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Friday, December 31, 2010

Reflection on my market...

2010 was a tough year for me in real estate. I closed about as many sides as in past years, but made much less from the efforts involved. Looking back, I only had two deals that were not either foreclosures, short sales or leases; two deals that I might classify as “normal” real estate deals. The rest were struggles with banks on short sales or with sellers and banks on short sales or just leases, which now make up almost 20% of our local market volume. Distressed sales – foreclosures and short sales – make up 60% of my little real estate patch.

I cover and report on six local markets, which are made up of six townships and the various villages and cities contained within them – Milford, Highland, Commerce, White Lake, Lyon and Brighton. That market spills over two counties – Oakland and Livingston – in which I do literally all of my real estate business. I list and sell houses outside the six markets that I track, but they are the ones that I focus upon with marketing efforts for listings and buyers.

The real estate statistics categories that I track on a weekly basis for these markets include the listed and sold prices of every home above $20,000 that sold during the year. Admittedly that is an arbitrary price cut-off; but I wanted to eliminate the leases and the sold as a tear-down homes. I calculate the percentage of sold vs. list price.

I record for each sale the State Equalized Value (SEV) listed in the public records. That is a number that is unique to Michigan and is supposed to represent ½ of the assessed value of the house (it is used for taxing purposes, although there is yet another Michigan-unique number for each property called the Taxable Value). I also calculate the sold price vs. SEV to see how close it really comes to being ½ the market value.

I record the Days-On-Market (DOM); although that is a mostly meaningless number these days what with all of the agent shenanigans going on with re-listing homes every month or so, to keep them “fresh” on the MLS. Finally, I record the Square Footage of the home and the list price cost per Sq Ft and the Sold price Cost per Sq Ft. There is enough data in these weekly reports to get a really good feel for these markets. In addition, I keep these reports by the month and have three years of data on line, month-by-month.

This year I also started a running Y-T-D report for each market; so now I’ll have yearly data on line, starting with this year. I’m trying to decide whether it makes sense to keep that annual data separated out by month next year. It probably does, so that one can see the differences in the market month by month. Below are some summary statistics from these reports.

In the Milford market, which includes Milford Township and the Village of Milford, the average sale list price was for $204K but the sales averaged $195K or 96% of asking price – not bad really and probably an indication that sellers are pricing more realistically lately. Home sale prices averaged 1.5844 times the listed SEV values. That means that the assessors are still lagging the market in terms of adjusting home values down enough to reflect the current market prices. Homes in the Milford market listed for an average of $92/Sq Ft and sold for an average of $88/Sq Ft.

Our neighbors to the north in the Highland and White Lake markets did not fare as well this year. Homes in Highland had an average list price of $156K and a sold price of $148K. Sold prices averaged 1.4072 times SEV and they sold for $75/Sq Ft vs. and asking price of $79/Sq Ft. In the White Lake market homes sold for an average of $76/Sq Ft, after being listed for an average of $80/Sq Ft.

The Commerce and Lyon markets did a bit better; however, the Brighton market was about the same as the Highland and White Lake markets. You can see all of this data at my Web site www.movetomilford.com by clicking on the “What has sold in the Milford area” choice.

I will continue to produce my weekly reports in 2011 and make more use of them as marketing tools with potential clients. They have certainly helped me make the case in listing appointments that I know and understand the local market. They also help with homeowners in price setting negotiations.

Wednesday, December 29, 2010

How low can we go?

I joke about Detroit being number one of so many bad lists and I’ve reported the tremendous loss of value that we’ve experienced locally; however, the latest Case-Shiller Market Report even surprised me. I had no idea we were so bad that the next worst city in the report isn’t even in view from our position. I remember once in high school when the track coach made me run in the mile run event. I’m not a distance runner…never have been and never will be. I was probably lucky that the leaders didn’t lap me out on the track. I was so slow that they were actually lining up for the next race by the time I got to the finish line. That’s sort of what the latest C-S numbers say about Detroit.

The C-S report shows how home values in various big U.S. markets compare to where they were in the year 2000. We all know that prices got wildly inflated in the mid-2000’s and then the bubble burst and they’ve been falling ever since in many places. Apparently some places have recovered better than others and clearly everyplace else has fared better than Detroit. Some places, like Los Angeles (174.05), New York (171.50) and Washington D.C.(186.67) are over 70% above their 2000 levels, which means that homes have appreciated in those areas by 74, 71 and 86% respectively.

