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Wednesday, September 29, 2010

Family trends may drive housing decisions...

From the Web-based newsletter IconoWatch by Iconoculture.com comes this story –

Chalk up another emerging trend to the lingering recession: 1 in 10 U.S. youngsters now lives with a grandparent, according to a Pew Research Center study (Washington Post 9.10.10).

The number of grandparents acting as caregivers rose gradually throughout the decade, then spiked sharply after December 2007, when the recession officially started. One reasons cited by analysts is that adult children are leaving the home for career retraining or to look for work in other locales.

White grandparents were most likely to be enlisted as caregivers. Their ranks rose 9%, as opposed to 2% for blacks and no change for Hispanics.

A previous Pew study noted a recession-linked spike in multigenerational U.S. households. So if it’s not just the grandkids it likely that the whole extended family is living together.

It’s also not unusual for ethnic families from many Eastern European and the Middle East to have multiple generations or extended families living together – it’s just a normal part of the cultures.

Whether it's boomerang kids moving back home or grands stepping in as 'rents, the recession has redefined "normal" family life. Companies looking to reach today's consumers need to understand the changing needs of multigenerational households.

From a real estate point of view this might mean that the older generation will be looking for a bigger house, so that the entire family will fit. I’ve certainly hit that myself with clients. Some times these families will look to buy multiple homes right next to each other, so that they can spread out a bit, but still be close together. Whatever the need – more space to accommodate grandchildren or lots more space to house an extended family, I can help – give me a call.

Sunday, September 26, 2010

A most unusual week in real estate

I've been tracking six markets in my immediate area for several years now and I believe that this is the first week ever that I had one of the markets not record a single sale. I don't track sales below $20,000, which includes all leases; so there was the possibility that I missed seeing a really low priced sale. I looked and that was not the case. For last week the Brighton market - city and township - did not record a single sale. There was one lease for $2,000/week; but, that was it.

It's not as if Brighton is my smallest market either. Milford, followed by Highland are smaller, in terms of units sold year-to-date. The South Lyon/Lyon Twp market is also smaller in terms of units. So it is a bit unusual that the Brighton market would be silent for a whole week. Maybe there is a pent-up demand building - the Brighton Bubble, so to speak - that will burst forth next week, as the month comes to an end.

Otherwise, and elsewhere, the markets that I track seem to be following a pattern of stabilizing and even rising home sale prices (at least in the averages and medians that I measure). Inventory is still down a bit and homes above $200K are finally selling. The foreclosed and short-sales, as a percentage of overall sales continues to fluctuate above and below the 50% mark, with last weeks sales made up of 53% of those distressed categories, after having been below 50% for a couple of weeks.

It's great to see activity in the segments of the market above $200K. That gives me great hope that a recovery has in fact started. All indication are that, if we have not started back up, we are at least bouncing along the bottom, with things not getting worse either. Time and the benefit of hindsight will tell us eventually if we had reached the bottom by this date. I'll see yo in the future where we can pontificate mightily that we knew it all along.

Friday, September 24, 2010

What now? What's next?

Now that the recession is officially over (and actually has been for over a year without us knowing it), what happens next? I'm still seeing stories on a daily basis about how bad the real estate market is in Michigan and in the Detroit area in particular - down again last month year-over-year. Apparently not everyone go the memo that THE RECESSION IS OVER PEOPLE! It's time to star buying homes again.

I guess the fact that about 25% of our population doesn't have a job or are severely underemployed may still be acting as a damper to local real estate sales. Combine that with a mortgage market that, while sporting the lowest rates in decades, is still one of the toughest to qualify for ever and you have the formula for the continued swoon of our local real estate market. FUD reigns supreme in Michigan. There is still Fear of more job loses; Uncertainly about what will replace the lost automotive jobs; and Doubt about the leadership in Lansing having a clue about what to do.

As I talk to people who are working I get an ear full about how hard they are working, because they are now doing the jobs of 2-3 people who were laid off. Companies that are hiring are hiring part-timers, so that they don't have to pay benefits and to allow themselves to be flexible if another downturn occurs (the so-called "double-dip").

