Originally Posted By: jhagarty
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By KATHY BARKS HOFFMAN
8/25/05
The Associated Press
LANSING, Mich. (AP) _ Dave and Ann Robach had their century-old Grand Ledge home with its polished oak woodwork and high ceilings on the market for 11 months. Despite dropping the $194,900 price by more than $30,000, they had no takers _ until last week, when they sold it for less than they were asking to the first buyer who'd made an offer.
For the Robachs, the fact that Michigan is among 10 states facing the most risk for home-value decreases in the next two years is no surprise.
"Everybody seems to be below market" price, said Dave Robach, a 58-year-old retired mail carrier who remembers when Grand Ledge's historic homes were snapped up even before they went on the market. "Whoever buys this is going to get a good deal."
Although Michigan isn't part of the housing "bubble" that has driven up prices in the past year by 20 percent or more in coastal communities such as San Diego and Fort Lauderdale, Fla., its poor economy is causing the housing market to soften. Even modest amounts of price appreciation are undermined by lost jobs and glutted markets.
"The whole state of Michigan is still in a recession, (and) in real terms, household income has declined," said Marco van Akkeren, an economist for PMI Mortgage Insurance Co. in Walnut Creek, Calif. "That really highlights the problems with the Michigan economy."
PMI's summer 2005 Economic & Real Estate Trends report lists Michigan as one of the 10 likeliest states, along with the District of Columbia, to see housing prices decline. It ranks Detroit as No. 15 among the riskiest U.S. metropolitan areas, with a nearly 30 percent chance that prices will drop.
Van Akkeren said one factor affecting Michigan's housing market is the number of people leaving the state.
Census figures released this summer showed Michigan with one of the slowest growth rates nationally. It's predicted that by 2030 the nation's eighth most populous state will be surpassed by North Carolina, Georgia and Arizona, moving it to 11th.
Without enough population growth to push up demand, housing prices will suffer, van Akkeren said. "You have excess supply in Michigan," he said. "You don't have that in California or the Northeast."
Michigan finds itself in the same high-risk category as states such as California, New York, Rhode Island and Minnesota. Yet its problems stem far more from the state's economic weakness than any overheated rise in housing prices.
According to PMI, housing prices have increased from a low of 3.6 percent to a high of 6.6 percent in various Michigan urban markets in the past year, far below double-digit increases in cities in Idaho, Florida, Nevada and elsewhere.
Yet Michigan buyers still have had a hard time keeping up. Household incomes have risen only modestly as the state has struggled with layoffs and fewer high-paying jobs.
Flint, for instance, has become less affordable because household income has increased less than half the national rate over the past five years. Flint's housing prices have risen about 25 percent during the period, but household income has increased only about 10 percent, van Akkeren said.
PMI estimates both the Ann Arbor and Bay City areas face a better than 20 percent chance of experiencing housing prices decline over the next two years. In Jackson, the risk increases to 26 percent and in Flint to 28 percent.
The only city rated higher is Detroit, along with its nearby communities. Home prices rose 3.6 percent in the area in the past year, only about 1 percent above the area's inflation rate. Yet homeowners face a 30 percent chance their homes will lose value over the next two years, according to PMI. In its spring report, PMI said the risk was nearly 38 percent in the Detroit area, then ranked No. 12.
Karen Kage, chief executive of Realcomp II Ltd., a large multiple listings company in Farmington Hills, said statistics for southeast Michigan reflect the softening market.
Homes and condominiums in the area stayed on the market an average of 73 days in July, up from 56 days in July 2004, Kage said. There's also 20 percent more property on the market right now, she said.
Kage said she's already seen a slight drop in housing prices in some southeast Michigan cities. In Detroit, for example, the median price of a home dropped from $59,793 to $59,102 between July 2004 and July 2005. In more affluent Farmington Hills, the median price went from $236,000 to $235,000.
PMI's forecast for Michigan likely poses less risk for existing owners who plan to hold onto their homes for the next two years or longer. But new buyers may get trapped in a house whose value drops, which could be particularly troublesome for those who choose to finance with alternatives to traditional fixed-rate mortgages, the PMI report said.
In most of the state's major cities, "there's a significant possibility of house prices dropping or at least staying flat" in the next year or two, van Akkeren said. "That should be a concern to home buyers getting into the market now."
The west side of the state faces less risk than the rest of Michigan, PMI says. Muskegon, Kalamazoo, Grand Rapids, Benton Harbor, Holland and Grand Haven are among the areas with an 11 percent to 15 percent chance prices will fall, while Monroe, Lansing and East Lansing are closer to 20 percent.
Saginaw-Saginaw Township is the only housing market elsewhere in the state to match the lower risk predicted for the west Michigan housing markets.
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Joseph Hagarty
HouseMaster / Main Line, PA
joseph.hagarty@housemaster.com
www.householdinspector.com
Phone: 610-399-9864
Fax : 610-399-9865
HouseMaster. Home inspections. Done right.
