A Company Perspective - August

Real Estate One and its Family of Companies, is the largest independent broker in Michigan. Following is their company results for August which will reflect what is happening in SouthEast Michigan real estate:

August sales showed some effects of the mortgage market upheaval, dropping about 10% off the pace we have seen for the past six months. The effects of the mortgage market will continue for the balance of the year as the markets stabilize. Our metro area will not be as affected by the reduction in mortgage money as other markets, but we will see some changes. With the average home value in excess of $400,000, California has been hit the hardest (much of that market was down 40% in August) with the drying up of Jumbo Loan money. For our market, Buyers for the lower priced markets will shrink, particularly in the city of Detroit. The city had shown some sales strength the last few years, fueled by the availability of easy mortgage money. The inevitable results of that excess has been the spike in foreclosures. As I indicated last month, the middle upper-end ($500,000 to $800,000) will remain softer as those jumbo loan buyers sit on the fence until interest rates stabilize. The upper end in excess of 1 million has been on the rise since spring of this year after falling in the fall of 06’. The comeback of the upper end has always been a good economic sign. Also, the Grosse Pointe market is showing signs of life, again they tend to be a leading indicator. Overall, we will appear to “bounce” off the market bottom over the next six to eight months as we work through the mortgage market stabilization and our local economy settles down. Predicting the true market bottom is difficult; we won’t really know it until after a recovery is well on its way.

Also, year to date, the number of leases has risen from nearly 6% of total units to 12%, reaching close to 20% for the month of August. The percentage of leases, like the percentage of vacant homes, are indicators of the direction of the market. For vacant homes, the percentage is running in excess of 40%, with a stable market in the 20-25% range. When both percentages begin to fall, our market will be on the rise. It is interesting to note that our company average sale price is only off 3.5% so far this year (taking out leases). Home values are certainly off more than that (over 10% this year) but our small drop shows the relative strength of the over 1 million market and weakening of the under $200,000 market as the exotic mortgage products dried up. Again, keep in mind we have the mortgage products to keep your transactions together. We can’t fix bad credit, but we can make sure those with mortgagable credit are not squeezed out of the market.

What are you seeing in your area? When do you predict a turn-around in real estate?