Real Estate Turn Around?
February 16th, 2008 at 12:58pm Mark Noonan
Sales of residential and condominium units in Detroit nearly doubled in January, compared with the same month a year ago, and the region overall got a nearly 15 percent bump, according to real estate data firm Realcomp.
The city of Detroit led the gainers, posting a 45.5 percent increase in the month, with 736 closings.
Seven Realtors who deal primarily in downtown Detroit area property said they have enjoyed some of their recent best sale months in December and January. Sales of houses and condominiums in Detroit jumped by a 33.9 percent in December 2007, compared to December 2006. No other market in the Metro Detroit area came close to that kind of increase last year, according to Realcomp.
Realtors credit tumbling prices, low interest rates and sales of foreclosed properties or properties hoping to avoid foreclosures.
I bring this up because I have some anecdotal evidence of my own on this - I’ve seen a very large number of first-time home buyers entering the market over the past 6 weeks. Home prices have really been at unheard of bargain here in Vegas - houses which were going for 300k two years ago now list for 200k or less…though my wife did note that one new home developement just switched their “from the high 100s” sign to “from the low 200s”; meaning that at least some home builders are not as desperate as they were two months ago.
As I’ve said before, I’ve taken it in the shorts on my equity (my guess is that my house is worth at least 60 thousand less than I paid for it), but one man’s garbage is another man’s treasure…in this case, the garbage of my shrunken equity is the treasure of young families being able to afford their first home. For all the doom-and-gloom being spread out there (mostly, it goes without saying, by Democrats who also propose to “fix” the problem via Big Government), there is always an upside, if one cares to live a life with a sense of joy and gratitude to God for even so much as being in existence.
I suspect that we’ve seen the bottom of the real estate bust - it will, of course, take a couple years before equity recovers, but in the meanwhile a lot of Americans will be able to start living the American dream.
Entry Filed under: Economy
20 Comments
1. LiberalMind | February 16th, 2008 at 1:07 pm
Deleted - off topic.
2. Real Estate/Buisness News&hellip | February 16th, 2008 at 1:16 pm
[…] Original post by Mark Noonan […]
3. Real Estate - Information&hellip | February 16th, 2008 at 2:00 pm
[…] Estate Turn Around? Todd Carpenter wrote an interesting post today onHere’s a quick excerptSales of residential and condominium […]
4. Facebook » Real Est&hellip | February 16th, 2008 at 2:02 pm
[…] Mark Noonan wrote an interesting post today on Real Estate Turn Around?Here’s a quick excerptI bring this up because I have some anecdotal evidence of my own on this - I’ve seen a very large number of first-time home buyers entering the market over the past 6 weeks. Home prices have really been at unheard of bargain here in … […]
5. phnx | February 16th, 2008 at 3:55 pm
I think you will see several markets recover this year. However the California housing market and the Florida Condo market are not going to be among them.
6. Real Estate » Real &hellip | February 16th, 2008 at 4:02 pm
[…] nelsonproject wrote an interesting post today onHere’s a quick excerpt […]
7. kjstrouble | February 16th, 2008 at 6:38 pm
Mark,
Can we get the idiot spam posts off?
As for the substance of your post - have seen that in the Omaha/Bellevue area too. I am hoping to buy in the next year, so I am watching housing prices. While they have not gone down much, they have never been as astronomical as in other areas.
8. Almiranta | February 16th, 2008 at 7:41 pm
Anyone with a lick of sense understands that ANY market has to level off, and/or go down, at some point. Ut’s the most obvious fact of economics. People are making more money, so they want to buy their first homes or move up to better homes, so the building market booms and so does the resale market. But at some point, the number of people wanting new homes has to taper off—there is not an unlimited number of buyers for houses. Or cars, or refrigerators, or television sets.
When the number of buyers tapers off, inventory exceeds demand. So the building of that particular commodity slows down. Eventually, as inventory is depleted, and demand exceeds inventory, manufacturing will start up again.
I love the hysteria attached, by the hysterics, to this simple, obvious, and historical pattern.
As for the foreclosure hysteria, it affects people who made bad economic decisions, mostly based on “hope”—”I hope I will make enough money next year to afford my mortgage when it goes up, because I sure can’t afford it now”. Hope as the foundation for financial decisons is not the best one to choose from.
