Recently, I heard Stefan Swanepoel, the real estate guru speak. Large corporations pay thousands of dollars for his Swanepoel Trends report and/or consultation. You can also find him under RealTrends.com. His take is that we are recovering from a giant hangover caused by a world class bender in the late 90's and early 00's. At that time the economy was tuned up, nearly everyone had a reliable, decent-paying job, the future looked rosy....consumers were bullish; ready, willing and able to buy and pay top dollar for real estate....no one was worried about the war or losing their job... interest rates were the lowest in history, banks and lenders were extra creative and many people used their house as a bank and took out their equity through refinancing...The US experienced unprecedented climbs in housing starts and prices.....what fun for everyone!
Presently the broad economy proves surprisingly resilient and economists haven't agreed on a definition of a housing bust; however all agree that the housing bubble has burst and we now are in a correction phase. To quote Mr. Swanepoel "the residential real estate market is about half way through a 10-15 year industry transition...one creating turmoil, confusion, regret, and huge opportunities". The Ann Arbor problem can be explained through a look at supply and demand. In 2002 there were about 8471 houses and condos listed on the mls (Ann Arbor Area Board of Realtors Multi-List System) and 4382 sales with an average sale price of $246,909.00....last year there were 14,720 condos and houses listed and 4106 sold at an average house price of $251,934. Houses were on the market longer: Average days from list to sell was up from 67 to 81 for houses and 52 to 93 for condos. Our area is seriously overbuilt and inventory is backed-up for at least a year and businesses bringing in people for new jobs has not kept pace.
In the NYT on Sunday Money June17, Anna Bernasek reported a correction nationally of 4% of median home prices and in various markets up to 12.4%...so Ann Arbor was, last year, well above the national average in sales price. Add to mix, the Pfizer effect of corporate underwriting of equity losses for favored employees of up to $100,000.00 rather than the corporation buying their homes at a higher % of market value and list them through a relocation company and take a loss at the end. This clever corporate strategy severely compromises neighboring houses who do not have a Pfizer subsidy....e.g., a house that might have sold over a longer listing at $240,000.00 is put on the market at $180,000.00 and sells in a week for $170,000.00 because the owner has a subsidy. This has reduced the average sale price for the overall market in Ann Arbor....and we are about ¾ of the way through about 800 of these listings.
One way to think of the local market is to think that we were on a binge of rich foods, high in fat and sugars and now we are on an eating plan to lose some of the overweight. Still how can we deal with the problem? For one: Keep in mind that good, clean, nicely designed and cared-for houses are selling for good prices. Second, relax, take a deep breath, and take stock; think what you might do to improve the quality of life and make your house and community a better place to live. Declutter, recycle, paint-up, clean-up, fix-up. If your house is on the market your realtor will probably council lowering your price.....certainly if you have had a number of showings with no offers that usually indicates need for a price reduction.
Get Green! As Thomas Friedman writes ‘America's saving grace may be leadership in the green revolution'. The US government estimates that American homes account for 21% of the nation's energy consumption and greenhouse gas emissions and that half of that is correctable. Buyers are also thinking green.....Older houses are worse energy wasters than newer, energy-efficient homes. Electricity isn't cheap even if we can afford the monthly bill. So, what can we do to correct our behavior? If you need to purchase anything for your house try for EnergyStar products that reduce the greenhouse gas emissions. Items with this designation meet strict EPA and US Dept of Energy guidelines. Plant trees and use compact fluorescent light bulbs (CFL's) that use 75% less energy and last 10X longer. The EPA says that if every American used just one CFL it, in one year, would not only reduce the need for electric power but also subsequent greenhouse gas emission equal to 800,000 car's emissions.(see Energystar.gov) Put in dimmer switches, eliminate loss of heat from your home with caulking and sealing, insulation in attic, crawl space and basement. New insulations such as Greenfiber Cocoon E-Z Pour is made from 85% recycled materials and has no formaldehyde. Replace single-pane windows, leaking doors, old furnaces and water heaters with EnergyStar products.
Most markets are cyclical and our market will correct and we will be back in an up cycle. It is estimated that 6% of homeowners have a negative equity and may face foreclosure; yet , 40% of home owners have up to 30% equity in their homes and the remainder even more. There is also good news. Michigan is working on a URC, short for University Research Corridor similar to those in Boston, Chapel Hill, Duke and Pittsburg. Wayne State, UM and Michigan State and their surrounding communities have a knowledge economy! And, "the knowledge economy and competition in the realm of innovation and ideas will be every bit as global and fierce as manufacturing!" (To read more go to www.URC-Mich.org.)
Meanwhile, it is a great time to buy for an investment or to eliminate paying rent
And please keep me in mind. I am here for you. Call me if you have any questions regarding real estate and if you or anyone you know wants to buy or sell!
Best wishes, Claudella
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