the week, we put our really low-dollar investor stuff out. Thursday night at 7:30 will have some of the better stuff."

The listings include homes in Detroit, Novi, Bingham Farms, Ferndale, Plymouth, Bloomfield Hills, Dearborn, Oak Park and other cities.

Another auction focuses on the other end of the market -- new homes and home sites. NRC Realty Advisors in Rochester plans to auction them on April 19. They include 16 new builder homes and condominiums and 273 build-ready lots in seven subdivisions.

The properties were developed by Fritz Builders of Romeo and Michael Moceri of Novi. They are in Almont, Armada, Hartland, Lapeer, Metamora, Northville, Romeo and St. Clair.

Suggested opening bids for the homes that were originally from $250,000 to $2.5 million is $60,000. The $2.5-million price tag came on a 5,700-square-foot luxury log cabin in Northville that is part of the auction.

"In distressed real estate markets such as Detroit, buyers have been able to pick up tremendous bargains when they buy at a real estate auction," said Laurie Tarver, NRC senior vice president.

To view the properties, go to www.nrc.com/806 or call 800-747-3342, ext. 806. The houses and condominiums will be open for viewings on April 4, 5, 12 and 13.

The auction is at the Royal Park Hotel, 600 E. University Drive, Rochester.

Taxes rise, home values fall, owners say, 'Huh?'

Proposal A to blame; many seek help from review boards

BY CECIL ANGEL • FREE PRESS STAFF WRITER • March 14, 2008

All across the tri-county area, there's a different kind of March madness going on that doesn't involve basketball.

Property owners such as 80-year-old Eloise Carswell of Southfield are dissatisfied with their annual property tax assessments and are flocking to their local review boards seeking reductions. A lower property assessment generally means lower taxes.

Carswell said it would be hard to sell her three-bedroom, 2,136-square-foot house with the kind of taxes she has to pay. "This is not pennies," she told the board of her $6,000 yearly tax bill.

With the state recession and rampant foreclosures, disgruntled property owners basically want to know one thing:

"How can my taxes be going up when my property value is going down?" said Westland City Assessor James H. Elrod.

The answer is in Proposal A, the state law passed in 1994 that limits the increase in property taxes to the rate of inflation. So while selling prices soared in the 1990s, taxable values rose much slower. But now the taxable values can continue rising with inflation -- between 2% and 3% -- even though assessed values are now falling.

In Wayne County, projected property assessments in 2008 have dropped about 5%, and in Macomb, they've dropped 7%. Oakland expects a drop of about 0.4%.

State law requires that tax review boards meet in March and field complaints. Property owners are especially frustrated in light of the state's economic recession and the foreclosure crisis that have caused the market value of homes to drop.

How it's all determined

What may seem straightforward to property owners is actually not so simple.

Cities and townships perform mass appraisals comparing sales of comparable homes in the same neighborhood. Elrod said that drops in property values can vary depending on the neighborhood.

In Westland, there was a 7% drop in property values overall. In some neighborhoods, assessed values went up, but in others, values decreased by as much as 22%, according to city records.

How does a homeowner know when to appeal the assessment? He or she should look at the taxable value for 2008 on the assessment notices, Wayne County Assessor Gary Evanko said.

"If twice that number is more than what you think you can sell your house for, go see the Board of Review," Evanko said.

In Oakland, '$80 is $80'

Oakland County may be one the richest county in the state but it, too, has seen property values decline.

Farmington Hills City Assessor Dean Babb said his office fielded about 50 calls from people complaining about their taxes going up, but their assessments going down.

"If people are coming to question that and want to know why, everyone's going to be sympathetic, but the board can't control the calculation of the taxable value. That's mandated in the law."

Still, Claudia and Bradley Trudeau went to Farmington Hill's City Hall on Wednesday with that common quandry:

While their appraised and taxable value of their two-bedroom, two-bath condominium on Orchard Lake Road fell, their property taxes increased.

Claudia, a 51-year-old occupational therapist, and her husband, a 62-year-old retired letter carrier, said it didn't add up.

They pointed out their neighbors were slashing prices of for-sale condos from about $200,000 to the mid- and low $160,000s.