Even cities like Las Vegas (100.97), Cleveland (102.20) and Atlanta (103.30), which took pretty good hits during the recession are back above their 2000 C-S value levels. And then there’s Detroit. According to this report, Detroit home values are at 69% of their 2000 levels. We’re back in the 1990’s somewhere, in terms of home prices. I’ve heard local assessors and appraisers place us back to about 1996 levels. That’s just depressing. Keep in mind that these numbers reflect values against 2000 as the ruler. They are still way below the market highs, which occurred in 2005-6. If current values were measured against that high-water mark Detroit home values would likely be down in the range of 40%.

About the only thing good that can be said about this report is that our bargain home prices are attracting more buyers to the area. I guess that’s understandable. Where else but Detroit can you find 1,350 homes for sale for under $10,000? It's not that bad out inteh burbs, but you can probably find over 1,000 homes for under $50K.

Tuesday, December 28, 2010

10,000 new customers a day

I read in my local paper this morning that, starting in January, 10,000 baby boomers a day will turn 65 and that this will happen every day for the next 19 years. Wow! That’s like getting 10,000 new customers a day for the next 19 years. The same article pointed out that the boomer generation, while it was quite innovative in many ways and changed our society in many ways, has not proven to be very good retirement savers. I’ll bet that many of them are also setting in McMansions that are currently worth much less than when they bought. However, a good number are probably still in that 1970’s or 80’s home that they bought and, even though it is worth less than a few years ago, they can afford to sell it and move on to a retirement home.

We’ve all been waiting for this tide of new potential clients to come in and it starts next year. Our work is cut out for us to help these new retirees understand the market dynamics of taking the paper loss on their current homes in order to get a good deal on a new, retirement home. Hopefully out of the 10,000 a day number there will also be a few that really did save properly for this time and can now act on their plans for retirement. I suspect that more than a few will just heave a heavy sigh and continue working, once they see that they don’t have enough saved to retire and once they find out what their home nest egg is worth on today’s market.

This is a potential market that I can get my arms around. I didn’t get into the foreclosure side of our business and haven’t really done many short sales, but helping retirees figure out what to do and what they can do with what they have I think I can help with. For one thing, I’m a little older than them and I’ve been “retired”, so to speak, for a couple of years now (even thought I work at two jobs pretty much full time). At least I can relate to the age group, to the things that we’ve been through and hopefully to the things we are looking ahead to doing.

So, I’ve got to run now, because I have 10,000 new clients to get ready for in January. Whew! I’m going to be busy.

Thursday, December 23, 2010

New Year’s Predictions - again

I’ve been publishing and distributing a paper-based newsletter to my SOI for the last seven years. As I prepared the Jan/Feb 2011 Edition (in better times it was a monthly newsletter) I started writing my annual real estate market prediction article and got to thinking about how many times I’ve offered the same “things will be better this year” advice (or maybe that was hope). As I rummaged through my achieves it was a little depressing to see that I’ve been writing about this terrible market for at least 5 years now. I’ve always found a way to sound upbeat and optimistic about the coming year and yet each January I’ve had to report that the year just passed was another tough year in real estate for homeowners, for sellers and for agents.

Again this year, I’ve found hope to write about in some of the data on improved home sales and an improvement in new home starts; however, I’ve also had to report that foreclosures and short sales make up more than half of our local sales and there is no end to that in sight yet, here in Michigan. I was able to put a positive spin on the fact that home values are not dropping nearly as rapidly as they have in the past; however, they are still dropping. There is also the ever popular “pent up demand” theory that various economists and real estate article writers drag out for want of any real proof that things will change. We are to imagine this pool of beet-red faced buyers who have been holding their breath for the last 3-4 years, awaiting the time to buy. Somehow they will supposedly make a collective decision that now is the time and rush to the market. It is unclear what magic sign they’ve been awaiting or when it will appear to them. Hopefully it’s the for sale sign that I put on someone’s yard.

