The following article appeared on the front page of the Detroit Free Press June 24, 2006.
It's a buyer's market as house sales sag
BY SUZETTE HACKNEYFREE PRESS REAL ESTATE WRITER
June 24, 2006
Source: Free Press research
BY SUZETTE HACKNEYFREE PRESS REAL ESTATE WRITER
June 24, 2006
Source: Free Press research
What the Free Press analysis found
• Metro Detroit home sales are in the worst shape in three years.
• Livingston County homeowners took the biggest hit in sales, a 24.1% drop.
• Nationwide, home prices scored double-digit gains.
• Buyers have more homes to choose from and more leverage.
• Some communities fared well, including Birmingham, Detroit, Hamtramck and Harrison Township.
Metro Detroiters looking for new homes are finding that this is fast becoming a buyer's market.
Sellers are increasingly willing to negotiate on price and throw in perks to close the deal. With the local housing market struggling in an uncertain economy, today's buyers also have more available homes to choose from -- with more reasonable asking prices. For buyers who are in the right position to pounce, it's bargain time.
"Even though the economy is in the state it's in, you can't stop living," Lakendra Hampton, 28, said earlier this month. She and her husband, Larry Hampton, recently closed on a 3,000-square-foot colonial in Eastpointe. "When we saw this house, we knew we had to buy it because it's been our dream."
A Free Press quarterly analysis of home sales in every southeast Michigan community during the past three years shows that the number of sales and the value of homes are plunging in most areas. Fewer homes were sold between January and March of this year than during the first quarters of 2005 and 2004. Those that did sell went for less than they would have in either of the two previous years.
Overall, metro Detroit sales and home values are in their worst shape in three years. Only Wayne County experienced an overall first-quarter jolt in the number of homes sold, with strong sales in affordable Detroit, Hamtramck, Trenton and Wyandotte.
Homeowners in Livingston County took the biggest overall hit in sales during the first quarter of 2006: a 24.1% drop, with the number of sold homes in Hartland and Oceola townships dropping by 39.6% and 34.9%, respectively. Oakland and Macomb counties experienced 12.9% drops in the number of homes sold.
That's creating opportunity for a select market of first-time buyers and move-up homeowners who are lucky enough to sell their starter homes. At the same time, the falling market is creating headaches and financial crises as more sellers compete for fewer -- and choosier -- buyers.
Bargains are out there
Despite what some would call unstable employment in the auto industry, the Hamptons wanted to move from their Detroit bungalow into a larger home that could comfortably house them and their two daughters.
The couple works at the Ford truck plant in Dearborn, building F-150s, and are aware of the economic realities facing the region's auto companies. But they were determined to buy the bigger home they had saved for.
Their real estate agent identified dozens of homes in their price range, and even some a bit over it. But early in the search, they walked into the pristine colonial with four bedrooms, 2 1/2 baths and a finished basement. The $279,000 asking price was a little more than they had intended to spend, so the Hamptons decided to take a gamble and offered $270,000.
The owners, eager to downsize into a condominium, snatched up the offer."I feel we got it for a steal; none of the other houses we looked at offered that square footage," Lakendra Hampton said.
In Sterling Heights, homeowner Sarvang Shah has reduced the asking price of his 3,300-square-foot, four-bedroom home three times -- from $485,000 to $435,000. He's seen lots of lookers, but no takers.
"It's quite the bummer," said Shah, who needs to move into a new house he just had built in Rochester Hills. But home sales in Sterling Heights are down 21.2% compared with the first quarter of last year, and house values have dropped 6.4%. "It's hard to believe that Michigan, a state that had one of the strongest economies in the '90s, has come to this," Shah said. "We thought what most people probably think -- that we'd buy a house, and in five years, we'd make some money back. ... "We're basically going to break even, based on what we've done to improve it."
How did we get here?
To understand the current state of the housing market and its fallout, look at what really happened during the bustling and booming market of the late 1990s and early 2000s.
During those years, the typical home in southeast Michigan rose about 50% in value, an unprecedented gain and among the fastest in the nation. A healthy economy, rapid suburban growth and new home construction, affordable housing and wealthy baby boomers willing to spend more money on their homes fueled the local market.
As the economy took a dramatic downturn in 2002, so did the existing housing market. Sales slowed, as did appreciations. With every announcement of layoffs, plant closings or company restructurings, more people left the area, downsized to smaller homes or lost their houses to foreclosure. Interest rates kept rising, making new mortgages too expensive for some people.
The inventory of unsold homes soared. The drop in demand led to a drop in property values.
At the end of March this year, 43,159 homes were actively on the market in metro Detroit. Last year, that number was 28,349, according to Realcomp II Ltd., a multiple-listing service in Farmington Hills.
Michigan's struggling economy has made lots of potential buyers too jittery to take the leap.
