Just over three years ago, a select group of brokers and agents in Grand Rapids, Michigan got together for series of meetings. They had been tasked by the Grand Rapids Association Board of Directors to study and make recommendations about a problem which seemed to be mushrooming across the local community. Foreclosure and Short Sales had jumped from being barely a bleep in the statistics to trending into the low double digits.
Although, few of us in the room could have envisioned where this assignment would take us, I vividly recall gasping when someone suggested that we might just be seeing the tip of the iceberg and that delinquency rates might be over 60% in the future.
Over the past 12 months as foreclosure and short sale rates in our local market have jumped to encompass up to 70% of the reported sales, one thing has become patently clear...foreclosures are impacting EVERY price range and some analyst predict that the higher end homes may comprise more of the foreclosure/short sale market in the next wave.
The Luxury Challenge...
High end homes face a unique set of challenges in this market. With the U.S. economy in a financial slow down, the rate of job loss has been very severe for many with managerial and professional skills.
The biggest challenge faced by homeowners in the luxury market is the inability of homeowners to clear their debt obligations through the sale of their home.
Greg Carlson, the 2009 President of the Grand Rapids Association or Realtors recently commented on the fact that over half the membership on our board had not made a single sale in 2009 (we're currently midway through the year) and only 200 agents had sold more than ten homes!
This underscores the real difficulty even professionals face in successfully selling a home today as banks deal with huge inventories of foreclosures and patience runs thin for home buyers skittish about taking risks.
Although recent incentives for first time home buyers have helped to bolster the lower priced homes, these incentives have not benefited sellers who need to sell luxury homes. In addition, many move-up buyers may not be able to sell their homes or may be struggling with financial obligations due to the credit and job crisis.
Soaring Delinquencies...
As delinquencies soar, a recent Business Week(June 15, 2009) article quotes a May 28 report from the Mortgage Banker's Association which highlights the threat "
For the first time since the rapid growth of subprime lending, prime fixed-rate loans now represent the largest share of new foreclosures...Nearly 13% of loans were delinquent or in foreclosure, the most since the bakers started keeping tabs in 1972." David Crowe, chief economist of the National Association of Homebuilders does not see this peak cresting until 2011.
The good news is that homes in Grand Rapids, MI and other areas across the country are still selling and this includes some high end homes. Selling a high end home in this market will require a good handle on the fundamentals of pricing strategy and also an appreciation for some of the emerging new avenues for marketing in a global arena.
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We're always available to answer your questions and provide informed counsel and recommendations.
Lola Audu, is the Designated Broker & Owner of Audu Real Estate. Our company specializes in helping people buy and sell homes in the greater Grand Rapids, West Michigan area. We've had the privilege of helping hundreds of clients succeed in their goals of purchasing and selling property including demonstrated success in the negotiation of Short Sale Transactions. You can contact us via e-mail @ info@auduhomes.com or by phone at 616-791-0511.
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Lola,
Part of the problem is the inability of loan officers to finance upscale homes adequately. Jumbo paper is not on the most wanted list, so the rates aren't in line with the rest of the market.
Mike in Tucson