And yet the Trudeaus' property taxes were going up about $80, they told the Board of Review. That might not seem like a big hike, Claudia Trudeau said. "But," she added, "$80 is $80."

Farmington Hills tax assessor Dean Babb explained there was nothing he could do. He already reduced the couple's assessed value to $97,740 down from $104,060 the year before, he said. And it was state law, not the city, that controlled the taxable value of the home, he said sympathetically. Assessments fell in Farmington Hills about 5.68%.

Board of Review Chairwoman Dorothy Jeffres added: "What he's saying is you have to pay your taxes. And we'll see you next year."

Sales help make case for change

There were hints something was wrong with Eileen McDonell's property tax assessment.

For one, her bank notified her in 2004 that her escrow account was short. But it wasn't until earlier this month when she was chatting about taxes with her daughter-in-law Brigid McDonell -- who also lives in a townhouse condominium on Ravencrest near Newburgh Road in Westland -- that it all came together.

"When it went up, I never even realized it," said Eileen McDonell, 90. "I didn't know what other people were paying."

Somehow, the tax cap on her home established under Proposal A had been lifted, and her taxes shot up, the women surmised. McDonell's combined summer and winter 2007 taxes were $3,564.81.

McDonell, a widow, purchased her 1,190-square-foot, two-bedroom townhouse with her daughter Patricia Evans in 1999 for $159,000.

Evans died in 2004, and her children inherited her share of the home. They signed a quitclaim deed making it seem as though Eileen McDonell had just bought the home.

"We believe that's what triggered it," said daughter-in-law Brigid McDonell, 66.

The drop in value is what led the women to Westland City Hall on Wednesday to explain how condo prices in their development had fallen, making a case for lower taxes.

Eileen McDonell mostly observed as her daughter-in-law peeled off copies of sales over the past year. She showed the Westland Board of Review printouts of a condo that sold for $174,900 in October 2006 and sold again for $152,900 on Feb. 1.

She later explained to the board her theory as to why her mother-in-law's assessment increased.

Board member Tracey Sabotchick said the board would not be making any decisions Wednesday because it investigates each case. Eileen McDonell can expect to hear from the board by June 1, she said.

Oakland increase tied to addition

When Jeff Fendelet and Heather Kaminski bought their home in Commerce Township in 2005, their taxes were about $1,900 a year. Now, they pay about $2,700 a year.

After their tax assessment this year showed their home's value at nearly $170,000 -- about $15,000 more than it was appraised for in 2005, when they purchased the home -- they decided to appeal.

The couple, who are engaged, explained to the board that they bought their home for $152,000, about $3,000 less than its market value. They said a real estate agent told them last month that the house couldn't fetch more than $160,000.

But their assessment shows the home valued at more than $175,000. The couple is being taxed on the home's assessed value -- which is actually $87,970, half of the property's estimated market value.

"Our house is not valued at that," Kaminski, 31, told the board.

The board said that a small addition the couple made to the house may have increased its worth. Board member Barbara McNutt explained that the assessment might seem high in a market where home values are declining because the assessments were based on home sales between Oct. 1, 2006, and Sept. 30, 2007.

The couple will have to wait a few weeks to find out what the board decides.

Fendelet and Kaminski said they disagree that the 10-by-10-foot addition raised their home's value so much. Now they say they may not build the addition above their garage as they had planned.

Taxed out of Michigan?

In Macomb County, a similar song is being sung.

Joshua Vance thought he'd take advantage of the housing crunch by buying a foreclosed home for $135,000 and fixing it up so he could raise his two young children in a nice neighborhood in Clinton Township.

Three years later, Vance is thinking of moving -- not just out of his 2,400-square-foot house, but out of Michigan.

His frustrations grew when he opened his tax bill to discover that the assessor pegged the value of his house at $260,000.

While the estimated value was about $10,000 less than it was last year, Vance said the township didn't reduce the value enough in response to the continuing decline of the state's economy. A licensed real estate agent, Vance estimates his house is worth no more than $220,000.

"It's extremely elevated," Vance told the Clinton Township Board of Review this week, in hopes of getting his taxes reduced. "I think it's optimistic, especially considering the current economic situation."

Now he has a tough decision to make -- stay or move.

"I want to stay loyal to my state, but I have a family to raise," Vance said.

