Why so many homes on market (Detroit: for sale, real estate market, foreclosure)

[walking1]

[SIZE=3]I can’t believe how many homes are up for sale in any given zip code in the city. Of course, just driving through different neighborhoods one notices the for sale signs, the courtonless windows and the tall grass. But what about the home occupiers who don’t make it obvious that they have put there house up for sale. When I do an on-line search of real estate, each Detroit zip codes results in hundreds of listings. I almost want to say that for most of the zips in the city, 40%-50% of the homes are listed for sale. Has anyone else realized this?[/SIZE]

[dmetro]

Originally Posted by walking1

[SIZE=3]I can’t believe how many homes are up for sale in any given zip code in the city. Of course, just driving through different neighborhoods one notices the for sale signs, the courtonless windows and the tall grass. But what about the home occupiers who don’t make it obvious that they have put there house up for sale. When I do an on-line search of real estate, each Detroit zip codes results in hundreds of listings. I almost want to say that for most of the zips in the city, 40%-50% of the homes are listed for sale. Has anyone else realized this?[/SIZE]

Yes, it is bad, but we're still not the worst in the nation for housing inventory. Many cities, such as Phoenix, have it much worse. 40% of the homes for sale in a zip code is ridiculous. There's only five homes for sale in my subdivision of 104 homes, which accounts for >5% of my neighborhood's homes. And I live in Orion Township, part of metro Detroit. I will admit, the market is terrible. But the market in most parts of the country mirrors that of Michigan's. No need to panic, just give it 2-5 years and it will return to good health again.

[Frank the Tank]

Originally Posted by dmetro

Yes, it is bad, but we're still not the worst in the nation for housing inventory. Many cities, such as Phoenix, have it much worse. 40% of the homes for sale in a zip code is ridiculous. There's only five homes for sale in my subdivision of 104 homes, which accounts for >5% of my neighborhood's homes. And I live in Orion Township, part of metro Detroit. I will admit, the market is terrible. But the market in most parts of the country mirrors that of Michigan's. No need to panic, just give it 2-5 years and it will return to good health again.

The real estate market is bad in much of the country, but it's a little too simple to state that the causation is the same in every market. Obviously, the prevalence of variable interest and subprime loans is a great factor in many markets across the country, whether we're talking about Phoenix or Detroit.

However, a major reason that there is a glut of homes in places such as Phoenix, Las Vegas and Miami is that they are popular vacation home markets with rapidly growing populations, so there was (a) a lot of rapid development to meet burgeoning demand and (b) when seeing rapidly rising prices, a lot of speculators bought in to those areas during the real estate boom a couple of years ago. When supply rapidly overshot demand in those markets, the prices started to drop as quickly as they rose. My best guess, though, is that judging by long-term migration patterns showing that those metro areas are still having population increases well above the national average coupled with continuing large-scale interest by Baby Boomers to seek vacation homes, the demand will eventually meet back up with the supply (even though it might be a few years before that happens) and prices will stabilize and start increasing again.

Detroit and Rust Belt towns such as Cleveland, Pittsburgh and Buffalo, on the other hand, did not experience a real estate boom this century. The glut of homes on the market are due to the fact that those areas are experiencing stagnant or even negative growth in population for their entire metro regions (not just the cities themselves). That is much more problematic because there is nothing in long-term migration patterns to suggest that demand is going to ever meet back up with supply again in those Rust Belt areas. There isn't significant (or any) job growth, while admittedly few people consider Detroit or Cleveland to be vacation home destinations. This translates into long-term stagnation or devaluation in home prices in those regions and also means that the real estate market in much of the Rust Belt won't turn around with the rest of the country unless more people start moving back in as opposed to out (which hasn't happened in a long time).

I don't mean to be gloomy, but at the end of the day, supply and demand is what determines the pricing of anything, so if there isn't a reason for demand to increase for real estate in a particular area, then it's hard to say that prices will rebound that area.

[Coldjensens]

In the City of Detroit, the real estate market is unbelievable. There was a tax auction where houses could be bought for $7-8 thousand and no one came to bid, so they canceled it.

