Article In July 27, 2006 Detroit Free Press

GM: Turnaround is working
Earnings fuel debate over alliance

BY MICHAEL ELLISFREE PRESS BUSINESS WRITER

July 27, 2006

Opponents and backers of a proposed General Motors Corp. alliance with Renault SA and Nissan Motor Co. could agree on one thing Wednesday: There is evidence to support their case within GM's surprisingly strong operating earnings.

The second-quarter operating profit of $1.15 billion, which was well above Wall Street estimates and fueled a rally in GM's shares, is evidence that GM's turnaround from last year's $10.6 billion in losses is working, GM Chief Executive Rick Wagoner said in a statement.

"Our turnaround has not just gained traction, it's accelerating into high gear," Wagoner said. "Conventional wisdom is that you can't turn a ship as big as GM around quickly. We aim to prove that conventional wisdom wrong."

Without saying it outright, Wagoner's uncharacteristically bold statement implies that GM doesn't need an alliance with the French and Japanese automakers to fix its problems.

As a result of the success of its job-cutting plan, which spurred 34,410 union members -- one-third of GM's U.S. hourly workforce -- to accept early retirement or departure offers, GM raised its cost-cutting rate by $1 billion to $9 billion annually. That's an amount Wagoner said was "unprecedented in this industry."

While GM cheered the results, those who say GM needs an executive like Carlos Ghosn, the CEO of both Renault and Nissan, can point to underlying signs of weakness in GM's North American automotive business.

Higher shipping expenses from increased gas prices and the rising cost of raw materials used in building vehicles offset increased profits from GM's new full-size SUVs, which were launched earlier this year.

Since the excitement over new models may drop off faster than the price of steel or oil, Goldman Sachs analyst Robert Barry warned clients in a note: "This does not bode well for the sustainability of earnings from the new products."

Supporters of an alliance point to long-term benefits, anyway, and won't be swayed by a strong quarter or two.

GM's second-quarter operating profit of $2.03 per share, which excludes several charges, easily beat Wall Street estimates of a 53-cent per-share profit. Total sales hit a record for the second consecutive quarter, rising to $54.4 billion from $48.5 billion in the year-ago period.

The benefits of GM's cost-cutting efforts will accelerate in the second half of the year, GM Chief Financial Officer Fritz Henderson told reporters and analysts.

"The lion's share of our cost reductions in North America we expect to be in the second half of the year. But we did benefit in the second quarter, as well," he said.

GM's stock price, already one of the top performers this year, surged $1.34, or 4.4%, to $32 on the New York Stock Exchange.

Even Jim Cramer, the host of CNBC's "Mad Money" and an influential stock-picker for many Main Street investors, said GM is a screaming buy. "When will people understand that GM is going to 40 bucks? GM is now a very cheap stock," Cramer said on a video on www.thestreet.com.

The stronger second-quarter results could give Wagoner ammunition against the proposal by GM's largest single investor, Kirk Kerkorian, to join the alliance of Japan's Nissan and France's Renault. Some GM supporters see Kerkorian's suggestion as a ploy to put Ghosn, who engineered the successful turnaround of Nissan, at the helm of GM.

David Cole, chairman of the Center for Automotive Research in Ann Arbor and a fan of Wagoner, said the result strengthens Wagoner's position. "Renault-Nissan may need the relationship more than GM," he said.

Including charges totaling $4.3 billion, mostly from job-cutting incentives, GM lost $3.2 billion, or $5.62 per share.

While GM's global automotive business recorded a profit, excluding charges, for the first time since 2004, the North American auto segment lost $85 million.

That's a $1-billion improvement from an operating loss in North America of $1.14 billion in the second quarter last year. But part of those gains resulted from the strengthening Canadian dollar and an accounting change in funds reserved for warranty costs -- items unrelated to how GM's business is really functioning.

In addition, GM's U.S. market share in the second quarter fell to 24.2% from 27.3% in the year-ago period, even as it increased the percentage of sales to fleet customers such as businesses, governments and rental-car agencies, which typically pay lower prices.

Higher gas prices, now averaging more than $3 a gallon across Michigan, could hurt truck sales just as GM launches its new pickups this fall and is counting on improved profits from its new large SUVs.

GM's largest contributor to earnings was an $898-million profit from its GMAC financial services arm. But GM agreed earlier this year to sell a 51% stake in GMAC, which will reduce its share of the profits in the future.

When asked about a partnership, Henderson said the automaker will spend the next 90 days studying the idea. He offered no further details.

A spokeswoman for Kerkorian's investment firm Tracinda Corp. did not return telephone calls seeking comment on Wednesday.

Many on Wall Street are still trying to figure out if an alliance is likely, or necessary.

"It's hard to see really significant benefits" from an alliance, said Joseph Phillippi, president of AutoTrends Consulting Inc. in Short Hills, N.J.

Article in July 26, 2006 Detroit Free Press

GM earnings report beats estimates, stock price surges

By MICHAEL ELLISFREE PRESS BUSINESS WRITER

July 26, 2006

General Motors Corp. shares surged more than 4% on Wednesday after the automaker reported surprisingly strong operating earnings, fueled by its massive cost-cutting efforts initiated after last year’s huge losses.

GM reported a second-quarter operating profit of $1.15 billion, or $2.03 per share, excluding charges totaling $4.3 billion, mostly from the costs of incentives to persuade 34,410 UAW members to retire early or quit.

“Our turnaround has not just gained traction, it’s accelerating into high gear,” GM Chief Executive Rick Wagoner said in a press release. “Conventional wisdom is that you can’t turn a ship as big as GM around quickly. We aim to prove that conventional wisdom wrong.

”Wall Street analysts had on average expected GM to earn 53 cents per share, excluding one-time charges, according to Thomson Financial.

GM’s global automotive operations also posted an operating profit for the first time since 2004.

The second quarter results come as GM’s largest single investor, Kirk Kerkorian, is pushing for the automaker to study a possible alliance with Japan’s Nissan Motor Co. and France’s Renault SA.

GM officials and supporters outside the company have said that talk of the alliance could distract the company as it tries to recover from last year’s losses of $10.6 billion, one of the worst years in GM’s history.

GM’s shares were up $1.25, or more than 4%, to $31.91 in late morning trading on the New York Stock Exchange.

While GM cheered the results, some Wall Street analysts warned that much of the earnings gains may not be sustainable. Higher shipping costs from increased gas prices and rising costs of raw materials used in building vehicles offset increased profits from GM's new full-size SUVs, which were launched this year.

“This does not bode well for the sustainability of earnings from the new products – especially because revenue per unit on new products tends to fall off as early adopter momentum fades but higher raw material and freight costs may not,” Goldman Sachs analyst Robert Barry said in a note to clients.

Including all charges, GM lost $3.2 billion, or $5.62 per share. GM reported its second consecutive quarter of record net sales -- $54.4 billion, up from $48.5 billion in the second quarter last year.

Article in July 22, 2006 Wall Street Journal

New Headache For Homeowners: Inflated Appraisals

Rosy Valuations, CommonIn Boom, Now Haunt Sellers;'It's Pay-the-Piper Time'

By JAMES R. HAGERTY and RUTH SIMONJuly 22, 2006

As the housing market cools, Americans are confronting a problem that was easy to ignore during the boom: inflated appraisals of home values.

Critics inside and outside the appraisal business have long warned that many appraisals are unrealistically high. That's partly because generous appraisals help loan officers and mortgage brokers, who often choose the appraiser, complete more deals. If a home is appraised at less than the buyer offered, the deal is likely to fall through.

Inflated appraisals didn't matter much when home prices were rising at double-digit rates, since market values would quickly catch up. Now, however, prices are leveling off in many places and falling in some. Some homeowners are finding that the market value is below what past appraisals led them to believe.

For sellers, that can mean being forced to drop their asking prices. Some people hoping to refinance, meanwhile, may be unable to lock in new loan terms because they have less equity in their homes than they thought. Lenders and mortgage investors, too, could take a hit if it turns out the collateral backing their loan is worth less than expected.

Most homeowners have enough equity in their homes so they don't need to worry much about whether past appraisals were realistic. But dubious appraisals are a risk for the hundreds of thousands of people who in the past few years have bought homes with little or no down payment, or used almost all of their home equity to finance home improvements or other types of spending. That has left these people with little financial cushion to deal with rising interest rates.

"Now it's pay-the-piper time for people, and they're finding out they don't have the value in the house they thought they had," says John Taylor, president of the National Community Reinvestment Coalition, a Washington-based nonprofit that supports low-income housing.

Karen Ammon, who works for an auto-parts marketing company in Bloomfield Hills, Mich., bought her home in 2002 for $141,000. A year later, a lender encouraged her to refinance into a larger loan that would let her pay off credit-card debt. The appraiser chosen by the lender had great news: Her house was now valued at $175,000. She had room to raise her total mortgage borrowings to $165,000.

Now monthly payments on the adjustable-rate loan she received in 2003 are rising in line with the general level of interest rates. So Ms. Ammon wants to refinance into a fixed-rate loan. But when she tried to refinance, she couldn't do so because several appraisers valued her home at around $148,000 -- or about $15,000 less than she owes in mortgage debt.

Appraisals are only opinions, and appraisers often disagree on the value of a home. But wide discrepancies can mean that at least one of the estimates was unrealistic. No one can say how many appraisals are unreliable. Still, Iowa Assistant Attorney General Patrick Madigan, who coordinates with law-enforcement officials from other states on mortgage-related issues, believes the deliberate inflation of appraisals is "widespread" among loans to subprime borrowers, or those with flawed credit histories. Jacquie Doty, an executive at Freddie Mac, a big provider of funding for home mortgages, predicts that inflated appraisals will lead to more foreclosures.

In the 1980s, inflated appraisals were one factor in the loan losses that sank many savings-and-loan institutions that were holding collateral worth less than they believed. Today, most loans are sold to investors and risks are more spread out, making it less likely that poor appraisals would cause lenders to collapse. But many people in the real-estate industry believe the appraisal system is overdue for reform, and investors who buy loans are asking tougher questions about appraisal procedures.

