Homes keep dropping (Detroit, Petoskey, Gaylord: mortgage, real estate, foreclosure)

[tcb]

there is over 13 houses for sale/rent on my street. I have invested a ton of time and money in my house only to find out I'm loosing money and owe more than it's worth and it's value keeps dropping, so far 15k in the past year. I lost my job and wanted to move but I cannot afford to leave my house. I'm now doing contract work but I'm going to have to figure out something sooner than later.

[Coldjensens]

Are prices still dropping? I was wondering if they may have bottomed out. I was told that Wayne county is not designated as a "declining area" by real estate lenders, but Oakland and Washtenaw are.

[sikes0000]

Housing is bad right now pretty much anywhere. However, I think we have it a little worse because of all the lay-offs and buyouts the past couple of years.

I was looking to buy a home in 05 but held off. There are houses I can buy now that I could not afford two years ago. Housing prices have come down dramatically in some detroit suburbs.

Sure, homes are selling, but not for what they were two years ago. I search listings quite frequently and notice quite a large difference in home prices in the same neighborhood. And when I say neighborhood I am talking same sub. Especially with all the bank owned homes which can be 20-30k lower on a 200k home.

Unless I plan on staying in the same house for ten years I am really gonna look for something thats been repoed or competitively priced. And even after 10 years, I might only be breaking even when I go to sell. Take into account seller fees and I could be in the hole. I can't say I will be in the same home for 30 years. Career changes, economy, who knows what will happen. Would hate to ride out another real estate cycle

[michiganbob]

Originally Posted by magellan

1) You use an example of someone "selling". Of course, if you HAVE to sell in a down market it's not good, but that's the exception not the rule. That's my whole point. 2) If you are in an ARM and looking to refinance but can't because comps have gone down in value, that again is an exception to the rule. Most people are not in ARM's, and those that are took those risks when they signed up for it. They should have bought within their means. 3) Most people will not have their assessed/taxable value changed, even if their "perceived" property value has gone down 4) I don't believe in doing home equity loans for anything, especially if you are in a precarious employment situation. That's one way the U.S. got into this mess in the first place, by people using their home equity as an ATM machine.

Your must be living in a different Michigan. Most of the people in Michigan that I know who are selling now HAVE to sell. That's MY whole point. It's what's driving prices down and will continue to do so. This isn't a game for them or something they are trying to see if they can get an offer. Look through some MLS listings and see how many of the pictures of the interior of the homes show they're empty.

As far as ARMs, you are correct oh wise one, they are not the rule (never said they were, by the way), but a large percentage of mortgages sold in the past five years (when prices were highest and people could not afford them any other way) were adjustable and they are resetting each month . . . which is why people are desperate to sell.
If you haven't seen this chart before, you will be shocked. The biggest part of the ARM reset wave is still in front of us. And it only takes a few of those to start a foreclosure wave.

And really, the fact that you "don't believe in doing home equity loans for anything" is admirable, but I somehow think that didn't prevent thousands of our fellow Michiganders from doing something stupid . . . or trying to again soon. Or getting 110% loans, or lying about their incomes on the mortgage applications. I don't believe in those things either, but some of my neighbors did, and it artificially inflated the price of homes and now that the bubble is bursting it will harm me, regardless of whether I sell or not.

70% of our economy is now based on consumer spending and that spending was propped up the past seven years or so by wild speculation in the housing market that could not be substantiated by incomes. People thought they were "rich" and spent accordingly, but now the time has come to pay the piper. Wishing it were different will not make it so.

[magellan]

Originally Posted by michiganbob

Your must be living in a different Michigan. Most of the people in Michigan that I know who are selling now HAVE to sell. That's MY whole point. It's what's driving prices down and will continue to do so. This isn't a game for them or something they are trying to see if they can get an offer. Look through some MLS listings and see how many of the pictures of the interior of the homes show they're empty.

As far as ARMs, you are correct oh wise one, they are not the rule (never said they were, by the way), but a large percentage of mortgages sold in the past five years (when prices were highest and people could not afford them any other way) were adjustable and they are resetting each month . . . which is why people are desperate to sell.
If you haven't seen this chart before, you will be shocked. The biggest part of the ARM reset wave is still in front of us. And it only takes a few of those to start a foreclosure wave.

And really, the fact that you "don't believe in doing home equity loans for anything" is admirable, but I somehow think that didn't prevent thousands of our fellow Michiganders from doing something stupid . . . or trying to again soon. Or getting 110% loans, or lying about their incomes on the mortgage applications. I don't believe in those things either, but some of my neighbors did, and it artificially inflated the price of homes and now that the bubble is bursting it will harm me, regardless of whether I sell or not.

70% of our economy is now based on consumer spending and that spending was propped up the past seven years or so by wild speculation in the housing market that could not be substantiated by incomes. People thought they were "rich" and spent accordingly, but now the time has come to pay the piper. Wishing it were different will not make it so.

I don't disagree with much of what you are saying, so I'm not quite sure why you can't discuss the issue without being condescending michiganbob.

Sorry, but I'm not jumping into the Edmund Fitzgerald with you.

[FERRETI]

Sorry Magellan.I was off in there.I agree with all of you and malamute.We have no economy anymore.You gotta start living below your means and look to move south or even out of the country.