It’s still a great time to buy a home in my market and still a challenging time to sell one, because you have to compete with pricing and appraisals that are driven by the distressed home sales. Homeowners in my area are coming to grips with the 30-40% loss in values that has occurred over the last few years. They don’t like it, but they are starting to accept that is happened and that the value is not coming back anytime soon. We’re sort of in that “life goes on” stage of acceptance of the situation that we find ourselves in today. Many underwater Baby Boomer homeowners have put off the inevitable for as long as they can and are now taking their losses to get on with retirement plans or other moves. Some are selling because they’ve exhausted their savings trying to keep up a lifestyle that they can no longer afford and now must get out before the house drags them under with it.

As for the agents in the business; many made the transition to working with banks and REO companies on distressed sales, but many did not. In the last few years the average sale price of sales that are made has dropped dramatically and a high percentage of transactions in my market are now under $100,000 per sale. The average transaction values have dropped from the mid $200K’s to the mid $100K’s locally. Leases have risen from a niche in the market to represent 20-30% of all transactions. All of that has made it difficult for many in the business to survive and many (including me) have had to seek “day jobs” to make ends meet.

So, again this year, I have published my optimistic missive of hope for the year ahead. When I looked back I found one article that I wrote about the market in 2008 in which I predicted that the real estate market would not turn around until 2011/2012 . I certainly hope I was right about that. We are currently breaking out the Champaign to celebrate that our unemployment in Michigan is down to only 12.7%. Maybe some of that euphoria will spill over into the real estate market. One can only hope, and hope, and hope…

Sunday, December 19, 2010

Turn the lights out when you leave...

Source: Forbes, Jenna Goudreau (12/08/2010) - Using data from Moody’s Economy.com, Forbes identified the top-10 states where more residents are leaving than arriving.

The factors that encourage outbound migration from these states are mostly economic — high employment and high cost of living — although both Louisiana and Mississippi have been affected by natural disasters.

The 10 states that have said goodbye to the most residents are:

1. New York
2. Illinois
3. Ohio
4. Nebraska
5. Kansas
6. Iowa
7. Louisiana
8. North Dakota
9. South Dakota
10. Mississippi

I’m amazed that Michigan is not on this list, with all of economic turmoil that we’ve had and with unemployment still running above 12%. An article in the Sunday paper (12/19 Detroit Free Press) stated that local demographers expect that Michigan will end up right below 10 Million people when the 2010 census data is all counted. That will keep the state in the Top-10 for population, but just barely above Georgia and North Carolina.

As one would expect, except for Mississippi and Louisiana, which both suffered in the aftermath of Hurricane Katrina, all of the population losing states are in colder climates or places with cold, snowy winters.
I wonder what this loss of population does to the local housing markets? In the distant past whole towns used to turn into ghost towns (The ghost town of Bodie California is pictured from WikiPedia) when the mines played out or whatever other local employment dried up. That doesn’t really happen any more, since people are more mobile and able to drive to jobs that would have been impractical in the horse and buggy days. Still, there have to be towns dotting the countryside that are mere shadows of their former glory days, before the big employer left town. That would make an interesting story for someone to research a dreport upon.

Thursday, December 16, 2010

Value vanished, into thin air…

A recent post on another blogging site – ActiveRain (a site primarily for people in the real estate business) – made the rather blunt point that the home value lost in this recession is NEVER, EVER coming back. The author explained that it has vanished into thin air and will never be recovered. He opined that, although prices will eventually start rising again; they are likely to rise at the historic rate of 3% a year, or about the rate of normal inflation. If that is true, then the increased price rise does not represent a true recovery of lost value, since one must adjust for inflation.

Many people commented on that post and most just didn’t seem to get it. For many, if the price goes up a bit then the value also went up and that means that lost value was recovered. That just isn’t true. Look at it this way. If a stock that I own drops in value 30% (a similar drop to home values in this area), that represents real loss of value. To make the example simple; if the stock was at $1 a share and I own 100 shares, then it was worth $100 just prior to the drop. Had I sold it before the drop, I could have bought goods worth $100 – let’s say 20 pounds of coffee at $5/pound. After the drop my holding in that stock is worth $70. With that, I could only buy 14 pounds of coffee.