Complicating matters for homeowners is the weakening housing market. In October, when Melinda and Steve Welch refinanced the loan on their four-bedroom home in Centreville, Va., the property was appraised at $682,000. Later they cut the price to $595,000, and recently accepted a bid around that level.

Built-In Conflict

The appraisal system has a built-in conflict of interest. Appraisers often are hired by loan officers or mortgage brokers, whose compensation depends on how many loans go through. Appraisers, dependent on loan officers for their livelihoods, say they often feel pressure to come up with a number that will allow a home purchase or refinancing to proceed.

Eric Randle, an appraiser in the Los Angeles area, says he frequently receives faxes from loan officers asking whether he could appraise a specified home at a certain level. The implication is that an assignment will be forthcoming only if he's willing to hit the desired number. Mr. Randle says he declines to work on those terms.

One of Mr. Randle's appraiser friends recently received a fax from Eric J. Roberts, a mortgage loan officer in Bakersfield, Calif., for Pinnacle Financial Corp. The scrawled fax message listed an address in Los Angeles and said, "I need 2 get to 750K for this Appraisal. If not please provide a value range or call me."

Mr. Roberts declined to comment. Doug Long, chief executive officer of Orlando, Fla.-based Pinnacle, said he didn't think Mr. Roberts did anything wrong but added, "The wording could have been better."

Consumers often play along with dubious appraisals. Danny Wiley, an appraiser in Nashville who is a member of the national Appraisal Standards Board, in May was asked by a lender to appraise a condo in Spring Hill, Tenn. The buyer had offered to pay $139,000, but the contract required the seller to pay $10,000 toward the buyer's closing costs. In effect, Mr. Wiley says, the price had been inflated by $10,000 to allow the seller to provide money to help the buyer cover closing costs.

Mr. Wiley estimated the value at $129,000, the same price at which numerous identical units in the same complex had recently been sold. That should have killed the deal. But Mr. Wiley says the sale later went through, apparently after the lender found another appraiser willing to value the condo at $139,000. Mr. Wiley declines to identify the parties involved in the transaction, citing client confidentiality.

Federal law governing appraisals dates to 1989, when Congress passed legislation aimed at preventing a recurrence of the savings-and-loan crisis. That law leaves licensing and regulation mainly to the states, but many of them don't provide much funding for oversight.

T.J. McCarthy, chairman of the Illinois Real Estate Appraisal Licensing Board, says the state's appraisal regulatory agency is "severely understaffed." As a result, he says, the backlog of unresolved complaints is so large that rogue appraisers sometimes can retain their licenses for years while awaiting regulatory action. The Texas agency responsible for monitoring appraisers has just three investigators, all part-time, and is so stretched that staff members answer the phone only in the afternoon. As part of a broader push to improve legislation of mortgage lending, Congress is discussing provisions that would tighten regulation of appraisers.

Some lenders use appraisal-management companies to create a Chinese wall between the appraiser and the loan officers. But appraisers say these companies often choose the cheapest and fastest appraiser rather than the most qualified. "You get someone who is not intimately familiar with the local marketplace because they are willing to do it for less," says Jeffrey Jackson, chairman of the appraisal firm Mitchell, Maxwell & Jackson in New York.

Rise of Mortgage Brokers

Another problem is that -- unlike in the 1980s, when current mortgage law was enacted -- around half of all mortgage loans are made through brokers rather than directly by closely regulated lenders. Mortgage brokers are lightly regulated in most states, and appraisers say brokers often apply pressure. Joseph Falk, chairman of the legislative committee of the National Association of Mortgage Brokers, says brokers shouldn't pressure appraisers to distort value estimates. But he advises appraisers to create and enforce their own ethical standards.

Lenders often play down the issue. Tim Doyle, an official of the Mortgage Bankers Association, says he sees no "broad" problem with inflated appraisals, outside of criminal rings engaged in fraudulent mortgage deals. Even though mortgage lenders typically sell loans to investors shortly after making them, the lenders have an incentive to ensure those loans are backed by property valued at least as much as the loan balance, Mr. Doyle says. Investors can force the lenders to buy back a loan if it goes into default and the appraisal was fraudulent, he says.

Even when all parties want an honest appraisal, that can be hard to achieve. In making their value estimates, appraisers rely heavily on "comps," or prices paid recently for similar homes nearby. But those prices may be misleading. For instance, builders of new homes sometimes include in the sale prices such items as landscaping or contributions toward loan fees or settlement costs. Such "concessions" are rarely broken out in the sale price listed in public records, though. So the resulting inflated price can become a misleading "comp" for nearby homes.

Article in July 23, 2006 Detroit Free Press

(RANGE) PRICING: Listing a range instead of a fixed sales amount can spur interest and get real estate bargaining off dead center

BY SUZETTE HACKNEY

FREE PRESS REAL ESTATE WRITER

July 23,

In a market flooded with homes that stay unsold for months and sometimes years, some weary metro Detroit sellers are trying to entice buyers by listing their houses with a price range instead of a fixed amount.

Called "range pricing" or "value range marketing," the practice gives potential buyers a range that the seller finds acceptable. The strategy assures potential buyers that the seller will at least seriously consider any written offer within the range by either accepting the bid or making a counter offer.

The process encourages open negotiations with a seller who will come down in price and a buyer who will go up. Compromises and amenities are frequently negotiated to reach a final price that is acceptable to both parties.

"The idea of range pricing is just another means and a way to get the larger public through the door of the home, which ultimately gets it more exposure," said Shana Sine Cameron, a Realtor with Sine & Monaghan Real Estate in Grosse Pointe Farms.

"If you're listing a house at $275,000 and there are buyers out there who only want to spend $250,000 -- so their agent is only showing them houses that cost no more than $265,000 -- they would never see your home. By having a range from $250,000 to $275,000, those buyers would then come through your home."

Range pricing started in Australia in the early 1990s and was brought to the United States, mostly in California, a few years later. In areas where homes are selling well and appreciating at a faster pace, the range can be anywhere from 12% to 15% from the pricing mid-point. Here in southeast Michigan, the spread is mostly 10% to 12%.

Not many metro Detroit real estate firms have subscribed to range pricing as a way of doing business, but some are easing in by marketing homes where the seller is willing to entertain all written offers.

Dean Sine, a broker at Sine & Monaghan, said he took a leadership position in bringing range pricing to metro Detroit in part because of the slow market and in part because he says it's the wave of the future in all markets. He learned the practice from brokers in California, where range pricing has been the most successful: Half of all sales there are done through the program, and the state's multiple listing services even register homes using range prices, something impossible here because not enough agencies use the program.

About half of his company's 250 current listings use range pricing, Sine said, and 65 to 75 such listings have been sold since February.

"Our showing activity has picked up since we started the program; we have had three times as many showings as most of our closest competitors," Sine said. "Range pricing helps us on both ends. It prepares the seller for the fact that they may not get full price. There's some give and take there because by giving buyers some numbers to work with, the comfort level is there."

Strategy pays off

Susan and Jonathan Hartz say they found the perfect buyers for their Grosse Pointe home using range pricing. The couple tried to sell their 3,700-square-foot, four-bedroom, three-bathroom home last August for $625,000 but had no luck and gave up after about a month. They listed it at a reduced price of $599,000 with a Realtor friend for about three months, but interested potential buyers couldn't come up with the money.

They took it off the market in January, but put it back on with a range price of $449,000 to $499,000 in March. They got an offer within the first week. The initial offer was at the bottom of the range at $449,000; the owners countered at $480,000 and the final agreement was for $465,000.

"You have nothing to lose since you don't have to take the offer, but in this market people are saying, 'Just come to me with some numbers and we'll try to make it work,' " Susan Hartz, 56, said. "In this economy, people are trying to get the sweetest deal they can, and no one is ashamed to say it."

Not everyone is sold on the concept. A paper published by a trio of economics academics last year in the Journal of Real Estate Finance and Economics found in a study of 5,852 residential homes sales in Texas that the houses took longer to sell using a range. In addition, they concluded that range pricing did not have a significant impact on final prices on homes sold during the time period covered by the study, January 1999 to December 2000.

"I think range pricing is a marketing strategy that may generate some interest for various realty companies that are looking for ways to be different than another company," said Marcus Allen, Florida Atlantic University real estate professor and a coauthor of the study. "It's just another marketing tool."

Still, Cameron said that for sellers and buyers range pricing is a way to do the heavy negotiating without the game playing. Even if an offer comes in on the low end of the range, it gets the potential buyer and seller talking.

"Even if they come in at the bottom end of the range, you sit down and try to negotiate," Cameron said. "Every house is different. When you sit down to negotiate a deal there is going to be concessions on both sides. You don't know what those compromises are going to be.

"An offer can come down to a washer and dryer, but sometimes it doesn't," she said. "Price is usually the driving factor, but after that there are occupancy issues, mortgage concessions, home warranties, decorating allowances. Those are all things that are negotiated and what affect the final outcome of the deal."

Generating traffic

Betsy and Thomas Ciconte have had their three-bedroom, 2 1/2 -bath Grosse Pointe Farms bungalow on the market for two months. The home has a second full kitchen in the basement, a rare find in older homes. But the couple have an 8-month old son, and they are thinking about adding to the family. After three years in the bungalow, they need more space.

They haven't received any offers on the home, with an asking range of $220,000 to $249,000, but they've shown the house to about 20 interested buyers.

Betsy Ciconte said they're not delusional about the market and know they're going to take a loss when selling the house, but she just wants to get potential buyers in the door.

"I hope it's working; we thought it would bring people in that might not come in," Betsy, 27, said. "We wanted to let buyers know that we're flexible. We've had a lot of traffic and activity.

"My girlfriend put her house on the market at the same time, and we have basically the same house but no one is coming to see hers and she's selling conventionally," she said. "I just want to leave my door open a little wider for people."

