The Southeast Michigan Market

Every market is different, of course; so this report is local to the Southeastern portion of Michigan, which embraces Washtenaw, Wayne, Livingston, Oakland and Macomb Counties and is inclusive of several cities, including Ann Arbor, Warren, Troy and Detroit. The statistics that were used to generate the chart below were collected from the various MLS's in those areas and compiled by Real Estate One.


The chart shows average home sale values and clearly shows what happened to this market right after it hit its peak in 2006. Our crash was rather dramatic and reached an average of 40% loss in values, with some areas (especially the City of Detroit) going well beyond that into value losses of 50-60%. We believe that the market bottomed out somewhere in 2011, after five years of falling values. The chart shows a gradual return of value over the next five years.

It should be noted that this chart assumes a fairly brisk appreciation rate and there are many factors which could impact the rate of recovery of value. A financial meltdown in Europe, for instance, would certainly not help our economy and would slow everything down. The pace of recovery could still be impacted by many factors, but the point is that those waiting to see their home values return should anticipate it taking years, not months.

Other factors that will impact the pace of recovery include the speed with which the lendors recover from the legal issues of the Rbob-signing debacle and get back on track with foreclosures and the release of the overhang of foreclosure inventories. We still need to work that inventory off the books.

Finally there seems to be growing awareness in Washington that something needs to be done about resetting all of the underwater mortgages that are essentially damming up the normal flow of homes and home buyers in the markets. I'm not sure that there is the political will to do anything this year, with the election looming; so, perhaps that is a 2013 issue to resolve - depending upon the election outcome.

Is there a way to the middle ground?

The American political process is well underway for the 2013 elections and it is readily apparent that the two parties are being pulled more and more towards the extreme positions on what should be the fringes of their ideologies. On the one hand the so-called conservative party is moving rapidly towards a form of theocracy that we take such delight in lambasting in the middle east and on the other side the line between liberalism and socialism is getting more blurry.

The so-called “litmus tests” for both sides have hardened and pulled further apart. Both parties are acting to reign in or disown members who stray to far away from the purity of their strident positions. Positions on social and fiscal issues have become dogma. Out of this stiffening of resolve over positions has come paralysis in Congress and an increasing level of vitriol and finger-pointing.

Having lived through more than 6 decades and many changes in political power, I can state unequivocally that our current set of lawmakers is the worst that we’ve ever had and that the situation in Washington is at its low point. There is no middle ground left, no room to compromise. It’s not just the fault of the Republicans or the Democrats. In fact both must share the blame and both need to be replaced.

In other countries (certainly Great Britain comes to mind), when things get this polarized, new parties spring up to fill the void lef tin the middle. Perhaps it is time for that here. Let the religious extremists on the one side and the socialist on the other side take their parties down those paths to destruction. It’s time for a middle party, a party of moderation and logical compromise, a party more interested in doing what’s right for the country and all of the people than just for an elite or noisy minority.

I know that we have some alternative parties right now – the Green Party, the Libertarian Party and others – but we really don’t currently have a party with a mission statement (probably a platform in political terminology) to be inclusive and to work towards compromise for the good of all. Certainly the current Republican and Democratic parties can’t claim those attributes.

I can see names such as the America First party or the American People’s Party for this centrist new party. And, I can see the possibility of defections by legislative members from both of the extremist parties, as legislators whose beliefs and values reject being forced to toe the line of dogma that both of the traditional parties have adopted.

The interesting thing is that it would take only a very small number of defections or outright wins by centrist candidates to change the balance of power in Washington and force compromise and change. A big part of that change would be the need to negotiate, to compromise, to reach out to others to get anything at all done. Imagine if you will a Senate split 47-48, with5 new members of the centrist party or Congress with a relatively even split and 15-20 centrist party members. The only way to get things done would be with the help of the centrists or with a few defections by traditional party members with a center-leaning bent. Things would change.

As long as we’re imagining things, we might as well tackle how this scenario could happen. The main hold that the political parties have on candidate members is money (no surprise in that). So, now imagine that someone like Warren Buffet, or Bill Gates or some other Bazillionaire decides that enough is enough. Remember that Ross Perot took this route when he ran as a third party candidate. Now suppose that one or two or more of these superrich people decided that enough is enough and decided to provide the seed funding for a new centrist party. A billion here and a billion there and pretty soon you have real money and with it a real chance to elect those 4-5 Senators and 10 – 20 Congressmen.

If that happened, I suspect that this would become the proverbial snowball rolling downhill, gaining momentum through traditional party defections and continued election successes. Remember t6hat it doesn’t really take that many to break the hold that the traditional parties have on the legislative process. Changing the ingrained, old-boy rules that prevail in the Senate and House would take longer, but what counts is that the votes still need to be counted and add up to majorities to get legislation passed. As soon as you take away the purse-strings as a control mechanism things change.

So there you have it. A modest proposal in this new year to change things, We won’t need to “throw the bums out”, at least not all of them – just don’t elect any new bums on either side. Instead let’s elect people who care more about getting this country going again than testing the religious beliefs of opponents or challenging everyone’s belief in capitalism.