Now if I hold on to it for 10 years and it finally makes its way slowly back to the price it was at when the drop occurred, my 100 shares would again be worth $100. But what happened to the price of the goods that I could have bought 10 years ago. At an inflation rate of only 3% in the price of coffee over that time coffee would cost $6.62/pound and I could only buy 14.88 pounds, or about what I could buy today for my $70. So the price is back to the pre-bust level, but the value has hardly improved at all. The same thing applies to home values.

The “value” that was lost from homes in the real estate bust was a paper loss for most but a very real loss for those who actually bought during the run-up prior to the bust. People who bought prior to 2000 are likely about at break even, that is their homes have a current value that is about the same as when they bought. They haven’t made the big appreciation that they hoped for (and once had, on paper); but, they are under water on their mortgages either (unless, of course, they got greedy and took equity out of the house during the boom).

And where did all of that value go? A good deal of the actual money that changed hands went to the developers and builders who were cranking out new homes as fast as they could, many of whom subsequently went bankrupt during the bust because they got greedy and overextended themselves to build even more homes. Some of it went into the well lined pockets of the cat-fat bankers and mortgage lenders and wall street operators who were busily packaging and selling off pools of mortgages and who scored outrageous bonuses prior to the meltdown, none of which will ever be recovered. Some went to the investors and layers of administration that are behind the mortgage lending process.

Much of the “value” that was lost was never real to begin with. That value was mainly in the inflated “market prices” of existing home stock and was the figment of some assessor’s imagination or the fantasy of some well greased appraiser. Both of those groups ran prices and “values” up as quickly as the market wanted, with little restraint. Asking where all that value went is like asking where your shadow goes at night.

So, what does this all mean? It means that we all need to let go of the past, give up the thoughts, hopes or dreams that we can wait this out and that the lost value will come back and everything will be as it was before the crash. That’s not going to happen. Get over it. Live with it. Get on with life..

Tuesday, December 14, 2010

Listen for the angels...


“If you are seeking creative ideas, go out walking. Angels whisper to you when you go for a walk.” (Raymond Inmon) from the Jack’s Winning Words blog.

I’m not sure whether it is angels whispering or just that a good walk can serve to clear ones mind and allow focus, but I do get some great ideas on the walks that I take with my dog. I don’t multi-task when I walk. No iPod or ear buds for me. I take the time to look around and see what’s happening in the neighborhood and maybe say hello to a neighbor or stop to talk.

Sometimes I’ll get so deep in thought about something that I’ll walk along, as if in a daze, and suddenly realize that I’m back home, having completed the walk and not remember how. Maybe the angels were whispering real loud on those days.

So, get out and take a walk. Let go of the iPhones and iPods and iWhatevers that tend to dominate life these days and just stroll along and enjoy nature and just being alive. You may be surprised at what wonderful ideas or thoughts pop into your head. Maybe it’s your angel whispering.

Monday, December 13, 2010

Using the numbers to understand the markets


Unless a large number of very expensive homes sell in the next 3 weeks, (which is highly unlikely) one can look at the numbers that I’ve been collecting and reporting all year long to get a better understanding of the local market. I collect and report weekly sold data for homes in six markets – Milford (Township and Village), Highland Twp, White Lake Twp, Commerce Twp (excludes Wolverine Lake Village and Walled Lake Village), The LyonTwp/.South Lyon market and the Brighton Twp and City markets (shown as just Brighton in the reports.

I decided early in the year to only look at sales of houses above $20,000, which probably leaves out a few really bad foreclosed and short sale houses, but also serves to remove any leases from the data. I report the last asked price and the sold price and calculate a percentage for the sold price vs. asked. I also report the SEV of the house at the time of the sale and calculate the SEV multiplier of the sold price vs. SEV. I report the Days on market, the square footage, the cost per Sq Ft asked and the cost per Sq Ft sold..

What good is all of this? Well it depends upon whether you are a buyer or seller. If you are a buyer, you can look at the data for the area that you are interested in and understand
What people have been paying for homes thereon a cost per Sq Ft basis and as a percentage of asking price. That is valuable information for negotiating a deal. If you are a seller or potential seller, you can see what a reasonable expectation might be for your home and maybe set a better market price for it that will help it sell faster.

