Living in a different state...

Lately I've noticed that many people that I run into in Michigan are also living in a different state. No, it's not that they have two homes or spend time traveling across borders. The different state that they live in is the state of denial. "Wow", they say, "I'm lucky that this downturn hasn't impacted my home's value." They commiserate, "Poor bob, my neighbor; his home has dropped 25% in value; but, mine is still worth what it was a couple of years ago." "I know that the rest of the neighborhood is down, but I have the best home in the area and mine has held its value."

The other thing that I hear a lot is, "I won't give my home away. If buyers aren't willing to pay what its worth, I'll just keep it." Well, I've got news for those people. Buyers are offering what its worth in today's market and if you won't sell it for that; well, you can keep it, because there are ten other sellers out there who will sell their homes for what the market says they are worth.

I'm just not sure where people are coming from when they say that they want to sell and then, in the next breath, basically state that they won't sell. They are living in a state of denial. If Yogi Berra were her he'd come up with something like, "You can't sell it, if you won't sell it." Well said, Yogi.

Here's the raw truth - your home is worth 20-25% less right now than it was 3-4 years ago. It is generally accepted in real estate circles that 2004/5 was the peak of the current real estate market and prices have been dropping ever since. Locally, we have seen a 1% per month drop in values/prices for the last 18 months. No one's home was/is exempt. Even lakefront homes in prestigious neighborhoods have fallen in value and in the prices that they will fetch.

It's not pleasant as a Realtor to have to tell potential listing customers this truth; however, it would be less than honest and a waste of their time and mine to go along with the charade that their house has not been impacted by the downturn. About the most encouraging thing that I can tell the owner of "the best house in the neighborhood" is that having the best house should help sell it quicker at the prevailing market price. That could mean saving thousands of dollars by not having to make several months worth of house payments; however, it isn't going to magically increase the market price.

So, get over it. Deal with it! Move on! Live in the moment, not in denial. Call me for an honest opinion of what your home is worth today. Just sit down before I tell you.

Yea! We're not #1!

A recent story on CNN's Money Web site used a set of predictions that have been created by Moody's (see whole story) on the coming declines in the values of homes in major market areas. The table lists the top 100 U.S. markets and the projected declines. Most of the predicted declines are yet to come, with Q3, 2008 as the projected "bottom" of this declining market. The list below shows only the top ten, plus the other market areas in Michigan that were on the top 100 list - some are groupings of cities in the area.

#1...Stockton, CA.....................................................-25.0

#2...Palm Bay-Melbourne-Titusville,FL..............-24.9

#3...Sarasota-Bradenton-Venice,FL.....................-24.8

#4...Reno-Sparks,NV..............................................-22.4

#5... Modesto, CA.................................................... -22.3

#6...Detroit-Livonia-Dearborn MI........................-21.3

#7...Fresno CA......................................................... -20.0

#8...Oxnard-Thousand Oaks-Ventura, CA.......... -19.2

#9...Sacramento--Arden-Arcade--Roseville CA..-19.1

#10.Las Vegas-Paradise, NV.................................. -18.7

#18.Lansing/East Lansing, MI............................... -15.7

#20.Warren/Farmington Hills, Troy, MI............. -15.4

#37.Flint, MI ............................................................ -11.3

#67 Grand Rapids/Wyoming, MI.......................... -5.3

California, as expected, had the most entries on the top 100 list, followed by Florida (also expected). Michigan tied with Ohio for Mid-west honors (if it can be called that); although Ohio cheated by having two area that it shares across borders with neighboring states - Youngstown and Cincinnati.

If the area that you live in is not named here, that's just because it isn't large enough in population to make the top 100 list, not because it is somehow magically going to avoid this decline. If you're in the Detroit metro area of influence - Wayne, Oakland, Macomb, Washtenaw and Livingston Counties - you are in a declining value market, likely in the -13 to -15% range. We may bottom out sooner here, since much of that decline has already shown up in pricing here, but it will still likely be early Q3 of 2008 before we start back from the bottom of this market.

These projections mean that we've got more price pressure to come; and, the sooner sellers accept that fact and deal with it in their pricing, the sooner we can get rid of some of the overhang of inventory on the market. Buyers can expect to continue to see great deals, well into next year; but buyers need to be ready to make decisions, instead of trying to wait for the "bottom" of the market. Market-timing in real estate is as much a fools game as it is in the stock market. You don't want to end up with a bad case of the "coulda, woulda, shoulda's", just because you waited too long for a better deal on the house that you wanted.