Tom Caulfield, a GMAC Mortgage loan officer, said he's noticed an increase in mortgage activity since a few metro Detroit real estate companies started range pricing this spring. He doesn't know if there is a direct correlation, but he said there has been increased buyer traffic.

"From a mortgage perspective, it allows the buyer to feel as though they're getting more house and the extras for their money," he said. "And they feel more in control because they got to choose what their offer would be instead of the seller choosing for them."

Article in July 20, 2006 Wall Street Journal

For-Sale Signs Multiply Across U.S.

Our Quarterly Analysis of 26 Housing MarketsShows Supplies Rising in Many Areas as Prices Slip

By JAMES R. HAGERTY July 20, 2006; Page D1

The housing market continues to weaken in much of the country as inventories of unsold homes rise and many sellers cut their asking prices, a quarterly survey by The Wall Street Journal shows.

There is no sign of a broad collapse of housing prices about a year after the once-hot coastal markets entered a long-anticipated cooling phase. But the general level of prices is edging down in some areas and leveling off in others, while the supply of homes for sale keeps rising.

The number of homes on the market in Orlando, Fla., for example, is nearly five times the year-earlier level, while the inventory has quadrupled in Phoenix and Tampa, Fla., and nearly tripled in the Washington, D.C., area.

In another sign of the housing market's growing weakness, the Commerce Department said housing starts fell 5.3% last month from May, to an annual rate of 1.85 million.

COOL DOWN

Use an interactive tool to search the latest data on housing inventories and price trends in 26 real-estate markets and see photos of houses on the market

One effect of the softening in many markets is that more sellers are willing to dicker. "Let's make a smoking deal," John Nichols wrote in a Craigslist.org ad for his three-bedroom ranch house in Sacramento, Calif., this week. He is seeking $315,000 but adds, "Make an offer. You won't necessarily insult me." Although the backyard is "currently a dump," Mr. Nichols says, the kitchen countertops are granite and the dual-pane windows are new.

To examine the residential real-estate prospects for 26 major metro areas, The Wall Street Journal gathered data on inventories of homes for sale at the end of the second quarter from a variety of local sources; pricing trends based on surveys of real-estate agents by Daniel Oppenheim, an analyst at Banc of America Securities in New York, a unit of Bank of America Corp.; and projections of job creation by Moody's Economy.com, a research firm in West Chester, Pa. Employment trends are among the most important factors in determining demand for housing.

Metro areas showing large increases of homes for sale and relatively weak employment growth include Boston, Los Angeles, Philadelphia and New York. Among the strongest markets overall are Houston, Dallas-Fort Worth and Seattle. All three areas are benefiting from robust job markets, and modest home prices are drawing investors and new residents to Texas.

In Massachusetts, where the job market is flagging, the median sale price for single-family detached homes in May was down 1.2% from a year earlier and nearly 6% below the peak reached in July 2005, according to the state's Association of Realtors. The supply of homes available for sale in May was enough to last 11.3 months at the current sales pace, up from 8.7 months a year earlier.

A June survey of real-estate agents by Banc of America Securities found that home prices had weakened from the prior month in 30 of the 42 metropolitan areas covered. The markets with the weakest pricing trends included Boston, Detroit, Phoenix, St. Louis and Washington, D.C.

In Miami prices have been about flat in recent months, says Ronald A. Shuffield, president of the brokerage firm Esslinger-Wooten-Maxwell Inc. Mr. Shuffield says he expects prices of condos in less-attractive parts of the Miami area to fall slightly in coming months. For condos in better parts of the area, he believes prices during the next year will range from about flat to as much as 5% higher.

So many new homes are available on the outskirts of Phoenix that it is "a total bloodbath," says Ivy Zelman, a Cleveland-based housing analyst for Credit Suisse Group. She doesn't see a recovery in most major metro areas in the near term. "It could actually get worse before it gets better," she says.

Conditions can vary considerably within a metropolitan area and among different types of housing. Sherry Chris, chief operating officer of Prudential California Realty, says condo prices in downtown San Francisco are about level with a year ago because new buildings have helped supply catch up with demand. Overall, the number of homes on the market in the Bay Area has more than doubled from a year earlier.

But in the suburb of Palo Alto, where the median home price is nearly $1.4 million, the inventory of homes has declined 2% from a year ago. Ms. Chris says she believes that reflects lots of hiring by Google Inc. and other technology firms.

Among the 26 metro areas, Orlando shows the biggest surge in inventory. But the supply was unusually lean a year ago, says Beverly Pindling, president of the Orlando Regional Realtors Association, and job growth is very strong. Ms. Pindling says prices in the Orlando area generally are down about 3% to 7% from a year ago. Home builders, eager to make sales, are "romancing the Realtors," she says; some are offering agents who bring in buyers commissions of up to 10%.

Kent Fowler, a real-estate agent and investor in Washington, is bracing for an extended period of pain. Construction was recently completed on a condo near the city's Chinatown district that he bought in 2004 for $629,000. Mr. Fowler believes the two-bedroom condo, with a view of the Washington Monument, now is worth at least $800,000. But potential buyers are scarce in today's glutted market. So he is trying to find a renter for the condo for the next year or two at around $3,500 a month, even though that rental income would fall about $900 short of his monthly loan payments, condo fees, taxes and insurance.

Some sellers are advertising prices below recently appraised values, and others are offering to help pay closing costs for buyers who are short on cash.

Many Realtors say the media have overplayed weakness in the market. Richard A. Smith, vice chairman and president of Realogy Corp., the real-estate brokerage business due to be spun off from Cendant Corp. soon, says 2006 "will be the third best year in the history of the business" in terms of total home sales, despite the cooling trend. The National Association of Realtors projects that sales of previously owned homes will fall 6.7% from last year's record.

While many investors have been scared out of the market, Mr. Smith says, plenty of other people must buy new houses because of changes in their lives, such as a new job or a divorce.

Others sound more cautious. "I do think we're going to see some tougher times ahead," says Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis. By August, he says, most cities in California will be showing modest declines from a year earlier in home prices, and prices also may decline further in parts of Florida, Nevada, Arizona and the Northeast.

Headlines about falling prices could make buyers more aggressive in negotiating and persuade some sellers to "get out with what they can," Mr. Anderson says.

Mr. Anderson expects the current downswing to last into next year; by late 2007, he thinks the market will be stabilizing. Though he doesn't expect a recession in the next couple of years, he says the housing market would be much weaker if one occurs. In the past, steep declines in home prices have tended to hit only metropolitan areas that have suffered major job losses, he says.

William Wheaton, a housing economist at the Massachusetts Institute of Technology, says the wild cards include how many investors or second-home owners will dump properties on the market and how many borrowers will default. Even if there is no surge in defaults or selling by investors, he says, some of the formerly hot local markets may be heading into five or 10 years of flat to slightly higher home prices. He believes many baby boomers on the coasts will cash out of expensive homes and move to cheaper areas; that would restrain price increases along the coasts.

Article in July 15, 2006 Detroit News

This is cool stuff. It's no secret that one of the long-time knocks on Detroit is the absence of a vibrant, upscale inner-city residential scene, ala Chicago or New York. I for one hope that the trend described below continues for years, because we need this type of option, regardless of where you live or want to live.

Heart of Detroit is on a roll

Downtown real estate bucks trend, lures those willing to take a chance

Louis Aguilar / The Detroit News

DETROIT -- A year ago, Bloomfield Township native Neil Greenberg bought a fancy loft in Birmingham, not far from a small, comfortable downtown district full of cafes, boutique stores and tidy eateries.

The 24-year-old lived there for a week before deciding to sell his loft and flee Oakland County. Too pleasant and predictable, he says.

"Birmingham will probably appeal to me 30 years from now," said the recent University of Michigan graduate. "Right now, I need a place with soul."

For Greenberg, who next month moves into a new loft on Woodward Avenue, and a growing number of suburbanites, that place is the emerging 21st-century downtown Detroit -- a place starkly different from the rest of the city, its suburbs and the region's recent past.

As it adds more upscale housing by the month, downtown is attracting the educated, the young and empty nesters to a community that looks much more diverse than the rest of Detroit. A large number of the newcomers are white, according to Realtors and others, in a city that as a whole is 80 percent black.

The new downtown is a key ingredient in the city's revival, many contend, but academics warn it takes more than a glittery core to turn around a city that's losing 10,000 people each year or to cure Metro Detroit's deep racial divide.

But for now, no one denies the heart of Detroit is on a roll.

Roughly bordered by the New Center area to the north, Detroit River to the south, East Jefferson Avenue near Belle Isle to the east and the Corktown neighborhood to the west, the core of Detroit is experiencing growth that runs counter to trends in other parts of the region.

Last year, Detroit led the area with 1,039 building permits for houses, condos and apartments, according to data compiled by the city planning agency. It was first time the city was tops in housing permits since 1982. Officials credited downtown for much of that growth.

In a lousy real estate market where housing can languish on the market for months, downtown real estate is red hot to moderate, say eight real estate agents and developers who have sold a total of more than 400 properties since 2000, many of which were new dwellings. Some of the housing, like Crosswinds Communities' Garden Lofts at Woodward Place, sells out in days, and prices keep rising. Several $1 million-plus luxury condominiums will be for sale by end of year.

Its clientele is anywhere from 40 percent to 60 percent white, say the agents and developers.

Downtown Detroit is following national trends that began emerging in the 1990s, according to academics who study U.S. demographics. Downtown populations grew nationally by 10 percent on average the last decade -- even in some cities with shrinking populations overall.

"Detroit has the same ingredients to emulate those downtowns," said Eugenie Birch, professor and director of Penn Institute for Urban Research at the University of Pennsylvania, who has authored several studies about new downtown populations. "There are museums, there's beautiful architecture, a waterfront, a sense of deep-rooted history. It all says great culture."