Every now and then you hear someone mention that they are in a "recession-proof industry." The health care industry comes to mind; although people also seem to be putting off health care due to lack of insurance and lack of jobs to pay for things. The back end of the health care industry - the funeral homes - may be the only truly recession proof industry. Even there people are opting for the cheapest funerals with rental of caskets for the viewing being hugely popular these days, along with cremation rather then internment.
So, maybe it's still too early to ask what's next. Maybe the better question is really, "When's next?" When are we finally going to get this recession behind us and get on with life. In Michigan that may still be a while. We are a state that has yet to deal with losing a big chunk of our population (their jobs went first and they followed). If Detroit has been characterized as a place with 1,2 Million homes for a population of 800,000, I hate to think what our excess housing overhang is at the state level, but we have to work our way through that inventory before much new building can take place. In the mean time, there are great bargains out there for the few people who are looking, so give me a call.

Wednesday, September 22, 2010

Numbers, numbers, numbers

The latest numbers on sold properties in the 6 townships that I track are available on my Web sites. I take a weekly look at sales in Milford (Twp and Village), Commerce Twp, Highland Twp, White Lake Twp, Lyon (Twp and City of South Lyon) and Brighton (Twp and City).

Sales of higher end house do seemto be picking up and the percentage of sales that involve foreclosures and short-sales is down below 50%. The average and median sold prices have also been creeping up. Those are good things and show a market that has at least stabilized a lotand one which is poised for a comeback.

I have a gut feel that there is a lot of pent up selling demand by owners who have just been waiting until things stabilized. There is also a rumored "shadow inventory" of foreclosed and pre-foreclosure homes out there that the banks are holding off the market. Those have got to hit the market sometime soon; so, we still have some issues to work through, but things are looking a bit better.

Employment uncertainty is stil holdign back the would-be move up buyers who used to make the market for mid-range houses, so hopefullyt that will also stabilize soon.

Tuesday, September 21, 2010

How'd I miss it?

“Nothing is as far away as one minute ago.” (Jim Bishop). Jim Bishop was a newspaper man. He might be as confused as I am at the report on yesterday's national newscasts that not only is the great recession over; but, it has been over for over a year now. With the great clarity that comes from hindsight, economists are now declaring that the Great Recession ended in June 2009. Wow! How'd I miss that?

Maybe it's the fact that we still have between 15-20% of our state's citizens wandering about like zombies looking for work that now longer exists here. I read in today's paper how one local luxury mall is dong great guns business and how workers at a local auto supplier are all very busy. Of course they're busy; all of the remaining workers are doing the work of 2-3 people, since everyone else was let go.

There are now many scholarly debates going on about what to do to get the economy moving again. I saw a great line in a local newspaper about one of the major issues with housing in Detroit that might apply to this issue, too. The writer said that Detroit has 800,000 people living in an area with housing for 1,200,000 people and that is why there is such a problem with blight and abandoned building. Well if you turn that around a bit and apply it to the job situation; we probably have 1.200,000 people living in an area with 800,000 jobs. And, the lost jobs aren't coming back. The problem is compounded by the fact that most of the people without a job are living in a house that is under water on the mortgage; so they can't even move to find work.

Now there are even articles starting to appear that say, "Gee, maybe we should bring back some of the manufacturing jobs that we shipped overseas." Well, DUH! It's starting to sink in that the Chinese workers that our American companies are paying to manufacture their goods are not running down to the local Walmart to buy those goods. In fact, no one is running down to buy those goods, because the Americans who remain in the area are out of work or fear that they will be soon. But, hey, the Great Recession is over! Celebrate! Just ignore those people with the "Will work for food signs." They're probably slackers. Oh, wait, that's my neighbor...your brother...someones daughter...

Monday, September 20, 2010

It ain't over 'til it's over...

That is a very famous piece of advice/philosophy from the master - Yogi Berra. He also coined the phrase "If you don't know where you're going, you might not get there." Both are useful to describe things in the real estate market these days. In many ways we don't know where we're going, because we're in uncharted waters in the current recession. And I'll be darned if I can tell if we're at the bottom of the market locally or may have already bottomed out and have started back.