For instance, in my home market area of Milford, sellers have been asking about $93/Sq Ft and getting about $89/Sq Ft. Those are just about the same for both the Average and the Median for those statistics. Buyers are paying about 97% of asking price, which means that homes seem to be fairly priced. Homes are also selling for about 87% of asking price in White Lake Township; however, the homes are priced at about $79/Sq Ft and are sold for about $76/Sq Ft. To see all of the data on all six areas, go to my Web site –
http://www.movetomilford.com/sold_homes.html

You can also get a feel for how far behind the assessors are in getting home assessed values down to reflect the market by looking at the derived number that shows the sold price as a multiplier of the State Equalized Value (SEV). In theory this quaint Michigan reflection of a homes value is supposed to be ½ of the homes assessed value, which should reflect the market value. If it is accurate the multiplier should be 2.0000, which would mean that one could multiply the sold value times 2.000 and get the market value.

In practice, because assessment adjustments in the downward direction have badly lagged the market, the numbers for most of the markets that I track are somewhere in the 1.5000 to 1.6000 range, with the Lyon/South Lyon market being the only one to average over 1.6000. Both the Highland and White Lake Markets are even worse in the 1.3000’s. That basically means that homeowners in those markets are being heavily overtaxed, since their taxes are based upon SEV values that are way above the market prices that are being paid.
Finally, you can also see how big the influence is of foreclosed homes and short sales – distressed properties. Nationally those types of sales make up about 30-35% of the sales that take place. In my six markets they have consistently run above 50% and for quite a while got as high as 70%. So far, in December they are running at 65% of the sales that have taken place.

What doesn’t show up in these numbers is the unknown number of would-be sellers who just can’t bring themselves to sell their hoes for what the market would currently bear. We’ll never know what that number is; nor will we be able to “see” the number of would be buyers who just can’t meet the current higher standards for a mortgage. There is believed to be a huge “pent-up demand” for both selling and buying just waiting out there for things to get better. There is also a reported “shadow inventory” of a large number of foreclosed homes that are being held back by the banks in hopes of a market turn around. Perhaps none of those would-be sales will ever occur; but, then we’ll never know, will we?

Sunday, December 12, 2010

Recurring themes – renewed hope…

I had occasion to go back over the last three years of postings to this blog recently and what jumped out at me was the recurring theme at this time of year for the last three years running – the bottom is near and things are about to get better.

It was actually hard to believe that I’ve been writing about this recession and its impact on the housing market for that long. Post after post was about the foreclosure mess and the mess that it has caused in the housing industry. I did see a few post back in the 08 and 09 that foresaw the current “new reality” situation that we are experiencing right now. I called it a fundamental reset of the American way of life in those posts. Perhaps that was a bit over dramatic but the basic premise – that things had changed permanently and that we would never return to the “the good ole days” turned out to be true (at least here in Michigan).

There were a few other themes that seem to have been consistent over the three years –

The ineptitude of government at the state and federal levels to deal with the issues at hand; with a running litany of alphabet soup programs HAFA, HAMP, HA-Whatever.
The ability of the scammers and sleazy operators in the banking and mortgage business to stay ahead of the regulators and to find new ways to rip people off during hard time.
The dramatic changes in the real estate industry as home values fell and as more and more practitioners turned to focusing on the distressed home market.
The failure of homeowners to accept and deal with the sudden loss in values of their major investment.
The unfortunate education of a whole new class of lowball buyers who are out trying to steal houses from the unfortunate foreclosed homeowners.
A recurring headline (used at least 5 times) of “Are we there yet?” as we all searched for the elusive bottom of this dreadful market.

Of course there were also lots of posts that encouraged hope and finding a positive attitude amidst all of the carnage. One cannot be forever the pessimist, after all.

Although I have been proven wrong for three years in a row, I am convinced that we are there now – bumping along the bottom and about to start climbing back. There are lots of positive indicators, from increases in housing starts and sales increases (albeit inconsistent, yet), to stories about the economy in general being back on track. In Michigan we were the first into the tank and many predict will be the last one out; however, even here we have some indication that the worst is over. Two of our local three automakers have been through their catharsis events (bankruptcy) and have returned to the living. The resulting ripples through our supplier companies are settling down and life is settling back into what will be the “new normal”. I’m even starting to see a trickle of move-up buyers cautiously re-entering the market – something that has been largely missing for almost two years now.