"In the 1990s, we were in such a fast, fast market -- there wasn't enough supply to meet our demand," said Jean Van Oosterwyk, an associate broker for RE/MAX First in Clinton Township. "We were getting three or four offers on one house, which raised the value of our homes.
"There are some areas that are doing very well," she said. "I'd love to say the market as a whole is experiencing this, but we're not. People still aren't realizing that they have to price their house according to what the market dictates."
How our area stacks up
Nationwide, home prices scored double-digit gains in the first quarter of 2006, up 10.3% from a year earlier, according to the National Association of Realtors. The median sale price for an existing single-family house rose to $217,900. That means half of the sales were for greater amounts, and half were for less.
Despite the growth, the housing market in most U.S. cities is slowing from the record-setting pace of the past five years. Several once fast-growing cities, including Boston, San Francisco and San Diego, experienced flattened prices during the first quarter.
In addition, national home sales were down more than 15% in the five areas -- California, Arizona, Nevada, Florida and the District of Columbia -- that have had the hottest housing markets. Overall, national home sales fell 2.1% in the first quarter.
In metro Detroit, sellers lucky enough to find buyers are making much less profit on their homes, especially when they haven't spent a lot of equity-building years in those houses. Sales are decreasing by more than 30% in some metro Detroit communities.
Consider Rochester, an appealing community because of its historic charm and Victorian- and Craftsman-style homes and architecture. Tucked inside the border of Rochester Hills, Rochester serves as a quaint retreat with a charming, old-fashioned downtown.
Still, in the past year, sales have slowed considerably and were down 33.3% in the first quarter of 2006, compared with the first quarter of 2005. An oddity: Despite sagging sales in Rochester -- 24 homes sold during the first quarter compared with 36 in that time last year -- house values have made a 9.5% jump, a modest increase. During the first quarter of 2005, the median sale price in Rochester was $314,000; this year, it was $343,750.
Other spots that are bucking the trend:
Sellers are increasingly willing to negotiate on price and throw in perks to close the deal. With the local housing market struggling in an uncertain economy, today's buyers also have more available homes to choose from -- with more reasonable asking prices. For buyers who are in the right position to pounce, it's bargain time.
"Even though the economy is in the state it's in, you can't stop living," Lakendra Hampton, 28, said earlier this month. She and her husband, Larry Hampton, recently closed on a 3,000-square-foot colonial in Eastpointe. "When we saw this house, we knew we had to buy it because it's been our dream."
A Free Press quarterly analysis of home sales in every southeast Michigan community during the past three years shows that the number of sales and the value of homes are plunging in most areas. Fewer homes were sold between January and March of this year than during the first quarters of 2005 and 2004. Those that did sell went for less than they would have in either of the two previous years.
Overall, metro Detroit sales and home values are in their worst shape in three years. Only Wayne County experienced an overall first-quarter jolt in the number of homes sold, with strong sales in affordable Detroit, Hamtramck, Trenton and Wyandotte.
Homeowners in Livingston County took the biggest overall hit in sales during the first quarter of 2006: a 24.1% drop, with the number of sold homes in Hartland and Oceola townships dropping by 39.6% and 34.9%, respectively. Oakland and Macomb counties experienced 12.9% drops in the number of homes sold.
That's creating opportunity for a select market of first-time buyers and move-up homeowners who are lucky enough to sell their starter homes. At the same time, the falling market is creating headaches and financial crises as more sellers compete for fewer -- and choosier -- buyers.
Bargains are out there
Despite what some would call unstable employment in the auto industry, the Hamptons wanted to move from their Detroit bungalow into a larger home that could comfortably house them and their two daughters.
The couple works at the Ford truck plant in Dearborn, building F-150s, and are aware of the economic realities facing the region's auto companies. But they were determined to buy the bigger home they had saved for.
Their real estate agent identified dozens of homes in their price range, and even some a bit over it. But early in the search, they walked into the pristine colonial with four bedrooms, 2 1/2 baths and a finished basement. The $279,000 asking price was a little more than they had intended to spend, so the Hamptons decided to take a gamble and offered $270,000.
The owners, eager to downsize into a condominium, snatched up the offer."I feel we got it for a steal; none of the other houses we looked at offered that square footage," Lakendra Hampton said.
In Sterling Heights, homeowner Sarvang Shah has reduced the asking price of his 3,300-square-foot, four-bedroom home three times -- from $485,000 to $435,000. He's seen lots of lookers, but no takers.
"It's quite the bummer," said Shah, who needs to move into a new house he just had built in Rochester Hills. But home sales in Sterling Heights are down 21.2% compared with the first quarter of last year, and house values have dropped 6.4%. "It's hard to believe that Michigan, a state that had one of the strongest economies in the '90s, has come to this," Shah said. "We thought what most people probably think -- that we'd buy a house, and in five years, we'd make some money back. ... "We're basically going to break even, based on what we've done to improve it."