Changing economic times

In good economic times, Theodore Whittlesey could better understand why an assessor would raise the value of his two New Baltimore industrial lots beyond what he paid for them in January.

But with all of the "For Sale" signs he sees throughout southeast Michigan, Whittlesey said property values estimated by municipalities should drop.

Whittlesey bought the two lots for about $330,000 apiece in hopes of finding a buyer. Then, he opened his tax bill and found out that New Baltimore estimated that each property was worth about $30,000 more than what he paid.

"It's worse out there than people think," Whittlesey said. "It's turning out that you can't sell a house for as much as the assessed value. You really can't."

When Whittlesey made his case to the Board of Review, imploring the assessor to reconsider the assessment, he got an optimistic reaction.

"The assessor needs to look at this," member Charlene McEachin told Whittlesey. "If there is an error, we will fix it."

This year's assessments hit Whittlesey's wallet in another way. The assessor increased the value of his rental storage units in New Baltimore by $60,000, to nearly $500,000.

He said the units are worth $400,000, especially since he can't find anyone to rent about a third of them.

"Things aren't going well right now," Whittlesey said. "That should be reflected in the assessed value."

Michigan 6th in nation for foreclosures

BY GRETA GUEST • FREE PRESS BUSINESS WRITER • March 13, 2008

Michigan ranked sixth nationwide for foreclosure filings in February, according to figures from RealtyTrac Inc.

The Irvine, Calif.-based Web site reported that Michigan foreclosures were up 1.96% from January and up 17.84% from February 2007.

Michigan ranked in the top 10 nationally for its foreclosure rate of one foreclosure for every 409 households and for the number of filings at 10,957 in February. The national rate was one foreclosure for every 557 households.

RealtyTrac figures include filings in all three phases -- notice of default, notice of sale and bank repossessions.

Michigan's breakdown includes 1,163 notice of default filings, 6,798 notices of sale and 2,996 bank repossessions for the month.

Overall foreclosures nationally fell 4% in February to 223,651 compared with January. Although the trend shows improvement, foreclosures are still up 60% when compared with February 2007.

Said James J. Saccacio, CEO of RealtyTrac, "The year-over-year increase of 60% this February was significantly higher than the 19% year-over-year increase from February 2006 to February 2007, indicating we have still not reached the peak of foreclosure activity in this cycle."

Nevada, California and Florida held the top three spots nationally for their foreclosure rates.

Bargains drive up sales of homes

Uptick from weak '07 sales signals Metro housing market may be rebounding, but prices are lagging.

Nathan Hurst / The Detroit News
March 12, 2008

DETROIT -- After more than three years of declines in home sales, prices and new construction, Metro Detroit could be taking a step toward a housing recovery.

For the third month in a row, sales of single-family houses and condominiums in the four-county region have increased over the same month a year ago.

In the February data released Tuesday, sales were up 13.8 percent over February 2007, according to Realcomp, the Farmington Hills-based multiple listing service. In December sales were up 7.3 percent from the same month a year earlier, and in January they were 15.2 percent.

In contrast, Metro Detroit home sales for all of 2007 were off 14.4 percent from their peak in 2004.

Market experts said the three-month uptick in sales could be a sign that Metro Detroit's long, slow journey to a housing market recovery has begun. Since 2005, home prices have dropped, foreclosures have soared and new construction has sunk to its lowest level in 40 years.

The sales boost is a shot in the arm the region needs, said Don Grimes, a senior research specialist with the University of Michigan in Ann Arbor. "Otherwise, it'll just keep dragging on and on."

But the experts caution that the next steps -- rebounds in home prices and new construction -- won't happen for quite some time.

The sales mostly are being driven by bargain-basement prices, especially for houses in foreclosure, which are bringing buyers back into the market.

Real estate agents have noticed that more homeowners who have had their houses on the market for a long time are pricing those homes to sell, so they can buy a new house at a bargain price, too.

Median sale prices in February demonstrate the effect of foreclosure sales on the local market.

In Detroit, for example, February sales were up 49.4 percent from a year ago, but nearly 58 percent of the sales involved foreclosed homes, with a median sales price of $10,000. In contrast, the median price of foreclosed homes in February 2007 was $27,000.

