Real Estate News

Michigan’s real estate market continues to surprise the naysayers who expect national real estate markets to recover slowly or even continue to drop. Unlike the rest of the country, Michigan is unique in showing signs of resurgence.

This is not completely surprising in view of the fact that Michigan’s economy and real estate markets have varied from the national experience for the past five years. Our markets were already in decline in 2005, 2006 and 2007 when much of the rest of the country continued to experience robust sales and increasing prices. By the time the national real estate recession occurred, sometimes characterized as the “sub-prime crisis”, Michigan’s residential real estate values had already dropped by 35 percent.
The rest of the nation is currently facing a second wave of foreclosures stemming from exuberant purchases and refinancing which occurred three to five years ago.
Michigan did not participate in that exuberance, due to a market already in decline, which is helping us pull out of this real estate recession sooner than the rest of the country.

Many brokers across the country are reporting lackluster sales activity since the home buyer tax credits expired two months ago. Most local brokers and agents in SE Michigan are reporting just the opposite.

It is important to remember that all real estate is local and national media headlines don’t always apply.

Kelly Sweeney, CEO Coldwell Banker Weir Manuel

Reason: “It makes more sense to rent than to own.”

Rather than speculate on this issue, why not look at some hard data. Let’s ask renters, not homeowners, what they think? Fannie Mae’s National Housing Survey 2010 reported:

* 58% of current renters believe now is a good time to buy a house
* 75% of current renters believe owning a home makes more sense and
* 67% plan to buy a home at some point in the future

When they asked current renters for the major reason to buy a house, these were their answers (they could pick multiple answers):

* 78% said it was a good place to raise children
* 75% said because they would feel safe
* 70% said because you have control of your own space
* 66% said owning a home would be a good way to build wealth
* 54% said paying rent is not a good investment

If it makes more sense to rent than own, why do more than half of renters think now is a good time to buy, three out of four believe owning a home makes more sense and two out of three plan to buy a home in the future?

To believe that renting makes more sense is to believe that the majority enjoy living in a less safe environment, which wouldn’t be as good a place to raise children; a place where they have less control of their space and a place that won’t enable them to build wealth.
It just doesn’t make sense!

With the scheduled closing deadline for the home buyer tax credits, existing-home sales slowed in June but remained at relatively elevated levels, according to the National Association of Realtors®.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 5.1 percent to a seasonally adjusted annual rate of 5.37 million units in June from 5.66 million in May, but are 9.8 percent higher than the 4.89 million-unit pace in June 2009.

Lawrence Yun, NAR chief economist, said the market shows uncharacteristic yet understandable swings as buyers responded to the tax credits. “June home sales still reflect a tax credit impact with some sales not closed due to delays, which will show up in the next two months,” he said.

NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said softer home sales expected this summer don’t tell the whole story. “Despite these market swings, total annual home sales are rising above 2009 and we’re looking for overall gains again this year as well as in 2011,” she said. “Conditions have become more balanced in much of the country, which is good for both buyers and sellers. However, consumers find it even more challenging to navigate the transaction process, especially for distressed properties, which only underscores the value Realtors® bring to buyers and sellers in this market.”

Existing-home sales in the Midwest dropped 7.5 percent in June to a pace of 1.23 million but are 11.8 percent higher than a year ago.

Kelly Sweeney, CEO Coldwell Banker Weir Manuel

A few years of a down market does not wipe out over 200 years of American real estate history. Owning your own home is as much a part of the American dream today as it was for our parents and grandparents. There are people flocking to America every day with the hope that they, too, will be able to someday purchase their own home: a place where they can raise their families and invite their friends; a place where they can build the memories that become the family stories that will be passed down from generation to generation.

This issue will cover Dumb Reason #1. Watch for the rest of the Dumb Reasons in future issues:

Dumb Reason #1: Real Estate is no longer a good investment

There is no doubt that houses in this country have lost substantial value over the last five years. One could make the argument that the purchase of a home should not be looked at as a financial decision. However, it cannot be denied that a home is the largest single investment for most people.

What about those who bought at the peak of the market? Some people have lost up to 50% of their home’s value.

However, those who placed money in the Dow in 2007 and sold it in January 2009 would have lost 49.3%. Even if they sold today they would still be at a 26.7% loss. Does that mean that we should never again invest in stocks?