In some areas, people cannot pay taxes, mortgage, utilities, etc so they just walk away from their homes. If a house is abandoned, thieves soon take the copper pipe, wire, even the bricks. Who wants these houses? No one. It costs more to fix them or remove them than the property is worth. The taxes in Detroit are out of control because the population has dropped by 50% but there is still the same amount of area to take care of. In the bad neighborhoods, no one wants to own any houses. real estate is a liability there. Soon, these areas wil be completely empty. Del Ray is a good example.

In the suburbs there are so many houses on the market mostly because no one is buying. Many people are upside down on mortgages and cannot afford to lower their home price to what it would sell for, so the houses just sit and sit. In most communities it is impossible to determine the real value of houses because nothing sells. Foreclosure sales are beginning to set the standards and as a reesult, no one can get financing for non-foreclosure homes because the banks will not loan on the amount fo the sale price. Banks are basing their appraisals on foreclosure prices. Thus, the only thing that anyone can buy are foreclosure houses. This perpetuates the cycle.

A lot of people are leaving the state, but if you look at the hard numbers, it is really not big enough numbers to cause the real estate situation. It is surprising that the market s not recovering. In Michigan, if a house is not maintained, it quickly becomes uninhabitable. Shortly after that, it is beyond saving. Thus, we lose housing fairly rapidly, very little new housing is being built, so the market should level out pretty soon.

What is sad is that the cost of building a custom home or restoring a historic home often exceeds its value. As a result, we are going to end up with nothing but mass produced garbage houses. Since the new mass produced houses do not last very long, this may actually help the housing market since the housing inventory will be further reduced. The problem is the no one will be able to afford a house. Maybe everyone will end up living in condos?

[Frank the Tank]

Originally Posted by Coldjensens

In the City of Detroit, the real estate market is unbelievable. There was a tax auction where houses could be bought for $7-8 thousand and no one came to bid, so they canceled it.

In some areas, people cannot pay taxes, mortgage, utilities, etc so they just walk away from their homes. If a house is abandoned, thieves soon take the copper pipe, wire, even the bricks. Who wants these houses? No one. It costs more to fix them or remove them than the property is worth. The taxes in Detroit are out of control because the population has dropped by 50% but there is still the same amount of area to take care of. In the bad neighborhoods, no one wants to own any houses. real estate is a liability there. Soon, these areas wil be completely empty. Del Ray is a good example.

In the suburbs there are so many houses on the market mostly because no one is buying. Many people are upside down on mortgages and cannot afford to lower their home price to what it would sell for, so the houses just sit and sit. In most communities it is impossible to determine the real value of houses because nothing sells. Foreclosure sales are beginning to set the standards and as a reesult, no one can get financing for non-foreclosure homes because the banks will not loan on the amount fo the sale price. Banks are basing their appraisals on foreclosure prices. Thus, the only thing that anyone can buy are foreclosure houses. This perpetuates the cycle.

A lot of people are leaving the state, but if you look at the hard numbers, it is really not big enough numbers to cause the real estate situation. It is surprising that the market s not recovering. In Michigan, if a house is not maintained, it quickly becomes uninhabitable. Shortly after that, it is beyond saving. Thus, we lose housing fairly rapidly, very little new housing is being built, so the market should level out pretty soon.

What is sad is that the cost of building a custom home or restoring a historic home often exceeds its value. As a result, we are going to end up with nothing but mass produced garbage houses. Since the new mass produced houses do not last very long, this may actually help the housing market since the housing inventory will be further reduced. The problem is the no one will be able to afford a house. Maybe everyone will end up living in condos?

The problem is that just because a home is not maintained or uninhabitable, that does not reduce supply. Unless it is actually torn down (which even if we assume this is an option, it would take a long time to get the point where a place is condemed and then forced to be torn down), the home will just sit there unsold as part of the increasing supply. At the same time, having a large number of unkept homes in a neighborhood usually has a depressing effect on the surrounding homes. Any amount of population loss from the region, even if it looks like a small number on paper, is going to lower real estate prices, as well. For every family that leaves the region, that is one more house on the market that probably won't be bought by anyone. Most of the metro regions outside of the Rust Belt are still gaining population at a decent-to-rapid pace, so a place with stagnant-or-negative growth is going to have a very long and tough road to have real estate prices turn around. It is similar to what has happened to Youngstown, Ohio (a place where real estate prices haven't kept up with inflation for the last two decades), only on a larger scale - the similarities in terms of population patterns and job losses are striking.