Friends plot Ellington move

Next month, Greenberg joins two other friends from Oakland County who are moving into The Ellington, a new loft development on Woodward Avenue. They will be able to walk to major cultural institutions, big-league sports stadiums, and the Majestic Theatre, as they enjoy a street life that can include a fair share of panhandlers.

Pleasant and predictable it's not. Vigorous and chaotic, with stark contrasts in race and class, it is.

About the same time the guys move into The Ellington, another young suburbanite, Leah Voytal, will move into a historic building a few blocks away. It has been renovated into upscale condominiums that sell as high as $300,000-plus. Many residents are either single young women or empty nesters.

Voytal grew up in Northville, a small, affluent town in Oakland County. After graduating from Michigan State University with an economics degree three years ago, Voytal started to hang out where many young people from her neck of the woods hang: Royal Oak and Ferndale.

That got tiresome fast, the 25-year-old said. "I see the same people I saw at Michigan State."

That's why she often drives 30 miles one way to downtown Detroit to enjoy the range of highbrow to lowbrow offerings: Openings at the Detroit Institute of Arts; Detroit Tigers games (she's been to 15 so far this season); Corktown dives like the Lager House, where she can see Detroit garage bands like her current favorites, the Paybacks; and new martini bars like Pulse and Proof.

"A big city has so much more depth," Voytal said. "It's so much more challenging than a homogenous, predictable suburb. It's a blast."

Schism stirs resentment

It's all great news for Detroit, academics contend, but it's not the only essential ingredient needed to save Detroit.

"The health of a city depends not just on a relative small percentage who are wealthy," said Thomas Sugrue, a University of Pennsylvania historian, and author of "The Origins of Urban Crisis: Race and Inequality in Postwar Detroit."

"It depends on the working class and middle-class residents of the city whose
quality of life is essential to a city's health. We can't expect the kinds of development transforming Wayne State to downtown to trickle down to the rest of Detroit."

Kurt Metzger, director of research for the United Way of Southeastern Michigan, said he often hears concerns from various Detroit neighborhood activists about the rise of the new affluent downtown.

"Often times you hear: 'Here come the white suburbanites taking all the good stuff,' " Metzger said. "Everybody wants to see Detroit come back. When you have a city that has a population where 33 percent live below the poverty line; have a high unemployment rate, a lot of people say. 'Wait a second, you have all these people with needs and you are taking care of people with money?'

"You have to keep paying attention to the neighborhoods, rewarding people and businesses who stuck it out during tough times to pull off a real comeback."

Groups chisel stereotypes

Many new residents are aware they are challenging long-held stereotypes about living in the middle of Detroit.

Austin Black II was born in Northwest Detroit but went to Seaholm High School in Birmingham after his family moved to Troy.

"A lot of people talked about Detroit in terms of stereotypes and there was a smaller group of people who knew that was not the reality," said Black, 26.

Enough people were in the latter group that the Cornell University graduate believed he could make a career selling real estate in downtown Detroit. He was right. He's sealed 20 deals in just more than a year ranging from $170,000 to $400,000.

He also formed a nonprofit group called City Living Detroit that promotes the urban lifestyle.

The growing lure of downtown Detroit and the return of suburbanites is a step forward, supporters say.

"Overall, it's a good sign." said Dwight Belyue, owner of Belmar Development Group, which is behind a number of high-profile downtown projects, including the upcoming @water lofts along the Detroit Riverfront.

"We need the balance," Belyue said, who is African-American. "Detroit is one of those unique cities that lost an entire segment of the population. I'm happy to help bring it back."

Comment in July 14, 2006 Detroit Free Press

Google move highlights value of state universities

BY MARY SUE COLEMAN

July 14, 2006

Type "economic development" and "research universities" into your Google search engine, and the results are clear: jobs.

The exciting and important announcement that Google will bring 1,000 jobs to the Ann Arbor area points to the power of Michigan's research universities to help transform our state's economy.

Our great state is in the midst of a difficult economic transition. And yet I am optimistic, because I believe our public universities, especially our research institutions, can and will play a tremendous role in helping to diversify our economy through innovation and collaboration. Google's decision to establish a major corporate presence in the University of Michigan's backyard proves that.

Google's arrival in Washtenaw County will be measured in terms of jobs, tax revenues, spin-off businesses and increased home sales. But just as important are the intangibles: a fifth-grader in Ypsilanti who now aspires to be a software engineer for Google, a venture capitalist who sees a Dexter start-up in a new light, a retired couple who decides to remain in Ann Arbor rather than move to the Sun Belt because the community is just too vibrant to leave.

Google's announcement marks an important turning point for our state, one that showcases the importance of collaboration and innovation as the economic model for Michigan's future.

Knowledge is the currency of the 21st Century, and Google cofounder Larry Page recognizes the rich resource of educated employees that awaits him in Michigan. By locating near U-M, and less than an hour from Michigan State and Wayne State Universities, Google -- and the spin-off companies it undoubtedly will generate -- will benefit from a steady stream of talent and fresh ideas.

Research universities help generate the kind of synergy that is vital to our state's turnaround as a hub for high-tech jobs. Our institutions are an impetus for attracting and nurturing talent, creativity and venture capital. We are a magnet for companies, large and small, that want to operate in communities that take risks and seek new knowledge critical for improving our lives, our society and our understanding of the world.

Google is not alone in recognizing that Michigan holds great promise as a high-tech market. Xoran Technologies, a U-M spinoff company, is expanding in Ann Arbor and creating more than 380 new jobs; Advanced Photonix is moving its corporate headquarters and 105 new jobs from California to Ann Arbor; and Arotech Corp. is making a similar corporate move from Alabama.

Expansion Management magazine recently outlined four factors that are critical to transforming Michigan's economy:

• A workforce populated with master's, doctoral and medical degrees.

• Workers with science and engineering degrees.

• The presence of a major research university and other colleges.

• University R&D spending on science and engineering.

Google's decision to choose Michigan is a milestone in our state's transformation. To continue the momentum, we need even greater collaboration between the private sector and public institutions like U-M, MSU and WSU. The 21st Century workforce requires the right talents and adaptability to compete, and Michigan's research universities are eager to be willing partners.

Article in July 14, 2006 Wall Street Journal

FTC Targets Home-Listing Limits

Regulators Aim to OpenIndustry Real-Estate DataTo Broader Competition

By JAMES R. HAGERTYJuly 14, 2006; Page A2

As part of a broader push by antitrust regulators to promote competition among real-estate brokers, the Federal Trade Commission is cracking down on rules that prevent data about some homes for sale from appearing on Realtor.com and other popular Web sites.

The FTC and the Justice Department are targeting what they say are anticompetitive practices in residential real-estate brokerage, which generates more than $60 billion a year in commissions.

The FTC action announced yesterday involves the Austin (Texas) Board of Realtors, a local affiliate of the National Association of Realtors, the dominant trade group for real-estate agents and brokers. Like most local Realtor groups, the Austin board operates a multiple-listing service, or MLS, that lets brokers share data on homes for sale.

In February 2005, the Austin board adopted a rule preventing homes listed under a certain type of contract, known as exclusive agency, from being sent from the MLS to Realtor.com and other sites accessible to the public. Exclusive-agency listing contracts often are used by discount brokers charging flat fees rather than a percentage of the sales price.

Under a consent order settling FTC charges that the rule violated antitrust law, the Austin board can't give preferential treatment to any type of listing agreement. The Austin board said in a statement that it scrapped the rule last August and added: "We are disappointed that the FTC's press release implies that we are guilty of wrongdoing."

FTC officials said they are investigating several other MLS operators that have similar rules and hope at least some will voluntarily change them. Justice Department officials also have contacted some MLS operators to inquire about such rules. MLS organizations that block exclusive-agency or limited-service listings from the public Web sites include those in Indianapolis, Detroit, Cleveland and Columbus, Ohio.

Realtor officials in Cleveland, Columbus and Indianapolis said they would review their policies in light of the FTC's move. The Greater Tulsa Association of Realtors in Oklahoma dropped a rule similar to the one in Austin last year after Justice Department officials raised questions.

John Roberti, a former FTC attorney who is now a lawyer at Mayer, Brown, Rowe & Maw LLP in Washington, said some Realtor boards are likely to change rules as a result of the consent order, but the FTC still may have to take some to court. He said the case shows the FTC is putting a high priority on real-estate competition.

A spokesman for the National Association of Realtors said the NAR doesn't have a policy on such rules.

Discount brokers want their listings to be displayed on Realtor.com and other popular sites where many consumers look for homes. Discounters also want to be able to display on their own Web sites listings generated by rival firms, including the traditional, full-service brokers that dominate the market.

Last year, the Justice Department filed a suit alleging that the NAR's national policy on Internet displays of listings data -- which allows brokers to block their listings from being displayed on other brokers' Web sites -- "restrains competition" from firms that rely mainly on Web sites to engage with their customers. The Realtors deny that charge and are fighting the suit.

Over the past few years, about a dozen states, including Texas and Missouri, have enacted laws requiring all brokers to perform certain services, including negotiation, whether or not consumers want to pay for them. State Realtor associations have pushed for these "minimum service" laws. About 15 states ban or restrict rebates, which are offered by some discounters as a way of reducing commission costs for consumers.

Article in July 12, 2006 Wall Street Journal

Popular Mortgage Web Site Under Scrutiny

Lawsuit Against BankrateSpotlights Difficulty of Getting Sound Financial Data Online

By MICHAEL HUDSONJuly 12, 2006; Page D1

A lawsuit against one of the Web's premier sites to shop for a mortgage underlines the difficulty consumers can have in locating reliable financial information online.

The lawsuit is against Bankrate Inc., the financial publisher behind the popular bankrate.com site that draws millions of visitors yearly through partnerships with Yahoo!, AOL and other top online companies. Bankrate provides advice, loan calculators and articles on financial topics. It supplies interest-rate data to eight of America's 10 largest newspapers, including The Wall Street Journal. It also caters to lenders, who compete to attract borrowers by posting their deals on bankrate.com.