If someone bought gold at the end of 1987 and sold it in 2000 he would have lost approximately 50% of his investment. I am sure there were people in 2000 who decried gold as an investment when it dropped to almost $250 an ounce. I hope people didn’t listen as gold is now trading for over $1,200 an ounce.

Kelly Sweeney, CEO Coldwell Banker Weir Manuel

It has been an interesting two months since the Home Buyer Tax Credit expired. Demand has slowed down but has not come to the screeching halt some had expected. The million dollar question is: “What will happen to demand as we continue through the rest of this year?”

Market demand is stratified into three categories:
1. Entry-level homes: Typically for first-time home buyers
2. Move-up homes: Purchased by sellers of the homes that first-time buyers are purchasing
3. Luxury homes: The high end of the market. These were formerly considered over $1,000,000. Now, anything over $650,000.
Let’s take a look at what will potentially happen in each category in the second half of 2010.

Demand for entry-level homes: There is no doubt that the Home Buyer Tax Credit increased sales in the first four months of this year. Some experts believe that buyers who planned on purchasing in the second half of the year moved up their plans to take advantage of the tax credit.

Business Week quoted Douglas Duncan, chief economist of Fannie Mae, the largest mortgage financier in an article last week: “Temporary tax credits change behavior temporarily. It’s simply shifted demand forward.” CNBC, in an article entitled, “Housing’s Double Dip”, quoted Zillow.com: “While temporary tax credits succeeded in lifting buyer psychology temporarily, they essentially shifted demand forward without having a lasting impact on prices or purchase behavior. We expect some payback in the form of decreasing sales after the final closing deadline at the end of June.”
Although all the above may be true, activity in the entry-level market is somewhat less discretionary than activity at higher price points.

CONCLUSION: There will be a somewhat lower demand for entry-level houses until later this fall. Demand will then resemble what existed prior to the tax credit. It will not be as robust for the next quarter, but there will still be activity.

Demand for move-up homes: This is a category we believe will remain strong throughout the summer. There seems to be a belief in some circles that the only houses selling are those that are distressed properties (foreclosures and short sales). These types of sales do not create a second buyer as the sellers leaving these homes cannot qualify for a new mortgage. More than 70% of the homes sold today are NOT in this category, however. The rush of first-time home buyers created a stream of move-up buyers currently looking for their next home. This group is somewhat hesitant to pull the trigger as they want to make sure the deal on their current home closes before the new September 30, 2010 deadline.

CONCLUSION: This category will remain strong for the next few months. Once the wave of closings created by the first time buyers slows, so will this category. We won’t see another increase in demand until very late this year or early next year.

Demand for upper-end homes: This category has stood alone from the rest of the housing market over the last 18 months. This market was immune to much of the government stimulus and even the artificial lowering of mortgage interest rates had virtually no impact on jumbo loan rates. This market was less affected by the tax credit and therefore will be less impacted by its expiration.
Prices in this segment remain soft and inventories remain high. There is tremendous opportunity here for savvy buyers.

CONCLUSION: We believe, as confidence is re-established in housing and the overall economy and jumbo mortgage rates become more favorable, the upper-end category, especially the luxury market, will continue to gain strength.

Can’t remember the last name of that Realtor you met at a cocktail party last week, or the agent who helped you on that house hunt two years ago?

An improved “Find a Realtor” search tool now allows location-based searches using part of an agent’s or company’s name. The initial search can also filter for designations and certifications and the number of active listings an agent represents.

The Realtor.com beta site, which officially launched last week, also sports some snazzy map-based search capabilities, serving up information about individual properties, neighborhoods and housing markets that can help buyers and sellers get a handle on recent trends.

Unless agents choose to suppress such information, their profile pages will show the number of active listings they have, the average listing price, and their designations and certifications.

Profile pages also display the geographic markets served by agents and recent updates to their listings.

Map-based searches show neighborhood boundaries and can display heat maps of home prices or property valuations. Users can zoom in to the parcel level to click on individual properties.
Officials with Realtor.com, operator Move Inc., say the new capabilities are intended to help Realtor.com maintain its position as the most visited real estate site on the Web. The goal is not only to put more information into the hands of consumers, but help them find a real estate professional to interpret it.