I have a friend who bought an overpriced, overappraised, home during the frantic rush to take advantage of the “We’ll Lend Money to Anyone” boom. Now her mortgage is more than the house is realistically worth. That is sad. But the truth is, she is pretty much guaranteed to make the worst possible decision about anything to do with money. It’s what she does. I’m willing to bet that very few financially savvy people got hurt in the sub-prime mortgage bust.
For one thing, financially savvy people are less likely to need sub-prime mortgages, and if they want to take advantage of them they will be more realistic about their ability to pay increased mortgages, will understand ARMs, and will not be suckered into over-appraised properties.
And the point everyone seems to miss is that she, and others like her, has a place to live. and has had a place to live all the time she has owned her home. If she had not been making those mortgage payments she would have continued to pay rent. Her down payment was practically nothing. So if she were to lose this house to foreclosure, she really would NOT be in a horrible bind, losing her life savings or being thrown out on the street. In fact, she would be in pretty much exactly the same position she was in before she signed the closing documents on the house, just with worse credit.
Housing prices never went down much in my market, but as I will be selling in the spring I am glad to see prices rising overall, as a rising tide lifts all boats.
I just wonder what will be the next target of “The Sky is Falling And We’re Facing A Depression” crowd.
9. LOLguy23 | February 16th, 2008 at 7:45 pm
Detroit is going good, getting stronger, so the rest of the country will soon follow the suit. The evidence that says that we’re headed to a recession is just a theory. Like global warming.
10. neocon | February 16th, 2008 at 8:26 pm
>>As for the foreclosure hysteria, it affects people who made bad economic decisions, mostly based on ?hope? - Almiranta<<
And that’s exactly how they’re going to base their POTUS vote in the fall - on “hope” and change, and change of hope, and hope for change.
Yes we can!
11. TheHarbinger | February 16th, 2008 at 10:08 pm
It’s all good. Don’t pay attention to the men behind the curtain.
Keep moving along.
Keep on piling up debt. All is well.
12. phnx | February 16th, 2008 at 10:51 pm
The housing collapse in California and Florida resulted in consumer fear and over reaction in other markets. This prevented consumers from makeing buying decsions they would have otherwise made. Many buying decisions were delayed in hopes of getting better deals, and this further depressed the market. Regardless there is a pent up demand in many markets, Detroit is one example. There are others.
13. js | February 17th, 2008 at 8:37 am
What really needs fixing is to make false appraisals a criminal offense. Seems like banks, real estatle brokers, and mortgage brokers all benefit from higher appraisals, at the cost of the buyer in the end run.
The appraisors who consistently provide higher appraisals for thier masters get more business as to commissioned sales agents who steer consumers to thier appraisors of choice.
When you buy a house that is valued at 150k, and was built for 70k, for a grand total of 250k, there is lots of room for profit for everyone when they mortgage company cuts the checks. A 6-8% commission on a 250k house for the mortgage broker is 15-20k, then you get the mortgage broker who can suck up 1-6 points on top of that. Right up front, the 100k increase in the value of the house is enough to motivate a lot of people to decieve the consumer, who trusts in the professionalism of real estate and morgage brokerage agents.
14. js | February 17th, 2008 at 8:47 am
“housing collapse in California and Florida resulted in consumer fear and over reaction in other markets”
Consumer fear is not the result of over-reaction, its the result of waking up to a spike in costs on a ARM that reset, knowing that you are going to lose your house.
Reaction to a sense of helplessness and homelessness isnt over reaction. My children were victims of these thieves and liars before this whole thing came to light. Repo’s have been strong money makers for both Mortgage companies and Real Estate Brokers for the better part of the decade, they need to fear that the truth gets out. Its thier fault.
15. neocon | February 17th, 2008 at 8:57 am
js,
I am a real estate broker and I hardly make a lot of money from repo’s. In fact just the opposite, it’s bad for business. Not only do brokers make less money per transaction on repos, we are dealing with clients who have had their credit destroyed, thus no longer able to be a client for some time, and at the same time dealing with an undervalued property that will have a hard time being approved for a new loan for any new prospective clients. Couple that with that home affecting the property values of the neighborhood, and your comment is just completely baseless.