So, as we head into the Holiday season and I get to write my annual “looking back” and “looking ahead” posts, I’ll be dragging out the old theses about how it seems that the worst is over and the year ahead is going to be better. Hopefully I won’t look back o that someday and wonder, “What was I thinking?”

Tuesday, December 7, 2010

Who's running the show?

I read today that Fannie and Freddie are saying it’s OK to go ahead with sales involving foreclosed houses. That’s probably a good thing, since sales of those homes have been stalled by the legal actions in several states against shoddy bank foreclosure practices. Of course, not to be thought of as Scrooges, they also said that they would not evict anyone until the Holidays are over. How nice of them.

I also read that the Comptroller of Currency has ordered banks not to continue foreclosure proceeding against people with whom they have entered into the loan modification process. That makes sense, since they have on the one hand decided to see if this person can save the house if his loan is modified. To turn around and on the other hand (and most would probably say behind their backs) keep processing the foreclosure, perhaps even speeding it up because of delinquencies that are a part of the loan modification process, doesn’t seem fair or make any sense. Either give the guy a break with a loan mod or take the hose, but don’t give false hope of a loan modification, while during the process continuing the foreclosure procedure. That’s just wrong.

In other news from the asylum we call Washington, the Congress seems ready to add to the deficit by passing the extension of the Bush Tax cuts for all while also adding “sweeteners” for both the rich and poor. This all comes just after the President’s Deficit Reduction Panel released it’s finding that massive spending cuts and tax increases will be needed to get rid of the deficit mess. Only in Washington could the report of a patient dying from loss of blood be “cured” by suggesting that we attach more leeches to the poor devil.

Elsewhere in the news there was consternation about the suggestion from the debit reduction panel to eliminate the tax free sale status for real estate transaction over $500,000. That is among the sacred cows threatened by the need to reduce Federal spending or raise revenues by eliminating tax breaks. Tax breaks are like sacred cows in India or sacred monkeys in Thailand. No one wants to touch them, no matter what havoc they may cause. They have become like entitlements in America and are often mistaken for rights.

It is hard t see much pattern or logic in much of what passes for government in Washington these days. It has devolved into an show akin to the glory days of the WWF Saturday night Smackdowns. The stars from both political parties seem more interested in carefully orchestrated showdowns and posturing for the media than in actually trying to govern. It might all be amusing to watch, if the consequences on us all weren’t so profound. As it is, it’s just scary to watch.

Friday, December 3, 2010

Foreclosure sales dragging all real estate down...

The Associated Press reported in a story on December 2 the 10 states with the highest percentage of foreclosure sales:

· Nevada, 54 percent
· Arizona 47 percent
· California 40 percent
· Florida 37 percent
· Massachusetts, 35 percent
· Michigan 32 percent
· Georgia, 29 percent
· Oregon, 27 percent
· Idaho 25, percent
· Illinois 25, percent

They also reported that about 25% of all residential sales in Q3 were foreclosures. They didn’t report how many short sales were in the mix of residential sales, but if it tracks anywhere near our local market trends that would take the overall “distressed” portion of the market up considerably – perhaps as high as 35-40%. The market was also reported to be down both quarter to quarter for 2010 (Q12 to Q3 down 25%) and quarter vs. quarter against 2009 (31%).

There are no real surprises in this story; although, I’m pleasantly surprised to see that Michigan has dropped out of the top 5 foreclosure states. I’m a little surprised by the 32% that foreclosures make up of the market for Michigan overall, since the numbers in my little six-township market area have been consistently higher than that – averaging above 50% for the last 18 months – proof again that all real estate is local.

I haven’t done the math, so I can’t tell how much downward influence foreclosures are having on non-distressed homes; however, the howls coming from other agents about low appraisals killing deals is proof that the influence is considerable. I guess you can’t blame the appraisers for that. They are given instructions in their assignments about what to take into consideration when establishing values in communities and it’s pretty hard to ignore the 3-4 empty and/or foreclosed houses that seem to be in each neighborhood. Assessors are having a tough time too, since they are serving a master to whom they must continue to give bad news – home values, and with them tax receipts, continue to drop.

