Excess in Michigan Housing

[bwindi25]

First off, sorry for the long post. I would supply a link, but newspaper article links tend to disappear quickly. Below is an article that recently ran about home-value decreases in Michigan.

Do people think there is truth to this article? What does it mean for all the new residential development in Grand Rapids? Would you sell or buy house in the next two years? How well will GR do if this future comes to pass?

Michigan housing prices could drop in next two years

BY KATHY BARKS HOFFMAN

Associated Press Writer

LANSING

[mrknowitall]

so dont sell, let them leave. nomads!

[fluffy]

I would say so. The job economy is crap. I've had 3 friends move out of Michigan because there is no market. Especially for teachers. There are so many other states needing teachers that they are offering signing bonuses and nice salaries for them to relocate.

[ModSquad]

Do people think there is truth to this article?  What does it mean for all the new residential development in Grand Rapids?  Would you sell or buy house in the next two years?  How well will GR do if this future comes to pass?

Michigan housing prices could drop in next two years

<{POST_SNAPBACK}>

I read this article with much chagrin on Sunday morning. It pretty much ruined coffee time with my wife because I was abig crab after reading it. At any rate, the only light I see in the darkness is that it seems that what is being affected the most is the large suburban "Mc Mansions" in the suburbs. I have come to say that the economy in West Michigan is changing, not that it sucks. We are moving from a manufacturing based economy to a information/technology/scinece based economy. This will take time and the economy will have to go down before it can go back up.

[GRDadof3]

There are a couple of issues with the article:

They are making a spurious correlation between housing values, home sales, and people supposedly leaving the area (ie: Joe has brown hair and blue eyes, Ricky has brown hair and blue eyes, therefore all boys with brown hair have blue eyes). Not necessarily connected.

I would venture to guess that the population in the region is still growing, but maybe coming down from the 3 - 5% growth of previous years,

If you are a teacher, I have heard it is tough right now in Michigan due to problems with FUNDING for the schools, which is why many are not hiring.

It is definitely a buyers market in some areas of GR, but I personally attribute that to many people having very little equity in their current homes (ie "let's put our boat on a home equity and get the tax deductions, yah!), and therefore have no room to maneuver on price and get the place sold. This causes people to hold out at prices that are not REALISTIC in the current market. Much of this also can be blamed on overinflated appraisals from scumbag mortgage lenders trying to get people to tap MORE into their "perceived equity", and therefore people cannot sell at the true market value, causing a log-jam of listings.

Some of the best areas for existing home sales right now are in the city: the near Northeast side and near Southwest side,

Some experts have now been able to calculate the PE Value of housing markets (similar to stocks) based on the average mortgage payment vs. what a house would rent for. The gap is what they use to determine the PE value of a particular housing market. I read that the GR area is not bad at valuation, but may lose about 10% (overall for the market, not individual homes) over the next year. That is compared to a whopping 50% devaluation forecast for areas like Boston, parts of California, parts of New York, etc. There are a lot of articles around:

http://www.google.com/search?hl=en&lr=&q=h...ion&btnG=Search

There has never been a better time to build new or renovate an older home. The cost of building materials is about to go through the roof due to Hurricane Katrina. The rebuilding is expected to suck all kinds of lumber, drywall, concrete, you name it out of other regions like ours, and drive prices up dramatically. Also, the price pressure on petroluem will get worse in the coming years, and although it does get people into buses and onto bikes, petroleum goes into a lot of construction materials llike roof shingles, sheathing, house wrap, plumbing pipes (PVC), etc..

Money is still the cheapest it has been in about 30 years, with rates still hovering around 6%.

The market for downtown has not nearly reached its potential. The 500 or so condos for sale being posted here are just a small drop in the bucket vs. many of the computer sections on the GR MLS.

Whew! Keep your head up Dave!

I need to get back to work

Edit: BTW bwindi, be careful posting entire articles. It is against board policy and may get you slapped

Oh, and the guy that they got the quotes from for the article: Marco van Akkeren, an economist for PMI Mortgage Insurance Co. of California. If you have had a mortgage and didn't put 20% down, you all know how much you loved PMI! And California is WAY overvalued, dork!

[ModSquad]

The market for downtown has not nearly reached its potential.  The 500 or so condos for sale being posted here are just a small drop in the bucket vs. many of the computer sections on the GR MLS.

<{POST_SNAPBACK}>

GRDadof3 I totally agree that the Downtown has not reached its potential yet. I think what is REALLY going to continue to sell is housing choices that are different. As I said in my previous post...not the Mc Mansions in the burbs.

BTW GRDadof3 - do you know what the warn scale is on my posts? It says 0% but has 5 blue boxes next to it.

[GRDadof3]

GRDadof3 I totally agree that the Downtown has not reached its potential yet.  I think what is REALLY going to continue to sell is housing choices that are different.  As I said in my previous post...not the Mc Mansions in the burbs.

BTW GRDadof3 - do you know what the warn scale is on my posts?  It says 0% but has 5 blue boxes next to it.

<{POST_SNAPBACK}>

Mine says the same thing. I think it means you are OK. I don't see the "warns" by your username when I look at it, but I can see mine.

[ModSquad]

  Mine says the same thing.  I think it means you are OK.  I don't see the "warns" by your username when I look at it, but I can see mine.

<{POST_SNAPBACK}>

Whew!!!Glad I am OK, because if I was not OK, I would be...well, not OK.

[joeDowntown]

Personally, I don't think Grand Rapids, or most of Michigan for that matter, will have a problem. We didn't have the extreme price increases like other cities (which at first may seem like a bad thing but it is not). I think our housing mark is very methodical just like many things in West Michigan. I don't think supply out-numbers demand. Remember, Pulte Homes pulled out of West Michigan because they were building 500-1000 houses a year and I for one think that is a good thing. Grand Rapids is not a boomtown, but it is solid and slow growing.

Slow growing oaks are always stronger than fast growing pines.

Joe

[bwindi25]

GRDadof3: thanks for the heads-up on posting full articles. I personally slapped myself on the wrist with a ruler.

I think until we get some sort of urban growth boundary in place, the demand for housing in the city proper will continue to rise, but the demand will be more limited than it could be.

[GRDadof3]

Here is the article I was thinking of regarding which housing markets are overvalued/undervalued:

http://money.cnn.com/2005/08/18/real_estat...ousing_markets/

Gee, I think the whole first column is pretty much California It looks like GR is in the best shape for Michigan cities at +13%.