But the company's reliability as a consumer tool is being challenged in the lawsuit, filed by a former advertiser, that accuses the company of allowing its Web site to become a haven for "bait-and-switch" loan pitches. Testimony and internal company documents filed with the court show Bankrate has fielded hundreds of complaints about mortgage lenders who fail to deliver the rates they advertise; one lender told a Bankrate employee a consumer would need "a direct pipeline to God" to qualify for its advertised rate. The legal battle, which began in 2002, is scheduled to come to trial this fall.

Bankrate says the lawsuit is "factually and legally without merit." Thomas Evans, Bankrate's chief executive officer, says that since he took over in 2004, the company has stepped up efforts to make sure lenders stand behind their advertised rates and won't hesitate to suspend advertisers who break the rules. Before, it was "like asking Barney Fife to monitor the town and not giving him a gun," he says. "It's a much more aggressive policy today than it was two years ago."

The court battle illustrates the potential hazards in the fast-expanding world of online commerce and highlights the need for healthy skepticism about experts who provide data and advice while at the same time benefiting from the sale of financial products.

Residential mortgages taken out online have totaled $100 billion a year on average since 2003, estimates Inside Mortgage Finance, a trade publication that tracks home-loan data. Some financial experts recommend bankrate.com and other Internet sites, including LendingTree, a unit of IAC/InterActiveCorp, and E-Loan, owned by Popular Inc., as useful tools for comparing a wide range of deals on financial products, in addition to getting quotes from local lenders.

Bankrate's legal battle traces back to 2002, when online mortgage lender American Interbanc Mortgage LLC, of Irvine, Calif., sued several lenders advertising on bankrate.com, accusing them of false advertising. It added Bankrate as a defendant a year later, alleging Bankrate ignored evidence of bait-and-switch advertising and yielded to pressure from other defendants to kick American Interbanc off its Web site. The suit, being heard in Orange County Superior Court, seeks $16.5 million in damages and a minimum $33 million in punitive damages, according to a Bankrate regulatory filing.

Bankrate says in court papers that it declined to renew American Interbanc's contract in August 2002 after the relationship reached an intolerable "level of hostility."

At the center of the case is a bankrate.com feature that asks mortgage shoppers to enter information about the mortgage they want, including their location, the desired loan type and how much they want to borrow. The Web site provides a "rate table" that lists offers from a number of lenders advertising on the site.

Mike Dannelley, American Interbanc's founder, alleges customers who click through to specific lenders often aren't given the deals that are offered on the rate tables. Although borrowers aren't required to take the more costly loan, the practice can waste time in booking a mortgage and leaves some consumers vulnerable to accepting a higher rate.

Mr. Dannelley's lawyers claim their review of Bankrate records identified 529 complaints, from consumers and lenders, who claimed Bankrate's advertisers weren't playing fair. Most of the complaints were lodged before Mr. Evans took over as Bankrate chief in June 2004, though some date to late 2004 and 2005.

In one complaint last year, Steve Knerly, a federal law enforcement instructor in Glynco, Ga., says a bankrate.com lender failed to honor an offer for a 3.875% adjustable-rate mortgage, which it posted on the Web site and then reiterated after he went through a "pre-approval" process, according to court records. The lender said it was a mistake, but "I felt it was just a pure and simple bait-and-switch deal," Mr. Knerly said in an interview. Instead, he found an adjustable loan starting at 4.25% through a mortgage broker.

Bryan Snow, who wrote Bankrate to complain in late 2003, said in an interview that several lenders he found on bankrate.com quoted him rates and fees that were higher than what they had advertised on the site. "You start to pick a rate that's a point higher than the lowest rate that's listed, because you assume those are the more-credible companies," says Mr. Snow, who works as a communications director in Charlotte, N.C.

Dana Bain, president of Premiere Mortgage Services, in Sterling, Mass., says he advertised on bankrate.com as recently as last September, but stopped because other advertisers were posting interest rates that weren't honored. "It's not a level playing field," he says.

Bankrate says the complaints it has received represent a tiny fraction of the more than 40 million people who visit the site yearly and that it works diligently to resolve borrowers' concerns. The company says when it gets a complaint about a lender not honoring advertised prices, it conducts a "mystery shop" test, assigning a Bankrate employee to pose as a borrower and call the lender to check its rates and fees. If the lender fails that test, Bankrate says, it will temporarily suspend the lender from advertising on the site. "It's a pretty onerous policy and we bounce dozens of people a month," Mr. Evans, the CEO, says.

E-Loan, a leading competitor, says it receives few complaints from mortgage borrowers, partly because it lends directly to consumers, rather than referring borrowers to third-party lenders, as Bankrate does. E-Loan President Mark Lefanowicz also says the company's compensation system doesn't reward loan officers for putting borrowers into higher-priced loans. LendingTree says it receives a small number of complaints. "We take them seriously. We can't put our brand on the line," a spokeswoman says. At LendingTree, consumers submit detailed information and the company then matches them with as many as four lenders in its network, who contact the borrowers directly with offers.

Other consumer Internet sites have had legal problems. Last month Dell Inc. reached a preliminary agreement to settle a class-action lawsuit accusing the computer maker of cheating online customers with false promises of low-cost financing, claims that Dell denies. And in May a judge approved a settlement in a national class-action suit that alleged Netflix Inc., the online movies-by-mail service, had failed to live up to promises of unlimited DVD rentals and one-day delivery. Netflix admitted no misconduct.

Consumer advocates warn that the Internet is vulnerable to traps similar to those that can snare consumers in the offline world, like slippery salesmanship, hidden fees and hard-to-fathom fine print. "You shouldn't suspend your consumer defense mechanisms just because the marketplace is electronic. If a deal is too good to be true, you have to be on the lookout for being bait-and-switched," says Jean Ann Fox, director of consumer protection at the Consumer Federation of America.

Financial experts advise consumers to consider walking away from a deal if they feel a lender isn't living up to its promises. Other advice: See if anyone has started a Web site to slam a particular lender's service, or check out sites such as ripoffreport.com. Don't take them as gospel, but use them as food for thought.

When sizing up loan offers, consumers should compare a loan's annual percentage rate, not the interest rate. The APR includes discount points and other charges not included in the interest rate. And don't apply for too many loans at one time, which can drive down your credit score. Do your homework first, then apply with no more than five lenders.

Article in July 12, Wall Street Journal

Calculating Your Home's Value Online

By JANE HODGESJuly 13, 2006; Page D2

Checking the estimated value of your home these days is a bit like following stock quotes.

That's mainly because many homeowners have come to see their property's price as a kind of stock, giving them equity they might use to buy a nicer place, pay for repairs -- or to feel rich.

To follow the possible changes in the value of their homes, more homeowners are turning to free or nominally priced online tools that spit out a probable home value. Unlike a stock with a daily closing price, a home's value is colored by several variables: neighborhood, the home's condition, the regional housing market, and an agent's or home buyer's rose-colored glasses.

To find out how good such Web sites are at generating consistent numbers, we pulled up estimates on one home in Seattle, a 1918 Craftsman purchased for $230,000 in February 2004. We weren't looking to sell, but wanted to see estimates for a couple of reasons. We wanted to take out a home-equity loan and also wondered how Seattle's booming real-estate market, along with economic development in the area (a new Home Depot, a new arts center, and park upgrades), affected the home's value.

After getting five estimates -- four from online sites, and one from a professional appraiser who inspected the home in person. We were told the home might sell for anywhere from $291,000 to $375,000 -- an $84,000, or 29%, spread.

The price range didn't inspire confidence. It appears that part of the problem is that some Web sites we used, including www.instanthomevaluations.com and HouseValues.com, provide only a broad price range and demand real-estate agent contact for a more specific figure. This seems like a tool for agents to build prospect lists, and most likely contributed to the broad price span. We found that it's not only hard to get an instant, single quote from sites that advertise free figures, but it's also hard to do so without providing personal information such as phone numbers and e-mail addresses and agreeing to agent solicitations. Agents pay sites for leads (i.e, your information) and then calculate a home value as a carrot to get your business. Two sites -- www.zillow.com and www.realestateabc.com -- solved that problem by offering a price estimate for any address, without asking us to identify ourselves. (Zillow.com is a Seattle startup launched earlier this year by former executives from the travel site Expedia.com.)

We did use one free agent-driven site, HouseValues.com, since agents will email a preliminary price quote without requiring an in-home visit. The HouseValues.com agent emailed only a broad value range: $320,000 to $375,000. His note essentially indicated that to get a specific figure we'd have to allow for a visit. (And hopefully we'd consider hiring him if we put our house on the market.) In the meantime, he put us on a generic e-mail list to solicit business.

Avoiding other agent-driven sites left only a handful of options, so we worked with the free sites Realestateabc.com and Zillow.com, then paid $9.95 for a quote from Instanthomevaluations.com, which generated specific figures instantly. Realestateabc.com and Zillow.com provided both lists of comparable homes and specific numbers $316,000 and $325,087, respectively. Instanthomevaluations.com, which says it uses the same data available to banks and lending organizations, provided only a range of values $291,000 to $343,000 as well as three comparable homes, and required $9.95 for the figures. (For even more money, the site promises more detail and more comparisons.) To get a more exact figure from Instanthomevaluations.com, we'd need to agree to contact from a real-estate agent.

Offline, we hired Richard Hagar, an appraiser with American Home Appraisals of Mercer Island, Wash., to price the home. He calculated different numbers based on a "desktop" appraisal (using local real estate and other computerized data), a drive-by, and an extensive on-site appraisal. The desk-top appraisal said the home would be worth $400,000, but the drive-by and on-site visit lowered it significantly, to the $305,000 to $320,000 ballpark, which Mr. Hagar said would be the most accurate for our purposes.

Mr. Hagar acknowledged that the on-site visit gives an appraiser opportunities for subjective calls: For example, a low ceiling might discount the basement's value, but the carpeting and finished walls offset that negative, in the appraiser's opinion.