In Oakland County, foreclosure sales made up nearly 35 percent of transactions in February, with a median price of $91,395, compared with $123,000 last year. The median price of non-foreclosure sales for the month was $176,500, compared with $191,000 a year ago.

Prices likely won't rise soon

Metro Detroit homeowners shouldn't expect significant price gains any time soon, said Dana Johnson, chief economist for Dallas-based Comerica Bank.

"The latest data on house prices still show a pretty ugly decline in the Metro Detroit area," Johnson said. He's predicting prices won't start rebounding until the end of the year, at the earliest.

While that might be disappointing for home sellers, it's not a bad thing for the market as a whole, Johnson said. Recovery in the housing sector will be driven largely by price declines, which will eventually draw buyers into the market.

As home sales rise, inventories will drop, making those homes remaining on the market more in demand, experts say. Only after that demand has been realized will new construction numbers start to pick up, as well.

Until that happens, real estate agents said the lower prices are keeping them busy, with more value-conscious buyers looking at properties.

"There is a tremendous amount of perceived value," said Nanci J. Rands, a broker with SKBK Sotheby's International Realty in Birmingham. "A lot of people have been on the sidelines waiting for that one perfect property that they just couldn't resist at a price that was attractive.

"We have seen many more people calling for appointments now than even a month ago, more than we could explain with the usual spring turnout," Rands said. "There are a lot of properties available at quite attractive prices."

February home sales leap 12.8%

Low prices draw buyers, exec says

BY GRETA GUEST • FREE PRESS BUSINESS WRITER • March 12, 2008

Sales of homes and condos in metro Detroit rose 12.8% in February compared with a year ago, according to figures released Tuesday by Realcomp.

There were 3,591 home and condo sales in the metro area in February compared with 3,184 in the same month in 2007. Realcomp figures are tallied from listing agents' reports of closed sales.

Karen Kage, president of Realcomp, a Farmington Hills-based real estate listing service, said the reason for the rise is that many of last year's foreclosures -- stemming from the sharp decline in the housing industry that began in August 2005 -- are being sold and, with prices down as much as 15% in some areas and interest rates stabilizing, buyers are beginning to step forward.

Detroit saw the greatest improvement as 804 homes and condos were sold in the month compared with 538 in February 2007, a 49.4% jump.

While the area is expected to see its high foreclosure trend continue, the February sales figures are a hopeful sign for the market as spring nears, Kage said.

"We started to see things go up in the fourth quarter of last year but nothing like we are seeing now," Kage said. "We are very optimistic that sales will continue to rise.

"If you are a first-time buyer, I have never in my 30 years in the business seen a better time to buy," she said.

Other highlights from the February sales report include:

• Macomb County sales rose 21.7% to 483 from 397.

• Oakland County sales rose 7.54% to 818 from 761.

• Livingston County sales rose 19.5% to 104 from 87.

• St. Clair County sales fell 9.4% to 87 from 96.

• Wayne County sales rose 28.1% to 1,481 from 1,156.

Home sales, prices decline

January metro Detroit figures are worse than last year's

BY GRETA GUEST • FREE PRESS BUSINESS WRITER • February 26, 2008

Home sales and prices continued to trend down nationally in January, according to figures released Monday.

Sales of existing homes in January fell 0.4% compared with December and were off 23.4% below the pace in January 2007.

The National Association of Realtors said that a seasonably adjusted annual rate of 4.89 million units were sold in January, compared with the 4.91 million sold in December and the 6.44 million sold in January 2007.

The national median existing home price fell by 4.6% to $210,100 from last January.

The fall-off for home sales in metro Detroit was much steeper, according to figures compiled for the Free Press from register of deeds offices in the tri-county area.

• In Wayne County, home sales fell 34% to 2,208 in January compared with January 2007.

• In Oakland County, home sales fell by 27% to 1,117.

• In Macomb County, sales dropped 40% to 864.

• In the city of Detroit, sales plunged 41% to 1,053.

Total housing inventory rose 5.5% at the end of January to 4.19 million existing homes for sale, or a 10.3-month supply at the current sales pace.

The national Realtors group said that as limits for FHA loans increase that should stimulate sales growth this year.