[malamute]

It's not to be pessimistic -- but back in the early 1900's, people could pinpoint what the economy was based upon --- manufacturing and of course that made most of the 1900's Michigan's heyday.

There was a short lived period where the economy seemed to be based on high-tech but that can't really be said now.

It's hard to see where/when it's going to improve without being able to specify what will change it around.

There are healthcare and teaching jobs -- but both require a lot of tax dollars and you can't have a good solid economy based mainly on jobs depending on tax dollars because after a while you don't have enough people to tax.

Things might turn around -- but who knows now what would be the reason. Consumer spending is now slowing and so many remaining jobs will begin to dry up. It's bad because we have a very large trade deficit, China has the surplus. With the surplus they can move full steam ahead and we cannot since we're holding the big deficit.

Our tool & die workers are falling behind -- cleaning carpets doesn't keep up their job skills -- the innovations will be by those active in their fields. Our factories are barely holding on -- so the new machines are going to the countries with the activity.

And as long as the minimum wage of Mexico is less than $5 a DAY and China's is even less, we simply cannot compete.

[ministerman]

Megillen is wrong, a price drop in your area does affect you. It affects not only people who sell, but if you want to refy your home. The only way it does not affect a person as much, and it still affects every one to one degree or another, is if you outright own your home with no loan, and never plan to finance it or sell it.
Another point he is wrong on is there are a lot of people trying to sell homes in michigan. I do not know where he lives and do not care, all one has to do is take a drive and look at the forsale signs on streets.
I have seen signs sprout up like weeds all around the state.
From north to south, as bad as it is in the north part of the state it is worse in detroit area.
The percent of people that want to sell, then add in the people who want to or have to refy makes a high % of the home owners who are greatly affected by the home crisis.
I am in the real estate industry and can tell you from this point of view that things are not good at all, and we were told last spring that it was just a blip that will shake out in a couple of weeks, LOL.
That was the understatment of the decade.
I do not think it will shake out for a couple of years at least.

[Drackoe]

Lets not forget that the Detroit Metro area was already one of the more saturated markets. I do believe it has the highest ratio of sprawl versus population growth of any comparable region. So, part of this is the result of overzealous building.

That being said, from what I can perceive, the major issue in the Detroit market is not necessarily a soft market but rather foreclosures. These are, of course, related since foreclosed houses lessen the demand for the other for sale homes. It seems, likely, that the great bulk of these foreclosures are among already lesser valued properties. These has the terrible effect of doubly penalizing the poorer homeowners by undercutting their primary asset when they least can afford it.

However, I would venture a guess that the example cited is the exception and not the norm. Those who own such valuable homes aren't nearly as likely to suffer foreclosure. This is not to say, of course, that there are many people who overextended their credit to get the big house and now are feeling the crunch. Merely, that they are not the primary basis for these massive foreclosure numbers.

So, the effect of foreclosure is likely felt differently in the different price range markets. Many of these reports seem to treat housing as one massive market. In truth, the market is fragmented by price range. Homes below $120,000 or so are likely being acutely devalued while homes above $500,000 may feel only a small or even negligible effect from the credit crunch and ensuing foreclosures.

So I don't think we point to foreclosures to explain the soft market. I think you point to 1) saturation matched with 2) weak demand as the result of more tenuous incomes. Thats where the poor economy has its impact, on the demand side. I doubt the foreclosures have as much to do with it as we're imagining.


"I was told that Wayne county is not designated as a "declining area" by real estate lenders, but Oakland and Washtenaw are."

That makes this make more sense. Foreclosures are certainly as widespread, if not more so, in Wayne than in Oakland or Washtenaw. What isn't as widespread is the saturation. Its possible foreclosures may actually be leading to a better market: people are picking up these foreclosed houses at half-price and investing in redevelopment, which could very well prove cheaper in the long run. Its also obvious that both Oakland and Washtenaw reached higher summits than Wayne's market, meaning that they have more room to decline. Much of Wayne has nowhere to go but up. Still, I think this too points to saturation and weak demand (for higher priced homes) as the cause of the soft market rather than abundance of foreclosed homes.

[Drackoe]

Originally Posted by ministerman

Megillen is wrong, a price drop in your area does affect you. It affects not only people who sell, but if you want to refy your home. The only way it does not affect a person as much, and it still affects every one to one degree or another, is if you outright own your home with no loan, and never plan to finance it or sell it.
Another point he is wrong on is there are a lot of people trying to sell homes in michigan. I do not know where he lives and do not care, all one has to do is take a drive and look at the forsale signs on streets.
I have seen signs sprout up like weeds all around the state.
From north to south, as bad as it is in the north part of the state it is worse in detroit area.
The percent of people that want to sell, then add in the people who want to or have to refy makes a high % of the home owners who are greatly affected by the home crisis.
I am in the real estate industry and can tell you from this point of view that things are not good at all, and we were told last spring that it was just a blip that will shake out in a couple of weeks, LOL.
That was the understatment of the decade.
I do not think it will shake out for a couple of years at least.

Since you're in the industry and know better than me... do you think a side effect could be a new focus on redevelopment and gentrification of poorer areas? It seems a smart developer who scoop up a ton of these foreclosed homes and try to spur such a move.