Article in July 12, 20006 Detroit News

Could Google be engine for Mich. rebound?
Web search site's jobs are type that state's ailing economy needs.

Louis Aguilar and Gary Heinlein / The Detroit News

LANSING -- Is Google the search engine that can rev up Michigan's old-school economy?

A jubilant Gov. Jennifer Granholm -- proclaiming "Michigan has been Googled!" -- on Tuesday announced the world's most popular Internet search engine will bring 1,000 high-paying jobs and build a facility in the Ann Arbor area, giving the state the kind of knowledge-based employment that it sorely needs to replace disappearing auto industry jobs.

A ready supply of graduates from the University of Michigan was a prime attraction, Google officials said.

Luring a high-profile, cutting-edge Internet company could go a long way in convincing other high-tech companies that Michigan -- at least the Ann Arbor area -- has the chops to be a major player in a new economy, several economists and analysts said.

"It's a very good one-shot. The question is does it have legs beyond that?" said Charles Ballard, head of the economics faculty at Michigan State University.

"It probably has some legs. The economy of the future is going to be driven more by companies like Google than by companies like General Motors."

Comerica Inc. chief economist Dana Johnson said Google's arrival has "symbolic significance" for Michigan. "If it goes well, we demonstrate that we have the work ethic and skill to attract knowledge-intensive businesses. When you can show things have gone well, it's easier to recruit the next company. Do that a few times, all of a sudden you have a different kind of reputation."

'Smart' jobs a hard sell

The state's loss of manufacturing jobs in the past decade, particularly in the auto industry, has been well-documented. From 1990 to 2005, 158,000 manufacturing jobs disappeared, a 19 percent decline, according to Michigan Future Inc., an Ann Arbor think tank that studies state job and economic trends.

And that doesn't count plans by General Motors Corp., Ford Motor Co. and Delphi Corp. to cut 73,000 jobs nationwide in the next few years.

Replacing manufacturing employment with the kind of "smart" jobs that have been shaping the global economy has been a hard sell for Michigan.

Roughly defined as good-paying work that requires a college degree, knowledge-based jobs in Michigan grew 17 percent from 1990 to 2005; compared to 31.6 percent nationally, according to Michigan Future.

If the state had matched the national rate, Michigan would have 220,000 more jobs than it does today, said Louis Glazer, executive director of Michigan Future.

"It's not the loss of manufacturing jobs; nationally, manufacturing jobs are on the decline," he said. "We have fallen behind because we have not replaced those jobs."

Jobs: Key election issue

The issue of job creation has been in the forefront as Granholm and her Republican challenger Dick DeVos battle it out for the state's top job this November.

On Tuesday, Granholm talked about the state's transition to a new economy.

"We know we have been transitioning from the image of being a manufacturing-only economy," she said at the news conference. "But we also know the manufacturing industry is a technology business. The more we can add additional technology firms to Michigan, it furthers our image as a 21st century state."

DeVos congratulated U-M and welcomed Google.

"The promise of more high-tech, high-paying jobs are a reaffirmation that one of Michigan's strongest assets remains full of promise for a complete state turnaround. With this partnership, one of Michigan's strongest assets -- its diverse network of universities and colleges -- is demonstrating that they are an integral part of turning Michigan's economy around."

The Google jobs, paying an average of about $47,000 a year, will be in the company's AdWords division, its chief revenue source. Those jobs could spin off another 1,250 jobs, according to a business model developed by University of Michigan economists, Granholm said.

The state beat out potential sites in Boston, Boulder, Colo., and Phoenix. Negotiations began last year and were top-secret, at Google's request, and intensified in the past month, said Michigan Economic Development Corporation spokesman Mike Shore.

State offers tax breaks

Tuesday's announcement had the air of a pep rally as Granholm was surrounded by state economic development officials, young Google executives and college students in Google T-shirts.

Google was drawn to Michigan and Ann Arbor because the office would be close to U-M and its top college graduates, as well as those from other state universities, said David Fischer, director of Google's online sales.

He said Google officials aren't leery of Michigan's struggles and Rust Belt image, adding his company usually doesn't follow "conventional wisdom."

Michigan offered Google $38 million in tax breaks over 20 years, should its employment reach 2,000, said Jim Epolito, chief executive of the Michigan Economic Development Corporation.

The tax breaks will be well worth it, Michigan boosters said.

The facility "will help us attract great students" and expand Michigan's growing technology base, much of which is located in a southern Michigan corridor running through Ann Arbor, said U-M President Mary Sue Coleman.

"Google is the coolest company in the country," she said. "Young people know it. They all want to work at Google."

Coleman said Google co-founder Larry Page, a 33-year-old East Lansing native who earned an engineering degree from U-M, "has talked to us about this dream of his, and wanting it to happen."

In a written statement, Page said the company's goal "is to have many Michiganians call themselves Googlers."

"We're delighted to open a new office in the Ann Arbor area. We hope to establish as wonderful a home in Michigan for Google as I enjoyed while growing up."

AdWords is 'cutting edge'

Google's AdWords is the company's flagship product in an online advertising market the company easily leads. Thousands of advertisers use AdWords to promote their products and services on the Web through pay-per-click advertising and site-targeted advertising for text and banner ads.

AdWords is "a cutting edge part of the advertising world," said Patrick Anderson, a Lansing economist whose consulting group uses the services.

Anderson praised the jobs, but criticized the tax incentives needed to get Google to Michigan. So did Trisha Kinley, director of tax policy and economic development for the Michigan Chamber of Commerce.

"It's not surprising that it took substantial tax credits to lure a company like Google here -- that's an unfortunate reality," Kinley said. "It's another example that points to the fact that we need to make our business and tax environment more attractive."

Google posted its Michigan job openings online Tuesday afternoon. The company still is looking for an office site, which it plans to open no later than this fall.

The office will be headed by U-M alumnus and Michigan native Grady Burnett. He will relocate from Google's home office in Mountain View, Calif.

Googleicious!

This item appeared in the July 12, 2006 issue of the Detroit Free Press. Let us bask in the glory that is Google...

Google brings in new jobs and hope

Ann Arbor HQ could reverse brain drain

July 12, 2006

BY KORTNEY STRINGER, ANGELA TABLAC and CHRIS CHRISTOFF

FREE PRESS STAFF WRITERS

Note to Google Inc. from Michiganders: Let the brain gain begin.

Hours after the Internet search engine giant formally announced plans Tuesday to expand into Ann Arbor, residents, students, educators, businesses and politicians were buzzing that the move could boost the state's sagging economy and stem the exodus of young college graduates to other regions.

Jeremy Wagner-Kaiser, a 20-year-old senior at the University of Michigan, said Google's decision to come to Ann Arbor increases the chance he will stick around after graduation.

"Google will be high on the list of where I'll send resumes, in part because I like Ann Arbor," said the computer science major from Battle Creek.

At a news conference in Lansing, the company, based in Mountain View, Calif., said Tuesday morning that it would bring 1,000 jobs to Ann Arbor by creating a headquarters facility for Google AdWords, its main advertising unit, which offers pay-per-click ads.

Google said it would begin hiring immediately for the jobs, which will pay an average of about $50,000 a year -- more than Michigan's average household income of $44,667. By Tuesday afternoon, Google had posted some of the jobs, which it says will be filled mostly from Michigan's current talent pool.

David Fischer, Google's director of online sales, said the quality of Michigan's workforce was a key factor in Google's decision. "We hire bright, motivated people," he said.

Google's news, reported in Tuesday's Free Press, was announced shortly after the Michigan Economic Development Corp.'s board approved a $38-million tax break over 20 years for Google's new Ann Arbor digs. Google officials said Monday that they hadn't decided whether to build or lease office space, but will open temporary quarters later this year.

The development group, which had been wooing Google for about a year, estimates the move will generate an additional 1,245 spin-off jobs within five years and generate more than $2 billion in personal income for Michigan workers over the life of the tax credit.

Surrounded by a few dozen students wearing white Google T-shirts, Gov. Jennifer Granholm said Google's presence will, among things, lead to other companies bringing in high-paying jobs. Granholm said Google cofounder Larry Page, an East Lansing native and 1995 U-M graduate, played a major role in the company's decision. "This is about our future," she said.

Google's announcement provides a breath of hope for Michigan, which has been plagued by a dismal economy and job market that has prompted young people to flee the state for areas with better prospects, a phenomenon often called the brain drain.

U.S. Census Bureau figures show 42,600 young, college-educated singles left Michigan between 1995 and 2000, while only 26,600 moved in, reducing the state's population of that group by more people than in any other state during that time, except Pennsylvania.

Steve Morris, managing partner of GVA Strategis, a Southfield-based office brokerage and consulting firm, said Google's move will stimulate spin-off benefits, such as boosting local real estate markets. "It's also a boost for the state's morale," he said. "It's just nice to have some good news instead of all this other stuff going on."

And at least one business that likely will compete with Google for workers saw the move as a win-win for Ann Arbor. "The issue Ann Arbor is having is keeping high-tech workers in the area," said Larry Foresee, chief executive of Foresee Results, which does Web surveying and has about 60 employees.

"You find great people who go to U-M and other colleges and then leave because opportunities don't exist, or the perception is that they don't exist. "Google coming to town reinforces that there's great opportunities in Michigan."

Unemployment in Washtenaw County, at 4%, is below the overall state rate of 6%.
Not everyone was convinced that Google's move to Ann Arbor is all good. Vivek Shende, a 22-year-old who just graduated from U-M with a degree in math, said he worries Google's presence "will turn this town into a place that students can't afford."

John Laird, a professor of computer science and electrical engineering at the university, has other concerns. "I think this will be great as a way to encourage students to stay in Ann Arbor and southeast Michigan, but there's going to be a funny twist -- a shortage of workers. They'll be in a competitive place to get the jobs, but what we need is more students to go into" the computer sciences.