A part of the confusion in the Michigan real estate market is caused by our horrendous unemployment situation - 13+%. There seems to be no end in sight for that, even though the local automakers have been through their rightsizing efforts. Most of the shakeout in the tier-one supplier base is also over, but the ripple effect through the entire supplier base is on-going. Basically, uncertainty reigns and no good can come out of uncertainty.

As I look at the data that I track, things don't seem all that bad. Houses are selling and more and more of them are houses above $200K, with fewer of them being foreclosures and short-sales. However, there is this impending sense of doom out there, too; because there is as big pool of homes that are delinquent but not yet foreclosed. I'm not sure if the banks are just holding back on foreclosures to try to stabilize the market or perhaps to keep more red ink off their books; but, it sure seems that they are going longer before pulling the trigger on the Sheriff's Sale these days. Perhaps some of the government's loan modification programs are working; but, my sense is that the banks are just holding back for purely selfish reasons.

I my little patch the percentage of sales that involve foreclosures and short sales slipped below 50% again last week - now down to 41% for September in the 6 market areas that I track. That's good news. The percentage of asked vs. sold prices in these markets has also crept up to about the historic norm of 97%. That means that homes are being priced properly and that buyers perceive that the asking prices correctly reflect the values. To see all of the local statistics for my market area, go to http://www.movetomilford.com/ and click on the Local Real Estate Statistics choice.

So, if it ain't over until it's over; how will we know when it's over? We likely won't know. We'll look back on some point in time and reflect that this is when things changes and the market started back. It's sort of like the economic numbers that economists use. They are always a quarter or two behind and they are almost always "adjusted" after the fact. Since Realtors are always using past sales to predict the future for new listings, we will undoubtedly miss the change by anywhere from a month to a quarter. We'll keep an eye on it for you, since Yogi also said, "You can observe a lot by watching."

Sunday, September 12, 2010

Observations from the local market data...

Earlier this week I updated the local market data that I track on home sales in the Milford market area. I define that as Milford (Township and Village), Highland Twp, Commerce Twp, White Lake Twp, The City of South Lyon and Lyon Twp and The City of Brighton and Brighton Twp. This was my first update that covered September sales, due to the mid-week switch between months (last week I just included the sales for August 30 & 31 to close out that month).

Anyway, the sales data for September and for the Year-to-Date in those markets is now posted at available through my main real estate Web sites - http://www.themilfordteam.com/, http://www.movetomilford.com/ and http://www.mihomebuyer.com/. One thing that I have noticed over the last few weeks is not really apparent if one just looks at the data. There are lots and lots of homes being sold fore less than the seller owes, but which are not short-sales. They are sales for which the owners/sellers are getting less than what they owe to the banks, but I'm noticing that many sellers are just eating the loss themselves. I've actually had a couple of listings that sold like that myself.

These sales are a classic case of owners not wishing to impact their credit standing by going through a short-sale. Short-sales, like foreclosures or bankruptcies do have an impact on the seller's credit. The severity of that impact is almost totally up to the bank involved and how they report the sale to the credit agencies. In a short-sale the bank agrees to take less for those that they were owed on it and the debt obligation is extinguished at that time; however, they do not have to (and most don't) report it as a debt that was satisfied. It was not paid off. Some banks even reserve the right to come after the shortfall later through collection actions or legal actions. It's the fear of those post short-sale actions and the potential damage of the report to the credit agencies that scares many homeowners into eating the losses themselves.

I suspect that every credit counseling agency would advise those owners not to strip money out of retirement savings or out of the kids college funds, but many do just that. Others may tap into mom and dad for a loan to pay the difference. Most do not have good enough credit to find unsecured lines of credit that they can tap for this purpose.

Another thing that I've noticed over the last couple of months is that homes in the $200 - $400K range (and even above) are starting to sell again - not like they used to, but still it's encouraging to see how many are selling this summer, even if about a third are short-sales.

Over the last 2-3 months there has also been fewer sales in the low-end $20-100K range, primarily I think because there has been little inventory since the tax credit was ended. Perhaps they were mostly sold off during the tax credit selling frenzy.