How did we get here?
To understand the current state of the housing market and its fallout, look at what really happened during the bustling and booming market of the late 1990s and early 2000s.
During those years, the typical home in southeast Michigan rose about 50% in value, an unprecedented gain and among the fastest in the nation. A healthy economy, rapid suburban growth and new home construction, affordable housing and wealthy baby boomers willing to spend more money on their homes fueled the local market.
As the economy took a dramatic downturn in 2002, so did the existing housing market. Sales slowed, as did appreciations. With every announcement of layoffs, plant closings or company restructurings, more people left the area, downsized to smaller homes or lost their houses to foreclosure. Interest rates kept rising, making new mortgages too expensive for some people.
The inventory of unsold homes soared. The drop in demand led to a drop in property values.
At the end of March this year, 43,159 homes were actively on the market in metro Detroit. Last year, that number was 28,349, according to Realcomp II Ltd., a multiple-listing service in Farmington Hills.
Michigan's struggling economy has made lots of potential buyers too jittery to take the leap.
"In the 1990s, we were in such a fast, fast market -- there wasn't enough supply to meet our demand," said Jean Van Oosterwyk, an associate broker for RE/MAX First in Clinton Township. "We were getting three or four offers on one house, which raised the value of our homes.
"There are some areas that are doing very well," she said. "I'd love to say the market as a whole is experiencing this, but we're not. People still aren't realizing that they have to price their house according to what the market dictates."
How our area stacks up
Nationwide, home prices scored double-digit gains in the first quarter of 2006, up 10.3% from a year earlier, according to the National Association of Realtors. The median sale price for an existing single-family house rose to $217,900. That means half of the sales were for greater amounts, and half were for less.
Despite the growth, the housing market in most U.S. cities is slowing from the record-setting pace of the past five years. Several once fast-growing cities, including Boston, San Francisco and San Diego, experienced flattened prices during the first quarter.
In addition, national home sales were down more than 15% in the five areas -- California, Arizona, Nevada, Florida and the District of Columbia -- that have had the hottest housing markets. Overall, national home sales fell 2.1% in the first quarter.
In metro Detroit, sellers lucky enough to find buyers are making much less profit on their homes, especially when they haven't spent a lot of equity-building years in those houses. Sales are decreasing by more than 30% in some metro Detroit communities.
Consider Rochester, an appealing community because of its historic charm and Victorian- and Craftsman-style homes and architecture. Tucked inside the border of Rochester Hills, Rochester serves as a quaint retreat with a charming, old-fashioned downtown.
Still, in the past year, sales have slowed considerably and were down 33.3% in the first quarter of 2006, compared with the first quarter of 2005. An oddity: Despite sagging sales in Rochester -- 24 homes sold during the first quarter compared with 36 in that time last year -- house values have made a 9.5% jump, a modest increase. During the first quarter of 2005, the median sale price in Rochester was $314,000; this year, it was $343,750.
Other spots that are bucking the trend:
- Oakland County: Though the number of homes sold in Birmingham during the first quarter of 2006 decreased by nearly 25% compared with the first quarter of last year, home values there continue to grow. Median sale prices have increased by 39.3% to $390,000, the largest increase in Oakland County.
- Macomb County: Harrison Township led the pack in the first quarter, with a 23.7% jump in home-sale prices, despite sales declining by 35.3%. The median sale price for a home there is now $241,588.
- Wayne County: Hamtramck leaps above other communities, with a 55.1% increase in sale prices -- to $25,975. In addition, Hamtramck experienced a 50% increase in the number of homes sold, from 48 during the first quarter of 2005 to 72 during the first quarter of this year. Grosse Pointe Park also experienced a 50% jump in the number of sold houses, from 20 to 30.
- Livingston County: Oceola Township experienced the largest jump in sale prices over the past three years, though prices dropped 0.4% in the first quarter of 2006. The number of sales dropped from 43 to 28, but jumped in nearby Hamburg Township from 55 to 66.
Comparable Washtenaw County numbers were not available for Free Press analysis.
Sam Baki, president of the Western Wayne Oakland County Association of Realtors, said he's expecting an upturn starting this summer. His long-term forecast: a better overall sales year than in 2005.
"The fear of all the job loss and people not making any moves because they're waiting to see what happens with the Big Three is going to subside," said Baki. Keep in mind, too, he said, that during the first quarter of any year, the weather is cold. It's just not the prime home-buying and selling season.
Added RE/MAX associate broker Van Oosterwyk: "The serious buyers are definitely going to buy and sell, even in this market. You may get less for your house now, but you're going to pay less for your new house, especially if you're upsizing.
"Now is the time."
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