Live/work combination units in Walled Lake and Ferndale

The following appeared in the July 11, 2006 Detroit News.

New, old idea: House above job

Walled Lake live/work units open, Ferndale's being built; mixed-use concept is revived.

Mike Martindale / The Detroit News

FERNDALE -- Fashionable Ferndale hopes to meet the future by dipping into the past for what was once a routine practice -- shopkeepers living above their businesses.
Novi-based builder Terra Land Group is building several dozen live/work units in which the owners operate a business or storefront on the ground level while living in a condominium above.

"It's actually an old concept," said Aaron Tassell of Terra. "This is the way businesses used to operate. And if the response we are getting is any indication, these will sell out before they are built next November."

The concept allows business owners the luxury of virtually no commute. It is gaining in popularity: Walled Lake also has a live/work development. The Ferndale live/work block along Hilton, about a mile north of Nine Mile, is one of four planned in Ferndale, totaling 62 units, including lofts.

Changes in city ordinances over the last few months have made the mixed-use developments possible, said Ferndale City Manager Tom Barwin, adding that the city's 30-year-old master plan was less flexible regarding land use.

Developers see it as a way for home buyers to purchase both a storefront and a two-bedroom, two-bath home with a balcony and attached garage. The live/work units run from $219,000 to $230,000. Some two-bedroom lofts are priced at $169,000.

"For someone starting off in a business, this eliminates not only an expensive lease but also a $3-per-gallon commute," said Tassell, who credited Ferndale city officials with revamping ordinances to permit mixed use in several areas.

The Ferndale sites are still under construction, but 19 have already been sold at Walled Lake's Legato Point on Maple, which opened in July 2005. Among storefronts operating there are an architect, a hair salon, a satellite dish company and an antique shop.

For Claudia Knapp, who lives above Claudia's Hair Salon, it's "a dream come true." Knapp moved to the United States from Italy in 1984, went to beauty school and worked in several salons.

"I worked in a salon as a young teenager," Knapp said. "It was always my dream to have my own salon, but there was no way I could meet a lease of $3,000 a month. We were living in Wolverine Lake, a couple miles away, and one day stopped by here.
"I've been open for three weeks, and it's been mainly people seeing my sign and stopping in," Knapp said. "I'm getting a lot of walk-ins."

Knapp is being helped in her business by her two daughters, Lacey, 12, and Samantha, 20.

"If I go upstairs to have lunch, we just lock the door," said Samantha, who is the receptionist. "If we hear the bell ring, we just have to walk downstairs and open up."

More new condos for Plymouth!

Condos to replace Plymouth eyesore

Bathey Manufacturing site is sold to company that plans to build high-priced homes.

Darren A. Nichols / The Detroit News

PLYMOUTH -- City leaders are cautious about proclaiming victory, but are pleased with the $3.1 million sale of the Bathey Manufacturing site, an eyesore for decades.

Last week, the City Commission approved the sale of the former 16-acre industrial facility to Connektiv Communities, a Royal Oak firm expected to build high-priced condominiums on the property.

Within walking distance to a vibrant downtown, the sprawling site is the largest piece of vacant land in the popular western Wayne County community.

Officials reopened bidding after a deal fell through in January that would have paid the city $4.5 million for a residential and retail project.

"It is with cautious optimism that we expect this to go forward," City Manager Paul Sincock said. "(But) the developer is anxious to go on this."

Bathey Manufacturing, which operated in Plymouth for nearly 50 years, made industrial baskets to hold auto parts while the parts were plated or chemically treated. For at least 20 years, though, it has remained vacant and attracted complaints from parents who say children often break in.

The city claimed the property three years ago in lieu of $3 million in unpaid city, county and school taxes. The owner of the former manufacturing plant hadn't paid property taxes in 20 years.

Connektiv Communities, which is expected to build 180 condominiums on the site, beat out two other developers. The company has targeted Metro Detroit young professionals and the growing number of baby boomer empty-nesters looking for urban housing.

Amelia Row, in Plymouth, will have 84 townhouses and lofts built this summer on a site where land is being cleared blocks from Bathey. The homes will sell for $258,000 to $442,000.

Connektiv has 180 days to move forward on its new project, but the deal can extend for another six months.

Google Expands Michigan Operations

Great news here, friends! The article says it all, but this is a significant event, particularly from a "vote of confidence" for the region from what is probably the single most respected, admired organization on the planet. Thanks, Google - we needed this!

Google coming to Ann Arbor

Center to bring 1,000 badly needed high-tech jobs to state

BY TOM WALSHFREE PRESS COLUMNIST

July 11, 2006

Michigan's battered economy will get a big psychological boost today when Google Inc., the high-flying Internet search engine giant, announces plans to hire up to 1,000 workers over the next five years for a new Ann Arbor-area facility.

California-based Google's decision to expand in Michigan, a state marked by the exodus of its college graduates to more prosperous regions, also is a timely win politically for Gov. Jennifer Granholm.

Granholm is facing a re-election battle in November against well-financed Republican challenger Dick DeVos.

At an 11 a.m. news conference in Lansing today, Google will unveil plans to create a headquarters facility for its Google AdWords unit. AdWords offers "pay-per-click" ads that are triggered when Google users search for certain words. It is the company's bread-and-butter advertising product and its primary source of revenue.

Google officials said they will start posting openings as early as today for jobs at the Ann Arbor facility at www.google.com/jobs.

The jobs will vary in skill demands and pay. The average salary for new hires is expected to be $47,000 a year.

"This is a huge, huge, huge, huge thing," Granholm said Monday. "It's a tremendous statement about Michigan having a cutting-edge workforce."

Before this morning's news conference, the Michigan Economic Growth Authority is expected to approve $38 million in Single Business Tax credits over 20 years for Google, whose development is expected to generate $165 million in tax revenue over that time.

As Google evaluates specific sites, it will work with local communities on other possible incentives to complement the MEGA tax credits.

"I don't know if there's a cooler company in America than Google," said James Epolito, chief executive officer of the Michigan Economic Development Corp. "They're looking for very skilled people at a time when we're trying to keep our kids in the state of Michigan."

The MEDC has been wooing Google ardently for about a year, ever since reports surfaced that the company was looking at Ann Arbor, Boston, Boulder, Colo., and the Phoenix area as possible sites for expansion.

David Fischer, Google's director of online sales and operations, said Monday that the company's focus is on hiring bright, motivated people.

"We worry less about experience than raw talent. We've had tremendous success hiring people straight out of universities, with majors from engineering to art history."

Google cofounder Larry Page, an East Lansing native and 1995 engineering graduate from the University of Michigan, was a major supporter of the decision to locate in Ann Arbor, Granholm said.

Google already has a small sales office in Southfield.

No decision has been made yet on whether Google will build or lease space in Washtenaw County. Grady Burnett, who will head the new Ann Arbor operation, said he hopes to open an office, probably in temporary quarters, this fall.

"All options are on the table," he said Monday.

Google, based in Mountain View, Calif., began in 1996 as a research project for Page and Sergey Brin when they were PhD students at Stanford University. Today it has 6,800 workers and is the world's largest Internet search company.

The reach of the Ann Arbor-area operation will be global.

After going public in 2004, Google's stock price has soared from $100.34 to a high of $475.11 per share earlier this year. It closed Monday at $418.20, down $2.25 on the day. At Monday's price, the total value of all the Google shares is about $127 billion.

That's nearly $50 billion more than the combined value of General Motors Corp., Ford Motor Co. and DaimlerChrysler AG. Toyota Motor Corp.'s value is $171 billion.

It's hard to overstate the importance for Michigan of landing a major expansion of a company with the cutting edge cachet of Google.

The declining fortunes of GM and Ford, along with the related bankruptcy filings of major automotive suppliers Delphi Corp., Collins & Aikman and Tower Automotive have hammered Michigan's economy.

Swedish-owned refrigerator manufacturer Electrolux closed its Greenville plant and moved 3,000 jobs to Mexico this year.

And along with neighboring Indiana and Ohio, Michigan is among the states with the greatest net loss of its college graduates to other states.

Although Michigan has had some successes during Granholm's first term -- new research operations promised by Toyota and Hyundai, plus the move of auto parts maker Borg-Warner's headquarters to Auburn Hills -- they've been obscured by the bad news.

If Michigan is to shed its Rust Belt image and avoid becoming an industrial backwater in the new global economy, it's clear that the state must diversify and emphasize the strength of its research universities in producing scientists and engineers.

Granholm has pushed those buttons hard in creating a $2-billion 21st Century Jobs Fund, aimed at creating and attracting growth of companies in life sciences, alternative energy and other high-technology fields.

"We see Michigan as an ideal location to recruit the best and brightest workers," said Fischer of Google.

If Google's experience in Michigan meets its expectations, the state couldn't ask for a better testimonial.

Exotic loans: proceed with EXTREME CAUTION!

I completely agree with the sentiments expressed in this article, which appeared in the Detroit News on July 7, 2006. A little background: Realtors, as a group, are probably the most greedy, self-centered people you will ever encounter. The ONLY other collection of individuals that may be WORSE? LENDERS! I can sum up the mentality of the average mortgage company like this: "What arcane, illogical, unconservative, risky mortgage concept can we come up with to squeeze even MORE money out of the ignorant public? And, once we come up with the latest sham, let's ADVERTISE IT on every billboard, radio station and TV station we can find!" I've been telling my clients for several YEARS that these exotic loan packages were poison, but many have ignored my advice and are now paying the price. Unfortunately, most people think like sheep. The simplistic analysis goes like this: "Well, if these interest only loans were bad, they certainly wouldn't be spending so much money on all this advertising that I keep hearing over and over and over every day. Everybody else is doing it. What the heck, I'll do it too!" Don't be a sheep!

Little equity in alternative mortgages

Borrowers pay no or low down payment, but in a falling market, some owe more than home is worth.

Brian J. O'Connor / The Detroit News

With the dearth of home buyers in Metro Detroit, lenders are touting different types of mortgage loans to help make the sale.