In our area I'm also seeing the sold price to SEV ratio creep back up towards the 2.0 mark that would indicate that the assessed values are getting closer to the market's perception of the real values. a home's SEV (State Equalized Value) is a unique Michigan value number, used for tax purposes and meant to represent 1/2 of the assessed value. In the good time (you remember them don't you) homes would sell for between 2.0 and 2.2 times the SEV. The township assessors couldn't keep up with the appreciation that was going on back then. For the last couple of years the assessors haven't been able to keep up with the decline in values and homes have been selling for between 1.4 to 1.6 times the SEV. Lately we are back up to about 1.8 times SEV, which means the assessed values and the market values are getting closer.

If you look at all of the charts that are available on my sites you'll also see that inventory is down, as is the median sold prices in most markets that I track. Right now inventory is so low that it is actually a good time to put a house on the market in most price bands. There just won't be much competition. It's still a good time to be a buyer, but you just won't have as much choice in most price bands as you might have had in the past.

Monday, September 6, 2010

The great weeding out...

One aspect of the current recession that is having a great impact on the real estate profession is the weeding out of many of the marginal, part-time agents. Unfortunately this same process has caught up many full-time agents, too; as more and more people in real estate find that they can no longer make a living in the current real estate environment. We've lost a few full-timers at our office. As a result of this process, the real estate "profession" is probably more heavily made up of part-timers than ever - mostly people seeking extra income who are not dependent upon real estate for their livelihood.

It's not so much that nothing is selling. It's just that so much of what is selling is so cheap and takes so much time and effort to get to a closing, that it is just no longer worth it to many. The average sale in my market area used to be about $200,000, which isn't much when compared to California or Florida or some of the other more expensive markets; but it was still enough to make a living, if you sold enough sides at that average. Now the average is approaching $100,000, with many deals on foreclosed or short-sale houses in the $20,000 - $50,000 range.

The real rub is that it takes as long, or longer, and as much, if not more, effort to sell one of those low cost houses as it did for the $200-300,000 homes that we were selling. It has ended up being much like the shift from high paying union jobs at $28-40/hour in the auto industry to the new second-tier jobs at $14-16/hour. It's tough to get by when your pay is cut in half or more. That's why a number of Realtors have abandoned the trade and why a number of them are also in the foreclosure ranks with their own homes.

There is one point of view on this whole matter that says, "That's a good thing. It gets rid of the people who shouldn't have been in real estate in the first place." There's something to that argument. There are very low barriers to entry into the real estate sales field; so, lots of people who got into it for the wrong reasons - thinking it is an easy way to pick up some extra money on the side - are now just as quickly exiting the field. That probably is a good thing. I'm not sure what the turnover rate for new agents is locally, but it's got to be high right now.

However, there are also good, full-time Realtors, who perhaps didn't jump on the foreclosure and short-sale bandwagons fast enough or who otherwise haven't adjusted as well to the new market that we face to maintain their needed income stream. We are losing them, too. Some older Realtors got disgusted with the market dynamics and retired, some shifted into other fields that are related to real estate and many just left for other jobs where they could make a living. That's a shame, but a natural part of any profession, I guess. Change happens and there are always some who just can make the necessary adjustments to accommodate that change.

I found myself with this same dilemma. I missed the foreclosure bandwagon and was loathe for too long to deal with short-sales; so, I got left behind. I decided to seek something else to do and went dual career - selling office copiers/printers, as well as real estate. The dual career path is not an easy row to hoe either, since you have two completely different sales environments vying for your time and attention. At first I had to devote most of my time to learning new products and a new company and getting started in the new venture. That took at least 3-4 months of hard work, during which my real estate business languished. Now I've been able to achieve a better balance between the two and had some recent success in rebuilding my real estate business with new listings - ironically all short-sales.

So, the great weeding out will continue. The strongest and most adaptable agents will thrive, even in the current market and many others will survive and hope that things get better soon. The thrashing and turnover will continue at a high level at most agencies and many of them will not survive either. The key to making it in real estate these days may well be the ability to let go of any dreams about things getting "back to normal" and dreams of "the good ole days" and figuring out how to deal with the "new normal" of the current market. I don't have an answer yet, but I'm working on it. In the mean time...anybody need a copier/printer?