"We should see some movement of pent-up demand by this summer, but higher loan limits need to be implemented fully and promptly to have maximum benefit," said Richard Gaylord, president of the Realtors group.

Nation's housing prices see largest decline in 20 years

By GRETA GUEST • FREE PRESS BUSINESS WRITER • February 26, 2008

Prices of existing homes plummeted nationally through 2007, ending the year down 8.9% -- the largest decline in 20 years, according to data released this morning.

In comparison, during the 1990-91 housing recession home prices fell 2.8%, according to the S&P/Case-Shiller Home Price Indices.

“We reached a somber year-end for the housing market in 2007,” said Robert J. Shiller, a Yale University professor and chief economist of MacroMarkets LLC. “Wherever you look things look bleak, with 17 of the 20 metro areas reporting annual declines and the remaining three reporting flat or moderate growth rates.”

In metro Detroit, home prices fell 13.6% through the end of December as compared to a year ago.

But some of the markets that had the greatest price runups during the housing boom are now suffering the biggest drops. Miami remains the weakest market in the country with home prices falling 17.5%, followed by Las Vegas and Phoenix with 15.3% drops and San Francisco with a 10.8% drop.

Charlotte, Portland and Seattle are the only three metro areas with positive annual growth rates, the index found.

Home Sales Give Some Relief

By KELLY EVANS and JOHN FLOWERS

February 26, 2008; Wall Street Journal

Sales of existing homes in the U.S. fell slightly in January, offering a bit of relief from the huge declines of recent months, but analysts said prices must fall further to help clear the oversupply of houses on the market.

The continued weakness in housing pushed down Lowe's Cos.' fiscal fourth-quarter net income by 33%, according to the home-improvement retailer. Lowe's Chairman and Chief Executive Robert A. Niblock said the next several quarters will be challenging "as industry sales are likely to remain soft."

The National Association of Realtors said home resales slipped a seasonally adjusted 0.4% last month from December to an annual selling pace of 4.89 million units. That was 23.4% below the pace recorded a year earlier. Condominium and co-op sales slumped but sales of single-family homes rose 0.5%, the first monthly increase in 11 months.

At January's sales pace, it would take 10.3 months to sell the houses currently on the market. That is up from 9.7 months in December.

The overall median sales price for existing homes in the U.S. was $201,100 in January, down 4.6% from $210,900 a year earlier. Housing experts say that potential buyers are waiting for prices to drop further before jumping back into the market.

Mr. Niblock said Lowe's sales were below expectations "as we faced an unprecedented decline in housing turnover, falling home prices in many areas and turbulent mortgage markets that impacted both sentiment related to home-improvement purchases, as well as consumers' access to capital."

On top of the housing-market downturn, the fourth quarter is typically the weakest for home-improvement retailers as colder weather curtails building and renovation projects.

For the quarter ended Feb. 1, net income at Lowe's slumped to $408 million, or 28 cents a share, from $613 million, or 40 cents a share, a year earlier. Net sales slipped 0.3% to $10.38 billion as same-store sales declined 7.6%.

In November, Lowe's projected earnings of 25 cents to 29 cents a share on a 3% increase in revenue, with same-store sales declining 3% to 5%.

Gross margin fell to 34.9% from 35.4%.

Lowe's forecast fiscal first-quarter earnings of between 38 cents and 42 cents a share on revenue growth of 2% and a same-store sales decline of between 5% and 7%. The company also expects fiscal 2008 earnings to be between $1.50 to $1.58 a share on revenue growth of 3% and a same-store sales decline of 5% to 6%.

Analysts' mean estimates were for first-quarter earnings of 43 cents a share on revenue growth of 4% to $12.61 billion, and 2008 earnings of $1.74 a share on revenue growth of 5% to $50.75 billion.

Home Depot Inc., the U.S. market leader in home-improvement products in terms of revenue, is scheduled to report earnings today.

The home-sales data, which some interpreted as suggesting the worst may be over for the housing market, were credited with helping fuel gains on Wall Street yesterday. In 4 p.m. composite trading on the New York Stock Exchange, Lowe's rose 91 cents, or 3.9%, to $24.50. Home Depot gained $1.05, or 3.8%, to $28.82.