Virtually unheard of five years ago, alternative mortgages have soared in popularity since the late 1990s, offering consumers a way to buy homes with no money down, low introductory payments or both.

The downside of these mortgage "products" is that the homeowners will hold very little equity in their property, leaving them no financial cushion if they have to sell, finance a major repair or re-mortgage the home.

Worse, if property values fall -- as they have now -- borrowers can end up owing more on the mortgage than the property is worth. In the case of an adjustable mortgage, borrowers could find themselves trapped in a home they can't afford to sell, but with their monthly payments rising by hundreds of dollars.

In fact, part of the glut of homes on the market is caused by homeowners trying to sell houses they no longer can afford, thanks to adjustable rate loans. Some of that problem comes from homeowners who have siphoned off all their equity through repeated refinancing and home equity loans, and now owe more than the home is worth, making it impossible to refinance to a more affordable mortgage.

Here's a look at the types of mortgages on the market today:

• 30- or 15-year fixed-rate mortgage: Offers a predictable and stable loan and rate, currently about 7 percent. Requires a down payment of at least 20 percent, or additional mortgage insurance charges are tacked on.
  
• 40-year mortgage: A recent invention that extends the length of the mortgage by at least 10 years, slightly lowering the payment but increasing the total interest paid.
  
• Adjustable-rate mortgage: Rate is typically low for the first three or five years (currently as low as 4.8 percent in this area) then adjusts every year, usually up to 1 point with a limit of 5 points over the introductory rate.
  
• Zero-down/low-down adjustables: These loans offer an adjustable-rate mortgage with a low down payment amount, or no down payment at all.
  
• Interest-only and option adjustables: Another adjustable loan where the buyer can pay only the interest during the initial period, usually up to 10 years.

http://www.professionalone.com

Fantastic bargains available up north

The news continues with regard to it being a great time to buy in Michigan. This article appeared on the front page of the Detroit News/Free Press July 2, 2006.

UP NORTH REAL ESTATE: Cottages for the taking

With for sale signs everywhere, now could be a great time to buy

July 2, 2006

Email this Print this BY AMBER HUNT and RUBY L. BAILEY

FREE PRESS STAFF WRITERS

Owning a cottage Up North has been a dream of generations of Michiganders, but now the dream is in limbo for many and second homes aren't selling like they used to.

Properties in northern Michigan, where vacation homes are the bread and butter of dozens of real estate agencies, are going wanting.

"I've never seen anything like it," said John A. Rowling, who runs his own agency in Lexington. "I'm glad I'm 88, and I'm glad the show's about over."

For buyers, there's a big upside: People who've long wanted to buy their vacation or retirement dream homes only to watch prices climb every year finally have a buyer's market.

"It's not all doom and gloom," said Dennis Stanley, broker and co-owner of Coldwell Banker Pete Stanley & Associates in Au Gres, northeast of Standish.

On Friday, Stanley sold a home that had been on the market 510 days. The 700-square-foot cottage, along 50 feet of sandy Saginaw Bay beach, sold for $190,000 -- 17% less than the original asking price of $229,000.

"Properties are selling," he said. "Sure, not as fast as we'd like, but we have nice properties and our location is wonderful."

Some agents on Michigan's west side say properties are selling well thanks to buyers from out of state and western Michigan, where the economy is stronger. And in places like Hamtramck and Grosse Pointe Park, homes are selling at a faster pace than they were a year ago. There also have been reports of strong home sales in affordable locations like Detroit, Trenton and Wyandotte.

However, throughout metro Detroit, home sales are the worst they've been in three years. Fewer homes were sold between January and March of this year than during the first quarters of 2004 and 2005. In Oakland and Macomb counties, there was a 12.9% drop in home sales and Livingston County had a 24.1% decline. Agents -- especially those in the state's central and eastern areas -- paint a worrisome picture: Houses are on the market months longer than a year ago, and some desperate sellers are cutting prices.

Hank Clabuesch, broker and owner of Scenic Realty based in Caseville in the Thumb, said statistics from nearby Sand Point on Saginaw Bay say it all: Two years ago -- between August '03 and August '04 -- 18 homes sold. Last year, the number rose to 22. But between August 2005 and May -- a nine-month span -- just eight homes have sold.

Clabuesch estimates the 12-month total will be 12 sales.

It's a buyer's market, but agents say Michiganders are having to put their second-home dreams on hold because of downsizing at Delphi, layoffs and buyouts at the automakers and foreign companies choosing to build plants elsewhere.

And for those who can afford a second mortgage at interest rates higher than a year ago, there's another obstacle: the high price of gasoline, which makes a 400-mile round-trip north each weekend more expensive.

"The market in this area is just flooded," said Kay Gonzales, of Town and Country Realty, based in Sanilac County's Lexington.

"We have a lot of people who have purchased vacation homes and now, with the general economy in Michigan and the gas prices, they can't afford them."

Months on the market

As in most parts of Michigan, there is a staggering variety of homes for sale Up North. Some are quaint cottages with beach rights for less than $100,000; others are 4,600-square-foot waterfront monsters with asking prices of more than $1 million.

But many have something in common: They've been on the market for months longer than average.

Take the two-bedroom, 840-square-foot home on Dogwood in Worth Township, about 15 miles north of Port Huron. The house, on nine acres, has been on the market 325 days, said Wynne Achatz, a licensed Realtor since 1978 with Real Estate One Westrick.

The house hit the market last year for the appraised price -- $89,900. The seller recently dropped the price to $74,000, hoping to unload it this summer.

Stanley, of Au Gres' Coldwell Banker agency, said most of his properties, from homes to boat slips, are staying on the market an average of 305 days this year, up from 298 days last year.

Achatz said her homes stay on the market an average of 267 days.

But while most agents agree the numbers are worrisome, some remain optimistic.

Stanley said he sold four houses on Thursday and Friday.

"For a buyer's market, we're doing pretty good," he said.

Said Sharon M. Houston, broker and owner of Re/Max New Horizons in Alpena: "We're holding our own. Really, we're just getting into our second-home market season," she said.

"It's too early to tell how it'll turn out."

Agents hope for boomers

Across the state in Traverse City, Petoskey and Harbor Springs, agents were more upbeat. Some said baby boomers and early retirees might fuel more sales in western Michigan.

According to the Northern Michigan Multiple Listing Service, they're right: Sales in the first quarter of 2006 totaled $102.5 million, compared with $95.6 million during the same span last year.

Also, first-quarter average sale prices this year were up 17% and the number of days properties stayed on the market dipped 16%.

"All these new second-home buyers are entering the market," said Richard Lobenherz, president and owner of Vacation Properties Network, which sells properties in Charlevoix, Harbor Springs and Petoskey.

Baby boomers also are credited with boosting the number of second home sales nationally to four of every 10 residential transactions in 2005, a record high, according to the National Association of Realtors.

Vacation home sales nationwide increased 27% last year to a record 1.2 million, up from 872,000 in 2004.

The median price of a vacation home last year was $204,100, up 7.4% from 2004, the association said.

The missing numbers

But some statistics are misleading. For example, Clabuesch said figures from the Rural Michigan Listing Service show that two years ago, houses in Sand Point stayed on the market for an average of 8.4 months. Last year, that dropped to 7.4 months, while from August '05 to the present the average is eight months.

Also, the average price for a home rose 14% from $240,000 last year to $279,000 this year.

But those figures take into account only the houses that have sold. Homes that stay on the market for months -- sometimes more than a year -- aren't reflected in the averages.

And agents statewide agreed that there are quite a few more homes for sale this year, many of them on the market for 180 days or longer. In the first five months of this year, according to the Northern Michigan Multiple Listing Service, which represents such counties as Charlevoix, Cheboygan, Antrim and Emmet, sales dropped 30% while the number of listings increased 15%.

"It seems like every other house is for sale right now," said Joe Baker, of ERA Houghton Higgins in Houghton Lake.

Broker Stefan Scholl, who sells homes in Petoskey, estimated that 2006 sales are down 20%, while listings have increased that much through May, thanks to the state's struggling economy.

Scholl owns Buyer's Broker of Northern Michigan, representing buyers in Boyne City, Charlevoix, Petoskey, Harbor Springs and Bay Harbor.

"Buyers are extremely scarce," he said. "Listing agents are begging me for offers, literally."

Lake Michigan shoreline a draw

Sellers and agents say there's a reason some chunks of western Michigan might be faring better: The Lake Michigan shoreline tends to draw more people from Illinois and Indiana, where economic news is better.

"We draw from all over the country," said agent Debra Hall of Century 21 in Traverse City. "People are starting to loosen up and feel they can buy that second property."

Janet and Dennis Holmes, who own a home on Tawas Point on Lake Huron, hope that'll translate further east. They've been trying to sell their two-bedroom house -- walking distance from Tawas Bay and Lake Huron -- since September.

They'd planned to retire there when Dennis Holmes accepted an early buyout from Ford Motor Co., but decided instead to buy a winter home in Florida and use a relative's summer house on Torch Lake.

"We have people stopping by, but they look at the price on the flyer and keep on walking," Janet Holmes said last week. The house is advertised for $219,900.

Lori Babcock of Port Austin's Babcock Realty said the numbers in the Thumb's Huron County are definitely down. She said the market is almost exclusively second homes.

From January to June 2005, 158 residences were sold in the county. Between January and June this year, 128 homes have sold.

But even agents in the hardest-hit areas say they're hopeful: Some are looking for early retirees to finally buy their northern Michigan dream home. Others are hoping out-of-staters will see Michigan's buyer's market and hop aboard.

"I just sold a half-million dollar home to a couple from Connecticut," said Clabuesch. The couple is moving there full time.

"Our volume is down, but it seems like we're starting to deal with some out-of-state buyers looking to get more bang for their buck.

"Anybody's who's been looking around here for property in the last five or 10 years, if they're still interested, now's the time to come up here."