It’s interesting to me that every time I make a post like this I get feedback in the form of responses that things aren’t as bad here or there, usually from agents in states not on the list above. I have yet to hear from a Nevada or California agent telling me how much worse off I am than them. I actually have some difficulty imagining their situations, given the market that I’m facing. Now, I must quickly add that there are some markets in Michigan that are doing relatively well - Ann Arbor and Birmingham on this side of the state and much of the western side of the state seem to be in better shape.

I suspect that much of the problem that we are seeing locally is a manifestation of the old real estate saw – location, location, location. Some of our most depressed areas are in the farthest out suburbs – places where people seemed to be willing to drive to in better times, just to gain that little extra bit of “country” atmosphere. Now those places are “too far out” on the feedback forms as people focus more on getting to and from work. The locations out along major highway arteries are still doing OK, but if the location is 20-30 minutes off the main highway, “forget about it.” Or, so it seems.

So, where is the economic recovery that I hear about in nightly newscasts? I suspect that it’s on its way and has probably already arrived in some locations. It might take a while to reach us in this area. We still have a big pool of unemployed ex-workers from the automotive industry and a pretty big inventory overhang of foreclosed or distressed houses in the area. When the 2010 Census results are released, I would be surprised if Michigan hasn’t experienced a significant population reduction. That may mean that we have lots more housing stock that we need. I guess we’ll wait and see.

Wednesday, December 1, 2010

Small is beautiful…

I saw an article about tiny homes in this weekend’s local newspaper. That is a topic that I have written about before, but not for some time. The houses in these stories are really tiny – some less than 100 Sq Ft. You can read more about tiny homes at several Web sites - http://www.tinyhomes.com/ is one. Most of the companies in this end of the business offer plans for the DIY builder or will prefabricate the home for you. Some even mount the tiny homes on wheels (see http://www.tumbleweedhouses.com/ ).

I’ve also opined here about the general downsizing of just about everything that has come as a result of the current recession. I characterized it as a “reset” of the American way of life. Some have found that to be a relatively drastic view (or term). So, call it whatever you feel comfortable with; just as long as you acknowledge that some fundamental changes seem to have occurred.

The folks who might find this all to be a bit déjà vu are the grandparents or maybe great grandparents out there who lived through all or part of the great depression. Really anyone who grew up in the 30’s, 40’s and 50’s remembers when houses weren’t all that big. Just about any older town or city has whole neighborhoods full of little brick bungalows that are 800-900 Sq Ft. Most had 2-3 bedrooms a living/dining room and a kitchen. Many likely did not have garages; although many had basements. Your grandmother may still tell stories about raising her family in one of these small houses - and a happy family it was, I’m sure that she’ll add. Many of those old home still exist, although most have had additions added and perhaps garages built by now.

I can remember back to my childhood and living until I was in third grade in a 400-500 Sq Ft , one-bedroom house that had a lean-to addition that served as the bedroom for my sister and me. The whole house was heated by a single coal-fired pot belly stove in the winter. I slept on an old Army cot and my sister had the bottom of an old sofa as a bed. When you’re young living like that can seem like a grand adventure. We moved to a “grand” 1,000 Sq Ft three bedroom ranch on a slab and I grew up through high school in that house. I never felt like I needed more. Later I raised my children in a 1,400 Sq Ft quad level home with 1.5 bathrooms, which we all seem to have survived fairly well.

By the 2000’s the master bedrooms of most new homes were bigger than the first house that I remember and the great rooms on most McMansions probably had more room than that house that I really grew up in. “Bigger is better” was the mantra for the 80’s 90’s and early 2000’s. Perhaps, that is no more the case. People have come to realize the waste and cost of those huge homes and much of the earning power that supported that excess has largely evaporated, at least in the so-called middle class, especially the blue-collar middle class.

Maybe this is really a good thing. Maybe the latest generation, who are learning to be happy with less, will turn out to be happier than the generations that were defined by excess and self-centered spending, but which never seemed to be happy with what they had. I don’t think we’ll end up seeing the market going back to tiny houses, or even new-build houses under1.000 Sq Ft.; but we will see smaller new-build homes with much more practical use of space and probably much better energy utilization, too. I for one think that’s a good thing.