The truth is that there were some unscrupulous mortgage brokers thattook advantage of easy credit and put people into bad loans, BUT nobody made those people make that decision to sign the documents. If you want to blame someone, look in the mirror. And educate yourself.
16. Christian Wright | February 17th, 2008 at 9:06 am
To understand the coming financial collapse of US banks you need to understand how they work. Banks take your money and give you interest. They are able to pay interest by finding people that they loan your money to. The interest they charge is higher than the interest they pay. The difference between what they charge and what they pay is the profit. Under Fractional Reserve Lending, a bank will lend many times over the cash they have in their reserve. They do this under the theory that people will not withdraw their money because they are earning interest. Fractional Reserve Lending is creating money out of thin air because it is not fully backed up by the reserves. In fact, banks are known to lend as much as ten times as much as they actually have in reserve.
Bank employees are paid commissions by the number of loans they bring into the bank. Adjustable Rate Mortgages (ARMs) pay more commission than regular mortgages. Agents sold ARMS to people they knew could not afford the mortgages once the rate was adjusted in two years just to earn the higher commission. They traded short term financial goals for long term financial health. The banks went along because it increased their quarterly profits. These ARMS were packaged and sold as security instruments on Wall Street. The loans were sliced up, bundled with less risky mortgages, and sold as mortgage-backed securities called “collateralized debt obligations” (CDOs). The banks used a computer model to estimate the percentage of foreclosures in a typical CDO and they determined that each CDO still made a handsome profit. These CDOs were sold to other banks that used them as collateral to make even more loans and then those loans were used as collateral to make even more loans with each bank using Fractional Reserve Lending practices. Unfortunately, the computer model was wrong, but the people who designed the models were the very same people who were trying to sell the CDOs to banks, pension funds, and corporations.
As mortgage defaults grew beyond anybody’s wildest imagination, the value of these CDOs became suspect so nobody wanted to buy them. These CDOs were originally valued, according to the computer model, at two trillion dollars. But a commodity is only worth what a person is willing to pay for it, and nobody wants to buy a CDO, so they are now worthless. This means that the imagined value of two trillion dollars that was used as collateral to make even more loans expands the damage to a thousand trillion dollars in the global economy with $600 trillion in world liabilities, plus more than $400 trillion derivatives.
So institutions that invested in CDOs are now stuck with financial instruments of no value, and due to Fractional Reserve Lending, do not have enough in reserve to cover this debt. And there are no more borrowers to cover this quadrilliondollar black hole. It means that only an optimist would be investing in gold right now. The best investment for the future is canned food. The economic stimulus package will do nothing to fill this one-thousand-billion dollar debt.
I am adding this link I found today. http://www.informationclearinghouse….
17. neocon | February 17th, 2008 at 9:34 am
>>To understand the coming financial collapse of US banks - Christian<<
Could this be considered fear based politics? Seriously Christian, do you think anyone here would even read beyond the first sentence knowing your complete lack of honesty and intelligence?
I know I didn’t.
18. Darva Conger | February 17th, 2008 at 10:53 am
Notwithstanding the housing boom in Vegas, the University of Michigan consumer confidence index is now lower than it ever was during the 2001 recession.
Bad news for the GOP and McCain who, by his own admission, doesn’t understand economics.
19. Christian Wright | February 17th, 2008 at 3:28 pm
Neocon: Just read the story in the link.
www.ft.com/cms/s/7faf3e08-db35-11dc-9fdd-0000779fd2ac,dwp_uuid=b6abe56e-d0c2-11dc-953a-0
This news also references other stories with their own links.
Spoiler thread: The financial sky is falling.
20. neocon | February 17th, 2008 at 6:39 pm
Christian,
You are the blog equivalent to the man on the corner holding the sign that reads: “the world is ending.”
You’re just an embarrassment. After 52 consecutive quarters of growth and record profits in some sectors, a financial adjustment is needed. Some sectors will get hit hard, others less hard. Those investors who manage their money properly will reap the rewards, those who didn’t, wont. This is, and alsways has been a cyclical event in mainly fluid sectors and other pockets of the economy will lessen the impact.
I work with many investors, who properly manage their portfolios and are soon to take advantage of some of the downtrodden sectors, which will help turn those areas around. Once you mature, you’ll understand this.
Goodbye.